Germany had that one single dramatic day – on 9th of Nov, 1989 – the day that marked the fall of Berlin wall and events that led to the reunification of Germany.
USSR had a similar dramatic moment on 19th Aug, 1991 - when Yeltsin stood on top of a tank and addressed people in Moscow – that lead to Yeltsin taking over USSR and eventually the breaking up of USSR into 14 new countries.
India’s economic revolution in 1991 did not have any such dramatic event– But if one has to look back and find one such single day when it all happened – it was 24th of July 1991 – exactly 20 years back. That was the day India dismantled the license raj – the mesh of government controls, through licenses and tariffs, used to control all industrial activities in the country in the name of centralized planning.
That was the day, when Manmohan Singh told the Parliament that “the room for manoeuvre, to live on borrowed money or time, does not exist any more.” He ended by paraphrasing Victor Hugo: “No power on earth can stop an idea whose time has come.”
The opening up of Indian economy in 1991 has had far reaching changes in our society – in 20 years, we have become richer ( or less poorer as some put it) - our GDP per person (in 2010 prices) has gone up from $503 to $1265. The official poverty rate in India has gone down from 45.3% to 32.3%. Our GDP has grown almost four times from $433 B to $ 1538 B and our forex reserves has shot up from $1 billion in 1991 to about $300 B now. Foreign investment also rose from $150 million in 1991 to $23.5 B in 2010. The markets have expanded, consumption levels have gone up and companies in virtually all industries have expanded. Adult literacy has improved from 48% to 68% and today we have 49 Billionaires in the Forbes list as compared to 1 in 1990.
What they achieved in that “Summer of 1991” was admirable – to dismantle 45 years of established system in 6 months would not have been easy – one has to note that all these reformers were part of the system all their lives - to fight such a well entrenched system, with people who have been part of the system for years must have been difficult.
Unfortunately for India, this was the reason why the reforms only went half way - what was absolutely required, was done. What was not urgent, was left for the future and was never followed up. I believe that these reformers were opportunistic - they were not 100% reformers at heart – they left it half way.
Today the license raj is gone – but the inspector raj is thriving –especially in the excise and customs duty area.
The size of Government has gone up since 1991.
93% of working-age Indians, estimated now at 500 million, continue to work informally—outside of the organized sector and without proper labour contracts - India’s labour laws makes it very difficult to hire and fire labour in India –it protects existing workers – but have kept new workers out of job.
Private companies even if they are bankrupt cannot be closed easily in India.
India has still not opened up Agriculture sector and is subsidising this sector very heavily.
India has still not reformed Education and Healthcare.
Infrastructure and retail is being opened up very slowly.
Despite all this, I believe, India’s time has come – we have reached the tipping point beyond which there is no return – increasing aspirations of Indians to improve their lives and the presence of democratic institutions in India will ensure that the politicians will, over time, improve their governance – our increasing consumption will grow the domestic economy - and our population demographics will ensure that we have lots of youth which will keep the labour costs low and companies technologically savvy and make us globally competitive in industries where manpower is a key cost component.
So I would Iike to remember that day 20 years back as a great step forward and I am grateful that I am living in these exciting times in India.
