Page 117 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 10: Critique of Indian Economy Policies—Pre and Post Reforms

the post-reform 12-year period (1990-91 to 2002-03) also suggests an average growth rate of 5.5%. Notes
Thus, the claim of the advocates of reforms is not borne out by facts. It means the reform process has
yet to establish its distinct superiority over the pre-reform period in the country.
Economic Reforms and Reduction of Poverty : According to Dr. S.P. Gupta, former member, Planning
Commission, the poverty reduction over 1983 to 1990-91 was around 3.1% per annum, but it reversed
to 1% in the 1990s (1990-91 and 1997). However, the GDP growth in India between 1983 to 1990-91
was around 5.6 % and between 1990-91 and 1997, this is expected to go beyond 5.7%. In this way, Dr.
Gupta, showed the pro-elitist bias of economic reforms. Dr. Gaurav Datt of the World Bank has also
drawn similar conclusions as given below :
1. In the urban sector, index of poverty declined at the annual average rate of 2.2% during 1973-74
and 1990-91 and the same trend is continued in the post-reform period (1990-91 to 1996-97).
2. In the rural sector, headcount index of poverty declined at the annual rate of 2.7% for the period
1973-74 and 1990-91 but the rate of decline is not significantly different from zero since then.
3. In both rural and urban poverty rates, there was a marked decline in 1973-74 with no such
comparison later.
4. The march of poverty reduction in the process of growth continues in the urban sector but rural
poverty was choked off by lack of rural growth in the country.
According to Dr. Gaurav Datt, stagnation in rural growth is the basic cause of slowdown in poverty
reduction.
GDP Growth, Employment Growth and Poverty : Although GDP growth during the 1990s (especially
after 1993-94) was quite high, it did not result in a corresponding decline in poverty. This was because
of slow down of employment growth. The total employment increased from 3,026 lakhs in 1983 to
about 3,568 lakhs in 1990-91 and then rose further to 3,829 lakhs in 1997-98. The rate of growth of
employment works out to be 2.39% per annum during 1983 and 1990-91. So far as employment is
concerned, a very disappointing situation arose in the postreform period (1990-91 to 1997-98). During
this period, the growth rate of employment sharply declined to a mere 1.0% per annum. The reform
process concentrated at the corporate yet the growth rate of employment in organised sector was
simply 0.6% which was just one-third of the growth of employment witnessed in the pre-reform
period. In the unorganised sector, the growth rate of employment which was of the order of 2.41 per
cent during the pre-reform period (1983 to 1990-91), also declined to 1.1 per cent in the post-reform
period. Thus, the trickle down effects of growth did not benefit the poor. According to Dr S.P. Gupta,
high growth in employment in India has almost always been associated with some reduction in
poverty. In the 1990s, a low growth of employment is seen to be associated with an increase in poverty
in the country.
Economic Reforms and Industrial Growth : Among the reforms, industrial licensing was abolished
in all but 15 industries. As a result, the reform process was able to dismantle the system of industrial
licensing in order to accelerate industrial production growth. However, we don’t see any sharp
acceleration of industrial production. The main reason for decrease in the growth of Index of Industrial
Production (IIP) was a sharp decline in electricity generation from 9.0% during the pre-reform period
to 5.7% in the post-reform period. At the same time, in mining and quarrying, the index of production
slumped from 8.0% to 3.8%. Thus, although the wide-ranging industrial reforms were aimed at
boosting industrial growth, but the ground reality as revealed by the data only points to the failure of
the reform process. Moreover, the failure was more pronounced in basic and capital goods sectors as
also in consumer durables in the economy.
Performance of Public Sector Enterprises : In the PSUs, gross profit as a%age of capital employed
was 11.61% in 1993-94, it improved to 15.88 per cent in 1995. This further improved to 17.5% in 2002-
03. This type of trend was noticed in net profit which improved from 2.84% in 1993-94 to 7.7% in
2003-04. It shows an improvement in the performance of Central Government Enterprises. Thus, it is
not considered desirable to undertake disinvestment of CPSUs. It would be far more rewarding if the
Government gave them greater autonomy to undertake business decisions.
Economic Reforms, India’s Foreign Trade and Balance of Payments : Boosting exports to improve
India’s balance of trade position has been one of the major objectives of india’s economic reforms.

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