Page 47 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 4: Economic Reforms in India Since 1991

irrigation provides water-security to the peasant in case of failure of rains. The slowing down Notes
of the growth rate of irrigated area under minor irrigation from 3.5 per cent during eighties to
2.3 percent during nineties is another contributing factor to slow-down of over-all agricultural
growth. Economic reforms did not pay adequate attention to expansion of irrigation and this is
a major sin responsible for low growth of agricultural production and productivity during the
nineties.
The upshot of the entire analysis is that the major sin of economic reforms is gross neglect of
agriculture— the mainstay of livelihood of over 60% of the population. This is more so in view
of the fact that though India had seven good monsoon years in succession, agricultural
production indicated year-to-year fluctuations. This casts a shadow on sustainability of
agricultural growth, unless there is a reorientation of priorities with much greater emphasis on
agriculture and rural industrialisation. The state, instead of withdrawing from investment in
agriculture, irrigation and rural infrastructure, has to strengthen public sector investment in
these areas.
4. Economic Reforms and Industrial Growth
Economic Reforms were mainly intended to remove the bottlenecks, which acted as obstacles
in industrial production. To pursue this goal, Industrial licensing was abolished in all but 18
Industries. Later the government delicensed several others. During 1998-99, three Industries
viz., (i) Coal and Lignite, (ii) Petroleum (other than crude and its distillation products), and (iii)
Sugar were delicensed. Accordingly, there are only six Industries now under compulsory
licensing. Two Industries, viz., Coal and lignite were taken out from the list of Industries reserved
for public sector. At present, there are only four industries reserved for the public sector. Put
another way, it can be stated that the reform process dismantled the system of Industrial licensing
which was considered to be a main roadblock in the progress of industrial development.
Despite all this, data provided in table 9 reveals where as the eighties (1981-82 to 1990-91).
general index of Industrial production recorded an annual average growth rate of 7.8 per cent,
growth rate of IIP slowed down to 7.2 per cent during 1993-94 to 2009-10. In manufacturing, it
increased from 7.6 per cent in the ’80s to 7.7 per cent, and in electricity it declined from 9 per
cent to 5.5 per cent and in mining & quarrying it slumped from 8.3 per cent to just 3.9 per cent.
Thus, the expectations that growth of IIP would be stimulated did not materialise. Further if we
break the period from 1993-94 to 2009-10 in two parts namely 1993-94 to 2000-01 and 2000-01 to
2009-10, we find that in the second period growth rate decelerated in case of electricity, while it
accelerated in case of mining and quarrying. In manufacturing it remained at the same level.
Table 1 provides growth rates of Industrial production on the basis of use-based classification.
The data reveal that but for intermediate goods, which recorded a slightly higher growth rate
of 6.3 per cent in post-reform period as compared to 5.9 per cent in the eighties, in all the other
sectors, growth rates recorded in the eighties were higher In the capital goods sector, growth
rate slipped to 10.7 per cent in the post-reform period as against a robust growth rate of 11.5 per
cent in the eighties.
Even in consumer durables, a decline in annual average growth rate was observed 9.2 per cent
as against a much higher growth rate of about 13.9 per cent in the eighties.
From the index of growth rates of industrial production, it becomes evident that the performance
of the industrial production during 1995-96 and 2009-10, which is generally identified as a
period of wide-ranging reforms in the industrial sector, was not up to the mark. It failed even to
equal the performance observed in the eighties, not to speak of improving the performance as
a consequence of the reform process in post-reform period. The failure of the basic goods and
capital goods sector really put a question mark on the success of the reform process.

LOVELY PROFESSIONAL UNIVERSITY 41