The Effect of Indian Reforms - Essay Example

INDIAN REFORMS The Indian Reforms have changed the Indian economic scene in many ways. What was once a socialistic economy following the pattern of the Russian design made a U turn and turned capitalistic and market oriented. Although this decision was not of choice but forced on them by circumstances and the Financial Institutions, they were prudent enough to adopt it as a gradual process. As a result this reform policy not only averted a crisis, it also changed the economic landscape irreversibly. The abysmal GDP, the barometer of economic success and prowess improved dramatically. The Global impact of this change can assessed from the fact that Indian economy is now attracting FDI at an increasing speed and it is offering support to world economies through its purchasing power parity and huge market. The reforms have however not yet benefited the entire population and in the interim the poor-rich inequalities have increased and need to be attended to with speed. Also the neglected agricultural sector needs to be reformed as well to give a balance to the reform process and the economy at large. It has been concluded that the economy has certainly improved since the reforms were initiated. TABLE OF CONTENTS Page CHAPTER I 1 Introduction 4 2 Aims and Objectives 5 CHAPTER II 1 History of Reforms 6 2 Grounds for Reforms 6 2.1 Stabilization 6 2.2 Economic Restructuring 8 3 The Economic Crisis of 1990-91 8 4 Liberalization & Globalization 10 5 Privatization 13 CHAPTER III 1 Pro-Poor or Pro-Rich Reforms 16 2 Domestic Savings 17 3 Foreign Direct Investments (FDI) 18 CHAPTER 1V 1 Econometrics 20 CHAPTER V 1 Economic Outlook 22 2 Conclusions 22 Bibliography 25 CHAPTER I 1 Introduction The days of imperialism and colonialism are pat and in this new age of globalization the world has veered to the view that all economies are interdependent and that failure of one would have deep repercussion over the rest. This has brought about a spate of reforms that are suggested or forced upon ailing economies, in the overall interest of the world economy. Theoretically the choice has been, initiated and led by International Financial Institutions, of big bang and shock therapy. But this formula is applicable in authoritarian regimes that force them on their economies and countries. The other approach, one that has not been largely favoured, is gradual and incremental. This has always been looked upon as slow, unwieldy and risky inasmuch that its decisions can be reversed quickly towards status quo on the first signs of failure or strain. India however chose the latter method and spread its reforms and the liberalization and globalization process to stretch over almost two decades. In the sixties it was unimaginable that from a net importer of food, India could become an occasional exporter about forty years later. Similarly, a receiver of foreign aid became a donor, even if small one. And, foreign exchange, once the great constraint, would eventually become plentiful. The Indian Economic reforms have become a central point of discussion mainly due to the growing prominence of Indian business activity in the last two years. The continuous average 9% growths over last few years, the booming stock indices, and the spate of Indian corporates in international acquisitions have been noticed with admiration. The question here arises that whether the Indian Reforms policy of the 80’s and 90’s has come to fruition and benefited the country? What impact have these reforms had on the economy and on the common man? How stable or vulnerable is the Indian economy as a result of these reforms? 2 Aims and Objectives The Indian economy has been through three economic phases. In the first phase (1951-63) the growth of GDP was slow. In 1950 the GDP at Factor Cost was Rs. 42,871 crores. In 1963 it rose to Rs, 69,581 crores. The country was largely agricultural industrial economy was in its infancy. In the second phase (1964-90) there was higher economic growth primarily because of the boost in agriculture consequent upon the Green Revolution and a more established industrial base. By 1990 GDP rose to Rs. 2,12,253 crores. But in the third and current phase beginning 1991 there has been much higher growth rates with most contribution coming from Industrial and Services sectors. The GDP stands at Rs. 2,848,157 crores in 2006-07. The aim of this study is to analyse the three major reforms that were undertaken in India and during 1980-91 and to assess their impact during the last twenty years. The study will also attempt to provide econometric data in support of its objective that the Indian reforms have been widespread and that they have had a positive impact on its economy and, that despite adversities and obstacles; continue to do so to the present day. CHAPTER II 1 History of Reforms Soon after Independence, India declared its policy of having a mixed economy balancing both public (government) and private investments in an attempt to industrialize the largely agricultural economy. The tilt was however on public institutions and a socialistic pattern of economy, greatly influenced by the USSR was commissioned. Industry was indeed in a nascent stage, and barring a handful of names, was largely non-existent. This state persisted for over three decades and Joshi and Little (1996) stated that even as late as June 1991 India was the most autarkic country outside the communist world. The IMF also noted that India was "one of the most heavily regulated economies in the world." 2 Grounds for Reforms The main grounds for the reforms in India can be divided into two main areas. 