Inherently,
all the economic policies made in India are for self-sufficiency. There is a
subtle feeling that importing things from abroad or depending on other nations
is to be the slaves of these nations.This imagery of slavery is quite
colorful, but it is precisely how we, as society view ourselves during under
the British rule- as slaves (read: Swadeshi Movement1). And so, with
the primary objective of being economically independent, India (the
policymakers) set out to establish avenues for its self-sustenance, above all
else.
If we consider this argument, most of the
oppositions against the new economic policies become clear. Apart from all the
logic of making India a dumping ground or those small businesses will extinguish
with the entry of retail giants like Walmart, TESCO etc., this inherent ‘prudence’
also contributes to the dilemma.Needless to say, that India was a Socialist
economy rather than a pro-market economy.
In retrospect,
beginning in the late 1940s, the Indian government sought to achieve economic
independence by protecting and controlling everything around the economy,
including both external and internal competition. In forging this command
economy, the government removed control from individuals, initiative from
entrepreneurs, and responsibility from firms and planners. Moving on, in 1960s,
due to the process of Nationalization2, the country turned even
further inward. This resulted in the remaining foreign firms leaving the
country and prevented large firms from investing in any core segments in India,
and destroyed further efforts to expand or grow in scale and productivity.
In 1980s, the
inefficiency of the Indian Economy and its unattractiveness to capital inflows,
led to India losing access to foreign markets. By 1985, the gross fiscal
deficit rose to 10.4% and by 1990-91, it had risen to 12.7% of the GDP. The
government was close to default, its central bank had refused new credit and
foreign exchange reserves had reduced to such a point that India could barely
finance three weeks’ worth of imports. The gravity of the situation could be
judged by the fact that India had to airlift its gold reserves to pledge it
with International Monetary Fund (IMF) for a loan3. Clearly, India
was in a deep crisis.
It was then
that the leaders of our country felt the need to revamp the economy. In June 1991,
the then prime minister P.V. Narsimha Rao along with the then finance minister
Dr Manmohan Singh, opened the economy to trade, reduced License Raj, and begin
a phase of liberalization that has transformed the nation.
Reforms are
very much necessary in this age of Globalization. Without reforms, we risk a
sharp and continuing slowdown of the economy which we cannot afford given the
imperative need to generate jobs and incomes for a large population.
Currently, FDI
limit (with much hue and cry) has been increased in India. FDI helps to bring
in greater capital, liquidity, increased efficiency and superior technology
which help an economy to further grow. And the biggest beneficiaries of this
all would be we- the consumers as we would get the best of the goods at
competitive prices.As for the small businesses- Pop’s & Mom’s stores,
majority of them will still be there and sooner or later will learn to coexist.
References:
*With inputs from ‘China, India
and the United States – The Future of Economic Supremacy’ by Dr Peter
Rodriguez, Darden School of Business, University of Virginia.
1,2.
Wikipedia.org
3. “I think a
stimulus package is necessary, yes. Bailouts, no” by LordDesai,
in business.rediff.com 25 May, 2009
_________________________________________________________________________________
wirtten by Shantanu Kumar (shantanu.pgdm14c@greatlakes.edu.in)
