India’s 1991 liberalisation leap and lessons for today: Montek Singh Ahluwalia

The reforms were hugely successful but a lot remains to be done, says one of the architects of the transition

The reforms were aimed at unleashing the energies of the private sector to accelerate economic growth and to do so in a manner that ensured an adequate flow of benefits to the poor. They certainly succeeded in this objective. The full benefits took time to materialise because a gradualist approach was adopted — entirely understandable in a democracy — but the results are dramatic if we look at a longer time frame. The GDP growth averaged 7% in the 25 years from 1992 to 2017, compared with an average of 5% in the preceding ten years and 4% in the preceding 20! And as growth accelerated, poverty declined. Between 2004-05 and 2011-12, the last year for which official data on poverty are available, about 140 million people were pulled above the poverty line. This is not to say that there were no shortcomings. Some of the reforms begun in 1991, especially in the financial sector, have yet to be completed. We have not done as much as we should have in the health and education sectors; environmental concerns have not been adequately built into our development strategy. This only shows that a great deal remains to be done. After all, we are still at the lower end of the middle-income group of countries and many more reforms are needed to get to the top of the group.