2.1 Stabilization: It is a popular belief that the OPEC’s hike in oil prices, the collapse of commodity prices and the results of imbalanced socialists policies were the reasons for ushering in reforms. The external factors were responsible partially but the real precipitation came from the unrelenting fiscal deficits that were budgeted every year for more than a decade to finance the state. Therefore more than the external shocks, it was the fallout of this faulted economic policy. During the entire decade of the seventies the average fiscal deficit was 3.9% of GDP. But this rose to 6.3 percent during 1980-84, and further to 8.2 percent during 1985-1989 and 8.4 percent in 1990-91. (Kirit S. Parikh 1997). This was bankrolled with printing additional currency and market borrowing and this vicious circle spiraled from year to year. Persistent fiscal deficits led to unrelenting rise in inflation. This affected the balance of payments situation by making exports increasingly uncompetitive for which they required support with higher export subsidies. Concurrently increased demand, fuelled by the fiscal deficits that were reflected in the inflation, resulted in larger imports especially oil and petroleum products, to satisfy it. Finance Minister Madhu Dandavate stated this in his 1990-91 budget speech as "the fiscal imbalance is the root cause of the twin problems of inflation and the difficult balance of payments position." (Finance Ministers Budget Speeches, II, p. 1253). Meanwhile Indian foreign debt more than doubled during 1980-85 and 1990-91. This had stepped up the growth of the economy but the cost was unsustainable fiscal extravagance and it had to be paid for at some stage. The macro economic imbalances were ignored, imports were progressively liberalized to fuel growth and the outcome was the external debt trap that showed finally in the balance of payment crisis. This led to the foreign banks withholding further funds and the fall in inward remittances precipitating the situation further and bringing the economy on the verge of collapse. This was the time in 1991-92 that the incumbent government was forced to find a solution and that was the beginning of serious reforms. 2.2 Economic Restructuring Tentative liberalization that had taken place during 1980-90 had raised the growth rate from around 2.5% to around 5% and gave a glimpse of the possibilities that lay ahead. This encouraged the initiation of the process of economic restructuring alongside stabilization of the economy. It was felt that the efforts on stabilization will remain unrealized unless there was a restructuring that will pave the way for further growth and the shackles of socialisms were loosened. The driver for these reforms were the hunger for increasing efficiencies in production to be able to face competition at international levels; both to enhance productivity domestically and to be able to increase exports. Investments and technologies were allowed to come in to achieve this. Public sector had to come out of its set mould and be ready to look for competitive edge for survival. The financial sector required to be modernized and the economy had to become an enabler rather than a sustainer. From looking inward at nationalism the thrust was to look outward towards globalization. India finally wanted to be a part of the changing global economy. The goal was turning into a major economic player in the world, and to raise the standards of living of the huge and still growing population. The previous policies had indeed isolated the country from the world due to its highly regulated nature. The structural changes that were introduced had less to do with the pressures put on by foreign institutions and banks and more with the realization that the earlier policies had failed to deliver the objectives of expected prosperity to the masses. They were a result of failed experiments and experiences. 3 The Economic Crisis of 1990-91 There were a number of internal and external contributory factors that finally resulted in the economic crisis of 1990-91. Among the internal factors was the growing public debt. By 1986-87 the net liabilities of the Government reached an alarming 12% of the GDP. These deficits had to be met by domestic borrowings; as a result the domestic debt of the government accrued rapidly and rose from 35 percent of GDP at the end of 1980-81 to an all time high of 53 percent of GDP at the end of 1990-91.1 The borrowing from Reserve Bank of India (RBI) was also the highest in that year at about 5% of GDP (Dandekar 1992). interest payments alone rose from Rs.22.5 billion in 1980-81 to a staggering Rs.199.4 billion in 1990-91.The Fourth Pay Commission also recommended a hike in the emoluments of both central and state government employees, and this put an additional burden of approximately 18% of the wage bill on the exchequer. In 1987-88 the country faced a drought and the diversion of relief resources added to the financial woes besides reducing the revenues by about 5% a year for two years. The decade of the eighties also saw unprecedented growth in government expenditure. Subsidies grew at alarming rate to cover high costs of inputs like fertilizers. While they were 8.5% equivalent to Rs 19.1 billion in 1980-81, these rose to 10.2% by 1990-91 amounting to Rs 107.2 billion. Fiscal deficits were sought to be covered by printing currency and resorting to further borrowings. As a last resort household savings that were phenomenal were diverted to sustain public debt thereby denying resources for private investments. The external factors were the two oil shocks that rocked India along with the rest of the world. Extensive protectionism and its prohibitive cost was the other one. There was loss of competitiveness and more subsidies were doled out to promote exports to get foreign exchange required