The transition period from 1991 to 2018 has seen India emerge as a potential superpower, the only Asian power that can overtake mighty China in the 21st century. In July 1991, the Indian government for the first time devalued the rupee and thus began India’s growth story.
In 1991, when Mr.Singh became the finance minister in the Congress government led by P V Narasimha Rao, India was on the brink of bankruptcy.
Its fiscal deficit was close to 8.5 per cent of the Gross Domestic Product; the balance of payments deficit was huge and the current account deficit was close to 3.5 per cent of GDP.India’s foreign exchange reserves were barely a billion dollars — (today forex reserves stand at around $400 billion) and foreign direct investment was almost non-existent.
In his maiden speech as the union finance minister, Singh quoted one of the greatest French writers, Victor Hugo: “No power on earth can stop an idea whose time has come.” And rightly said this was an idea that changed the Indian nation for better.He began the restructuring process of the Indian economy and opened up the economy to competition and foreign investment.Singh, unshackled the country from the bureaucratic controls and licence-permit raj, and took the economy to a high growth path of 6-7 per cent during his five-year stint at North Block.Singh had also devalued the rupee and slashed subsidies for domestically produced goods.The reforms introduced by Singh — which included the reduction of several redundant socialist policies — are regarded as primarily responsible for the present economic boom the country enjoys, and considered irreversible in face of the real progress achieved.By 1994, when he presented his historic budget, the economy was well on its way to recovery. Nearly 1 crore (10 million) new jobs were created, an environment of liberalisation was set in motion and the foundation of an information technology and telecom revolution was laid. Under Singh, the government entered into an understanding with the Reserve Bank of India to deny itself the right to ‘draw’ on the RBI to fund its deficit. This put paid to the unlimited monetization of the fiscal deficit.Singh also got the government off the backs of the people of India, particularly India’s entrepreneurs. He introduced more competition, both internal competition, and external competition; simplified the tax structure and tried to create an environment conducive to the growth of the business.A strong proponent of globalization, Singh felt free trade and India’s labor-intensive products can find markets, which will help India generate new jobs and relieve poverty.
When India embarked on economic reforms in 1991, it was akin to a beggar that looked for funds from the International Development Association and the World Bank. Almost 25 years later, India today has become a donor country. A line of credit of $10 billion to Africa, $2 billion to Bangladesh shows how reforms have transformed Indian economy. Remittances from NRIs total $75 billion a year, and foreign direct and portfolio investment often exceed $60 billion per year. Commercial loans exceed $35 billion. It’s per capita income has shot up from $375 in 2011 to $1,700 today, taking it from low-income to middle-income status. India is making a serious bid to overtake China thanks to our young tech-savvy English-speaking population. The 25-years of reforms have resulted in catapulting India as the third-largest economy in the world after China and the US. The best part is that India has overtaken all European economies and Japan.
The recent budget estimates released by the Finance Minister, Arun Jaitley show that India has become the fastest-growing major economy in the world, touching 7.6 percent in 2016 after a similar rate in 2015. In fact, India accelerated to become a miracle economy, averaging 8 percent growth after the year 2003. Growth rate wise, much against what sceptics thought out, India has already overtaken China.
India has regained its title as the world’s fastest-growing major economy, after figures confirmed it grew more than 7 percent on an annualized basis in the three months to December, overtaking China after a year of lagging behind.