Economics · Ch 9 — Liberalisation, Privatisation and Globalisation: An Appraisal
Indian Economy During Reforms: An Assessment
Indian Economy During Reforms: An Assessment
The reform process launched in 1991 has now completed three decades, which makes it possible to look back and assess how the Indian economy has actually performed during this period. In economics, the growth of an economy is measured by its Gross Domestic Product (GDP), the total value of goods and services produced.
The overall growth record:
Post-1991 India witnessed a rapid growth in GDP on a continual basis for two decades. The growth of GDP increased from 5.6 per cent during 1980–91 to 8.2 per cent during 2007–12. However, this headline improvement hides an important shift in the composition of growth.
The following table shows the growth of GDP and of its major sectors over successive periods:
| Sector | 1980-91 | 1992-2001 | 2002-07 | 2007-12 | 2012-13 | 2013-14 | 2014-15 |
|---|---|---|---|---|---|---|---|
| Agriculture | 3.6 | 3.3 | 2.3 | 3.2 | 1.5 | 4.2 | −0.2* |
| Industry | 7.1 | 6.5 | 9.4 | 7.4 | 3.6 | 5.0 | 7.0* |
| Services | 6.7 | 8.2 | 7.8 | 10.0 | 8.1 | 7.8 | 9.8* |
| Total | 5.6 | 6.4 | 7.8 | 8.2 | 5.6 | 6.6 | 7.4 |
Source: Economic Survey for various years, Ministry of Finance, Government of India. …
What the sector-wise picture shows:
During the reform period the growth of agriculture declined, the industrial sector showed fluctuation, and the growth of the service sector went up. This indicates that GDP growth has been driven mainly by growth in the service sector. During 2012–15 there was a setback in the growth rates of the different sectors witnessed post-1991: while agriculture recorded a high growth rate during 2013–14, this sector witnessed negative growth in the following year, 2014-15. The service sector continued to grow at a high level — higher than the overall GDP growth in 2014-15 — recording a growth rate of 9.8 per cent that year. The industrial sector, after a steep decline in 2012–13, returned to continuous positive growth in the years that followed.
Foreign investment and reserves:
The opening of the economy led to a rapid increase in foreign direct investment and foreign exchange reserves. Foreign investment — which includes foreign direct investment (FDI) and foreign institutional investment (FII) — rose from about 100 million US dollars in 1990–91 to about 30 billion US dollars in 2017–18. Foreign exchange reserves increased from about 6 billion US dollars in 1990–91 to about 413 billion US dollars in 2018–19, making India one of the largest holders of foreign exchange reserves in the world.
Exports and prices: …