to pay for necessary imports. According to the Economic Survey 1992-93, a relatively large sum of $3.7billion was spent on oil purchases in 1989-90. The adverse exchange rate movements also played a vital role in the deteriorating balance of trade that became acute by the early nineties. Predictably a balance of payment crisis materialized in early 1991. The $ 2.3 billion current account deficit equaling 1.2% of GDP of the 80’s ballooned to $ 5.5 billion equaling 2.2% of GDP during the second half of the eighties. Large scale commercial borrowings and short term debts were resorted to for meeting shortfalls. This further aggravated the situation as there was no rise in income to pay for these over time. By the end of 1990-91 the external debt, including deposits by the Non-Resident Indians (NRI), climbed to 23% of the GDP. The debt service burden alone rose to 30% of the export earnings. The result was obvious. Finally the economic catastrophe became real triggered by the twin liquidity crisis of early and mid 1991. In both cases foreign exchange reserves dropped significantly and the government had to physically mortgage its gold reserves to get special assistance from the IMF to tide over the problem. Bilateral assistance from Germany and Japan also came to the rescue among other friendly nations. The government barely avoided a default on its debt service obligation and this pushed the agenda of reforms on top of everything else. The stability and structural reforms were undertaken and the proper reforms era officially took off. 4 Liberalization & Globalization During the 80’s some liberalization movement was attempted by Mrs. Indira Gandhi and later by Rajiv Gandhi, but it was rather feeble and ineffective, although it must be admitted that this tentative step became the foundation of bolder attempts in the nineties. The reforms of 1991-97 were dramatic in the sense that it was a U turn from protectionism to open market policies. Finally globalization started to replace nationalism. Privatization that had already begun in the 80’s and got accelerated. The scope of these reforms was both external and internal. On the external front the Rupee was devalued by 20% and was made fully convertible on current account. Most licensing was abolished, import and export tariffs were drastically reduced and foreign direct investment was allowed up to 51% in a wide range of industries. At a later stage even the stock exchanges were opened to accept investment by foreign funds and institutions. The Internal reforms were no less dramatic and unusual for a nation used to controls and regulations. Except for fifteen strategic industries, it was no longer a requirement to obtain license to start an industry. The dreaded MRTCP Act was amended and capacity expansions as well as diversification were thrown open for large industrial organisations. Only six industries remained on the list reserved for the public or government owned sector. And above all, taxation, both personal and corporate, was reduced to the levels of ASEAN nations. In a major reform of the banking sector, spectacular changes were made and private banking became prominent once again. The best part of reforms was that these were irreversible changes that gave rise to huge investor confidence, both within India and from abroad. But there were some serious shortcomings too. The Rupee was not made convertible on current account, although almost fifteen years later limited convertibility was permitted. Import of consumer goods remained restricted to small quantities. Public sector reforms were ignored and they remained strictly regulated without any autonomy. Those that were privatized were not granted full autonomy. Small scale industry reservations remained as before and the sanctified labour market remained untouched. Insurance sector remained firmly in government hand and avoided competition. Subsidies to various sectors, though mismanaged, remained unaffected. This was the first phase of the reforms that ushered in liberalization and market economy. For the first time, Indian companies faced external competition, on both quality and prices, and faltered. Many old established enterprises that bred on protectionism and licenses went under and a number of them were taken over by foreign firms. New economic groups were formed. Stock markets sagged and surged and finally found new equilibrium. There were two aspects to this liberalization move in India. The first was the International side and the other was the Domestic side. On the International front, the move was forced by the balance of payment crisis that faced the government under which they had to physically mortgage a portion of the gold reserve of the country to obtain loans to tide over the necessary import requirement. There was also a build up of eroding investor confidence that necessitated this move. It was also the result of the power wielded by foreign banks and financial institutions like the IMF as well as by the nations that supported these institutions. Above all, the failure of the socialist system was the main driver as a different market oriented ideology had begun to look attractive. On the domestic front it was realized that the economy was on the verge of collapse and needed a shock treatment to come out of its socialist stupor. The capitalist elite were raring to go for market economy, seeing the stunning progress made elsewhere in the region by much smaller nations with far less resources and limited markets. The opportunities were great and all it required was an economic crisis which triggered the events. However the limited reforms that were brought about had the mark of the democratic nature of the Indian polity that could not have possibly absorbed greater freedom at one go. There were several reasons for ushering in the reforms. Normally economic policy reforms undergo two distinct phases; stabilization that is a short term measure to overcome immediate macroeconomic imbalances like high fiscal deficits due to excess of expenditure over incomes, uncontrolled inflation, balance of payment problems and loss in currency value. The other phase relates to structural adjustments which is longer in duration and its objectives those fundamental factors that brought about instability through macroeconomic imbalances described above. In the Indian context both phases commenced almost simultaneously for reasons of exigency. 