The GDP is growing at over 8%, MNCs are lining up to cater to the demand of an upwardly mobile middle class and Indian companies are going global. The country has come a long way since the days of license raj ended in 1991 when India opened its doors to the world.
Walk into any shopping mall of a large city and you will see top global brands jostling for space. The liberalization which began in 1991 and will complete two decades next year, has completely transformed the Indian economy pushing it into the league of the fastest growing economies of the world and providing consumers a wide choice.
The trigger, however was a balance of payments crisis when with barely $2.2 billion dollar exchange reserves (enough cover for 15 days imports) in its coffers the government unleashed wide ranging reforms. Over the years that followed the so called Licence Permit Raj was dismantled. Despite handling a coalition government the former PM Narashima Rao and his finance minister Manmohan Singh slowly lifted the iron grip of the state on industry and liberalized trade policy. Successive governments have carried forward reforms, strengthening the private sector which now contributes almost 80% to the country’s economy.
The once competition shy Indian corporate sector has come into its own and taken on global players. That ‘s not all, Indian firms have gone ahead and acquired global companies, such as Tata Steel’s acquisition of Corus and earlier this year, Bharti Airtel’s $9 billion buyout of the African operations of Kuwait’s Zain. Liberalization of trade policy and abolition of import licensing has led to an increase in trade. The reduction in import tariffs from as high as 400% has gone a long way attracting foreign investment. Foreign exchange reserves now stands at $ 295 billion putting India among the top ten countries holding such high reserves.
The most visible impact of liberalization has been the rapid growth in the Information Technology (IT) and IT enabled business and the telecom sector. Virtually non-existent in 1991, the IT and business process outsourcing sectors reflect the impressive gains from the opening up of the economy. The sector’s revenues as a proportion of GDP are expected to rise to 6.1% in 2010 from 1.2% in 1998. It has created 2 million jobs in a very short span.
The success of the outsourcing sector has been possible due to the telecom revolution which has completely transformed the communications landscape of the country. Owning a telephone two decades ago was a status symbol. But policy changes and reforms have meant that it was emerged as common man’s necessity. Latest data shows that India has nearly 700 million mobile phone connections. The telecom sector was liberalized in 1992 and the private sector was allowed to participate but it was only in 1995 that mobile telephones arrived in India.
We had to go to our neighbor’s house to receive telephone calls from my cousin in London. We had to wait for almost an hour for her to call and we would all be in a hurry to finish the call.
Economists say opening up the economy and dismantling of controls and restrictions helped in rapid economic expansion. The Indian economy has come a long way from the so called Hindu growth rate of 3.5% in the 1950s to 1980. GDP growth was below 6% in the 1990s but shot up to above 7% in early 2000s and hovers around 8-9 % now.
Source: Education Times