Page 44 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Indian Economic Policy

Notes achievements and shortcomings of economic reforms to understand as to whether the country is
moving in the right direction, or alternatively, there is a need to reform the reform process undertaken
during the nineties.
Before undertaking an appraisal of the economic reforms, it would be desirable to state the goals of
the process of economic development. The reforms process while accelerating economic development
should lead thus to the following ends :
(i) A higher rate of growth;
(ii) an enlargement of employment potential leading to full employment;
(iii) reduction of population living below the poverty line;
(iv) promotion of equity leading to a better deal for the poor and less well-off sections of our society;
and
(v) reduction of regional disparities between the rich and the poor states of India.
It would be of interest to examine economic reforms in terms of goals of the society listed above.
1. GDP Growth and Poverty reduction
There is no doubt that economic reforms have been able to promote a relatively higher growth.
After the teething troubles of the first two years viz., 1991-92 and 1992-93, the growth rate
during 1993-94 to 1997-98 has averaged to more than 7 per cent per annum. After 1991 -92, the
momentum of growth has been maintained providing increasing evidence that the growth
potential has improved as a result of the reforms initiated in 1991.
If we compare the annual average growth rate during the pre-reform period (1980-81 to 1990-
91) which was of the order of 5.2 per cent per annum, then the post-reform decade (1990-91 to
2000-01) also shows a little higher average annual growth rate of 5.8 per cent of real GDP.
However, there is a distinct improvement in growth rate of GDP during the 5-year period
(2000-01 to 2003-04) to an average of 6.0 per cent and further to 8.7 percent in next 5-years from
2004-05 to 2009-10.
(a) Economic Reforms and Reduction of Poverty
Dr. Gaurav Datt of the World Bank in his article “Has Poverty Declined Since Economic
Reforms ?” has compared the decline in head-count index, poverty gap index and squared
poverty gap index for rural and urban India in the pre-reform and the post-reform period.
The main conclusions of the study are as under :
1. Mid-1980s seems to be a significant watershed in the evolution of living standards
in India. ... While there was a marked decline in both rural and urban poverty rates
between 1973-74 and 1986-87, there is no sign of anything comparable.
2. For the rural sector, the results indicate that while there was a significant trend
decline in all the three poverty measures up to mid-1991 (at an annual rate of 2.7 per
cent for the headcount index, 4.5 per cent for the poverty gap and 5.9 per cent for the
squared poverty gap index), the rate of decline since then is not significantly different
from zero.
3. For the urban sector, in the pre-reform period (1973-74 to 1990-91), the results indicate
a declining trend in all the three poverty measures upto mid-1991 (at an annual rate
of 2.2 per cent for headcount index, 2.8 per cent for poverty gap and 3.1 per cent for
squared poverty gap), the same trend is continued even in the post-reform period
(1990-91 to 1996-97) and all the three poverty measures register a decline (at an
annual rate of 2.2 per cent for headcount index, 2.65 per cent for poverty gap and 3.7
per cent for squared poverty gap).
4. While the urban sector appears to have continued its trajectory of growth and poverty
reduction through the 1990s, rural poverty reduction was choked off by lack of
rural growth.

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