5 Privatization Privatization has taken place in both Industrially developed economies as well as developing economies as it was felt that it leads to promote efficiency, to raise revenue for the state and help it to bridge fiscal deficits, for reducing government’s role in managing companies and for promoting wider share ownership for development of the capital market. The main motivation has been promoting efficiencies as it was felt that government ownership fostered complacency and developed relaxed attitudes in the absence of pressure to earn profits for the owners who were a benign state. Vickers and Yarrow (1988) state that the public sector has no incentive to perform as they are poorly monitored and are not worried of results. Kornia (1980) is of the opinion that since they can always be bailed out of financial difficulties due to budget supports. The managers lack focus as they are expected to work for many objectives, all of which may not be profit oriented (Shleifer and Vishny 1996). For India Privatization was a relatively new element. It was ambitious as it was a corollary to the economic reforms programme that was to cover industry, trade, the financial sector and agriculture with the objective of correcting the imbalances created by the economical crisis. India has a much diversified public sector as the country originally started off on a socialistic pattern of industrialization. True it had a long tradition of private enterprise but the needs after independence were great and the private sector consisted mainly of trades and not industry. Privatization or disinvestment was envisaged by the government as selling of stakes and parting with control. This was a concept unique to India and did not enjoy full support of the market as it could not bring about the efficiencies that privatization would normally bring. The colossal companies remained largely inefficient as before. This move also brought in little revenue for the government as no appreciable competitiveness or competency was developed for the company to perform better. It was mainly a part of the deregulation that was declared in the Industrial Policy Statement of June 1991 which drastically reduced the number of industries reserved for the public sector from seventeen to eight. Privatization was considered an inevitable part of the deregulation of industry considered as necessary in order to enable companies in the public sector to compete and survive in the new environment. It is only lately, after 2002, that the government has seriously turned to selling majority stakes in public owned companies. It can be said that privatization has really begun only then. This too is the result of realization on their part that government should restrict itself to governance and not strategic management or marketing. Thanks to globalization this move will nett huge revenues for the government as there is huge value locked into these companies. By 2002, Disinvestment of equity in 40 public sector companies had raised about Rs12 billion. Only profit-making enterprises have been offered for sale but there are huge values stuck in the no-profit making companies too. The methodology adopted for sale was making a bundle of shares and offering these blocks to institutional investors only. But later foreign bids were also accepted and lastly the public were also offered these shares. Now most shares are traded openly on the bourse and are priced alongside other private companies based on their fundamentals and profitability. It is widely expected that privatization or disinvestments will be done at an increased rate but the current political will is what is coming against this move. CHAPTER III 1 Pro-Poor or Pro-Rich Reforms An area of concern is the spread and reach of these reforms. The final objective of economic growth must be the raising of the standard of living of every citizen of the country especially its poor. When this does not happen this means there are serious problems with the programme. If growth is achieved without encompassing the poor then it is creating more problems than it is solving. Such a growth will be short-lived, will not sustain and more disasters will follow. It will brew social tensions and political upheavals, both of which will mean worsening of the situation. It may sound strange but an economic growth that largely benefits the rich will actually give rise to abject poverty inviting revolutions. This is exactly what happened in Russia that gave rise to the Bolshevik revolution of 1917. This can also happen if reforms are thrust upon the population. India has taken a middle road to reforms by opting for a slow reform process, which is painful and has many constraints. A very gradual privatization programme while avoiding capital account liberalization has seen a stability that has gone very well with the political ambitions of the country. This prudent approach has helped to avoid major shocks, but as a consequence of these reforms there are little changes in inequality compared to transition economies. Urban