Economic Reforms in India

Since July 1991, India has been taking up economic reforms, to achieve higher rates of economic growth so that socioeconomic problems like unemployment, poverty, shortage of essential goods and services, regional economic imbalances and so on can be successfully solved. The force behind the reforms is

• Indian economy reached a level of growth and strength to benefit from an open market economy.
• Private sector in India had come of age and was willing and capable of playing a major role.
• Indian economy needed to integrate with the world with all the advantages like capital flows, technology, higher level of exports, state of art stock markets, Indian corporates can raise finances abroad and so on.

The country under the leadership of Dr. Manmohan Singh, Union Finance minister (1991-1996 and Prime Minister since 2004) converted the economic crisis — caused by , domestic cumulative problems of economy, political instability and gulf crisis-into an opportunity to initiate and institutionalize economic reforms to open up the economy. The deep crisis in 1991 could not be solved by superficial solutions. Therefore, structural reforms were taken up.

It was realized that by closing economy to global influences, the country was missing on technology developments and also gains from global trade. India needed exports, FDI and FII for stability on the balance of payments front and higher growth rates for social development. Worldwide, countries were embracing market model of growth, for example China, with proven results. So, India could make the historic shift from centralized planning to market-based model of growth.