The lessons of India’s economic reforms of 1991

The economic reforms of 1991 marked a turning point for India and were characterised by a growth-oriented approach. From 1991, the Indian economy ascended from its long period of 3-3.5% annual real growth to a new normal of 6-6.5% over the next 25 years. The economy is now about five times the size it was in 1991. However, India is still a low middle-income emerging economy and has miles to go before poverty is eliminated.

In June 2021, Hindustan Times ran a series commemorating 30 years of the economic reforms, with contributions from Rakesh Mohan, President and Distinguished Fellow, CSEP, and Montek Singh Ahluwalia, Distinguished Fellow, CSEP.

From 1991, the lessons for the India of 2021

Thirty years ago, reforms energised the Indian economy and lifted millions out of poverty. In this piece, Montek Singh Ahluwalia, former deputy chairperson of the Planning Commission and one of the architects of the 1991 reforms, writes that as India grapples with a post-pandemic economic crisis, there are lessons on what to reform and how.

The 1991 strategy had two components — reducing the fiscal deficit and implementing structural reforms. Both are relevant today, but with differences. In addition to that, India needs to move away from a “long list of reforms” approach towards a more strategic approach, focussing on the most critical reforms needed immediately. Ahluwalia argues that it is time to outline a credible new reform agenda that will not just bring GDP back to pre-crisis levels, but also ensure growth rates higher than it had when it entered the pandemic. 

Read the full piece here.

The 1991 reforms: The right people at a tight time

In this piece, Rakesh Mohan, who was the economic advisor to the Government of India in the industry ministry in 1991, argues that the reforms were a product of an objective economic crisis, the presence of bureaucratic and technocratic talent in key positions, and an available blueprint on how to proceed. Mohan revisits the moment in time to chronicle how the economic reforms, a significant redirection in Indian economic policy, came into being.

Read the full piece here.

India needs a third generation of reforms

In India’s development journey, two major policy departures in its approach to growth and development stand out. In each case, there was an acceleration in growth, which then started petering out. In this piece, based on a CSEP Working Paper, Rakesh Mohan argues that India is at a similar crossroads and need a third generation of economic reforms now. In a key departure  from current received wisdom, Mohan emphasises the role of the State in promoting economic growth. Countries that have been most successful in maintaining high sustained growth rates have done so by setting up growth-promoting governmental institutions to coordinate public investments, while also incentivising the private sector to make investments necessary for a growing, dynamic economy.

Read the full piece.