inequalities are sharper than the rural ones as reforms have been largely restricted to urban areas. Three factors account for these inequalities. (a) There has been a marked shift in earnings which are more capital based instead of labour based. This means profits of companies have increased manifolds and labour income has risen in lesser degree in comparison. (b) There has been fast growth in the services sector, especially the software and information sector where wages of skilled workers has seen very high and unprecedented increases. (c) Due to better induction of latest technology and improved techniques there has actually been a drop in labour employment comparative to increase in production. Per capita production has increased dramatically lowering the requirement of labour. As a result of above inequalities have widened instead of becoming smaller. Liberalization and privatization have been confined to urban areas and to industries and the service sector. In the mining sector too there have been some improvements but the agricultural sector has not seen much except for food processing industry, which has been very small. This meant that labour remained where it was before and income disparities in this sector were also unaffected. Some benefits of reforms reached the rural areas in the form of expansion in banking into these areas. Thus financial liberalization is the only benefit these areas received, although it was indirect as the larger benefit was meant for the banks only. Therefore by and large reforms bypassed the poor in India. 2 Domestic Savings Indian savings have always been high and have been the envy of the developed world. Consumption was considered as frivolous under deep rooted religious beliefs and this contributed a high savings rate of over 20% during the fifties and sixties, much before reforms of any kind were thought about. These savings were channeled into investments, largely into gold, but some into industry as well. The surprising fact is that even today the savings are a way of life, despite the current generation’s hunger for high consumption the savings rate has risen sharply. In 2006-07 Gross Domestic savings are estimated to be at Rs. 14,41,423 crore as against Rs. 12,27,348 crore in 2005-06, constituting 34.8 per cent of GDP at market prices as against 34.3 per cent in the previous year (GOI 2008). The increase in savings has resulted in higher Capital Formations. Gross Domestic Capital Formation at current prices has increased smartly from Rs. 12,71,953 crore in 2005-06 to Rs. 14,87,786 crore in 2006-07. (GOI 2008) 3 Foreign Direct Investments (FDI) Liberalization brought a new element of financing to the Indian scene. This was Foreign Direct Investments (FDI). This is not only a measure of a country’s economic success but also a tool for aiding this success. This is a risk that a foreign investor is willing to undertake and grows on the confidence the economy reflects through its open market policies. In the aftermath of the economic crisis of 1990-91, and subsequent reforms, FDI was welcomed in many industries. Based on this reception, inflows of foreign investment (FDI, FII, and euro equities) increased from $3.75 billion in 1993-94 to $4.66 billion in 1994-95. In fact between April and September 1995, these flows stood at $1.4 billion. Approvals for FDI have witnessed sharp increases. The total FDI approved between 1991 and September 1995 amounts to $15 billion, against just under $1.0 billion approved during the previous decade (1981-90). The actual FDI inflows rose from $154 million in 1991-92 to $958 million in 1994-95. During April-September 1995, the actual inflow of FDI was around $1517 million. (Economic Survey, 1995-96). In 2006-07 FDI has increased to -----and has been directed to both the stock market as well as setting up of new industrial projects. This is the fallout of the confidence the economy has generated as a result of ongoing reforms. The larger benefit of FDI, apart from its investment capability is that it brings technology, management and marketing inputs. These are invaluable as they assist in upgrading the industry by modernizing it and placing it alongside the best in the world, making it competitive and acceptable in the global context. It is interesting to note that apart from the centre, even the state governments are now actively pursuing and offering attractive opportunities to foreign investors to attract FDI at state levels. It has dawned upon them that faster economic growth requires not only investments, but active participation with new technologies and industrialization. The foreign investors are attracted towards infrastructure projects as they offer Greenfield opportunities that require very large investments and very high returns. The states are attracting both domestic and foreign investment and promise to expedite their decision making processes, especially for provision of land, electricity, water and other infrastructural services to investors. There are also some Infrastructural projects on which survey and project work has already been done and even these are offered to prospective investors. CHAPTER IV 1 Econometrics Some fact will throw light at the changing face of the Indian economy after the introduction and sustenance of reforms. PERCENTAGE CONTRIBUTION – GDP at Factor Cost Year 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 1. agriculture, forestry & fishing 25.0 23.9 24.0 21.5 21.7 20.2 19.7 18.5   2. mining, manufacturing, electricity & construction 25.3 25.8 25.0 25.8 25.6 26.1 26.2 26.6 3. services 49.7 50.3 51.0 52.7 52.7 53.7 54.1 54.9 Gross domestic product (GDP) at factor cost at constant (1999-2000) prices in 2006-07 is estimated at Rs. 28,64,309 crore as against Rs. 26,12,847 crore in 2005-06 registering a growth of 9.6 per cent during the year as against the growth rate of 9.4 per cent during the previous year. At current prices, GDP in 2006-07 is estimated at Rs. 37,90,063 crore as against Rs. 32,75,670 crore in 2005-06, showing an increase of 15.7 per cent during the year. This growth is tremendous when it is compared with the dismal picture that was just after independence and a far cry form the agrarian economy that prevailed in those early days of the nation. The growth rate of 9.6 per cent in the GDP during 2006-07 has been achieved due to high growth in mining & quarrying (5.7%), manufacturing (12.0%), electricity, gas & water supply (6.0%), construction (12.0 %), trade, hotels & restaurants (8.5%), transport, storage and communication (16.6%), financing, insurance, real estate & business services (13.9%), and community, social and personal services (6.9%).. (GOI 2008). Of course the lagging behind of agriculture is a setback as up to 74% of India still lives in rural India where agriculture is the mainstay. It is a great need of the hour to perform another balancing act to bring reforms to this sector as well. CHAPTER V 1 Economic Outlook The IMF has projected a moderate growth in GDP of 8.75% in 2007-08, and somewhat lower at 8.25% in 2008-09 and predicts that inflationary pressures will be contained. It expects current account deficits to be about 2% of GDP due to incremental services and inward remittances which will offset the widening trade deficit on account of higher imports. On the export front it expects a sharp dip due to slowdown in developed countries, led by the US, but increase in exports to Asian, Gulf and regional destinations is likely to mitigate this. Investments will be on the rise due to the strong fundamentals, continuing profitability and rise in domestic savings. IMF explains that domestic liquidity is plentiful and inflation risks are contained. However it cautions against rising wages of skilled workers and together with contrained capacities could expose the large gaps in infrastructure. One pressure point that remains is the soaring international oil and food prices. (IMF) 2 Conclusions Emerging economies like India are driving global growth and having a big impact on developed countries inflation, interest rates, wages and profits. As India becomes more integrated into the global economy and the Indian incomes catch up with the rich countries, they will provide a boost to the world economy. Perhaps India should be called a re-emerging economy, because it is regaining its former eminence. Until the late 19th century India was one of the two largest world economic blocks, the second one being China. The success of the Indian economy brought about by economic reforms will help boost both global demand and supply. But there are other sides to the Indian reforms. With the integration of its economy with the world it is providing a new opportunity for the developed countries to stabilize. It is offering them a huge market that they cannot but rush to embrace. Over the next decade, millions of new consumers will enter the global marketplace as household incomes rise above the levels at which people generally begin to spend on non-essential goods. The future enhancement in demand will be large. But another important factor in the long term will be the incentive to the world economy is what economists call a “positive supply shock”. India is already supplying a large pool of knowledge workers as well as unskilled labour force to the world. It is more important to the developed economies that are facing the prospect of ageing population that will, one the one hand, reduce their work force, and on the other, will increase requirement of support facilities for its older population. India also provides them with a new platform for investment and production. It is having a larger global impact because of its vast size and its unusual openness to trade and investment with the rest of the world. What is new is that software technology has made it possible fundamentally to reorganise business activities across borders. Thanks to information technology, many of the non-tradable services, such as accounting and other back-office and support functions, can be provided from offshore locations like India thus exposing more sectors in the developed world to competition from India. Having said what the reforms have done for the world, they have certainly put India in reckoning for becoming part of the G-8 block of developed industrial nations. The fruition of the idea a little far off but that it can be mentioned and given serious though is the crowning glory of the Indian reforms movement. Closer to home Indian reforms have decidedly made an impact and large sections of the population has benefited out of it. It can be argued by cynics that a larger population still remains out of it, but it must be noted that the first step towards development is the most difficult one. With diverse interests and varied opinions due to its democratic nature, the reform process has been very slow but equally very steady. Bibliography IMF report, published in Hindustan Times, Delhi, 6 February 2008. GOI Press release January 2008 Joshi, Vijay. and Little, I. M.D., Indian Economic Reforms, 1991-2001 (Delhi: Oxford University Press, 1996), and Ajai Chopra et al., India: Economic Reform and Growth (Washington, D.C.: International Monetary Fund, 1995), p. 57. Kirit S. Parikh, ed., India Development Report (Delhi: Oxford University Press, 1997), statistical tables. Kornai J. (1980), The Economics of Shortage, North-Holland, Amsterdam Shleifer, A. and R. Vishny (1996), A Theory of Privatization, Economic Journal 106; 309-319 Read More