Friday, July 1st, 2016

Reforms: 25 years of liberalising Capital

NK Bhoopesh | July 1, 2016 3:07 pm Print
Economic liberalisation has changed India like never before,with concept of welfare state giving way to state as the facilitator for capital
Indian Economy

Former PM Dr Manmohan Singh

On the occasion of  the 25th anniversary of economic  reforms  Dr. Manmohan Singh the prime architect of the reforms was quoted as saying “I think in crisis, we act constructively. When it is over the status quo takes over “. So the crisis that was happening in the 80’s led to the far reaching economic reforms that changed India like never before.

This is exactly what Naomi  Klein said in her book Shock Doctrine. An ardent critique of neo liberalism Kelin said world wide various crises are being used by rulers and neo- liberal advocates to impose unpopular policies on people. And she cites instances from across the world how liberalisation policies were implemented.

Former PM Dr Manmohan Singh

But there are different out looks on the result  of India’s liberalisation, globalisation and privatisation process together called as reforms.  Some say the policies of late 70s and 80s led to the crisis of 90 which led to the liberalisation. But it is a fact that the crisis was so deep that a reform was unavoidable.

India’s Foreign  trade balance was depleting fast during the late 80s and early 90s. By the end of 1990-91 the balance of payment deficit became Rs 10,644 Cr. The surging oil prices was one of the reasons for  this.  In 1990-91 government had to take huge amount of loan from the IMF as compensatory financial facility. This forced  the minority government led by Chandrasekhar to mortgage 46 tons of gold in Bank of England for a short term foreign loan from the Bank of England.

This crisis, as Manmohan Singh would say opened an opportunity to reform the India’s economy. Rupee was devalued. Trade policy was overhauled and foreign investment was allowed. Public sector units were started privatising.

In the recently published book, ‘Half Lion, How PV Narasimha Rao Transformed India’ Vinay Sitapati writes about how Narasimha Rao resisted the opposition to economic reforms. The book says he even asked the Intelligence Bureau to keep a tab on those who were opposing economic reforms.  Manmohan Singh says even the traditional industrialists were against the economic reforms.

Despite the initial opposition or scepticism  what India have seen  since then is that almost all major political parties have agreed to continue reforms despite their ‘ideological’ orientations. The Left parties may be the odd one out in it.

Down twenty five years many things have changed in India as statistics shows. India’s foreign currency reserves which was $1.12 bn when reforms started , reached to $339.57 billion last month. Population below poverty line came down to 21.9% from around 45 during the start of the economic reforms. The supporters of economic reforms use these figures to prove their point.

But the criterion adopted to measure the poverty line, the ever growing income disparity between richest few and majority of poorer people, Indian economy becoming susceptible to the whims of international finance capital, the foreign policy becoming predominantly influenced by the interests of capital,  the rural distress resulting out of the lesser budget  allocation to the rural ministry, the  environmental cost of fast urbanisation mainly due to the migration of people from rural to semi urban areas are some of the many issues that the detractors of the economic reforms point out.


The reforms, viewed by those  as a political project believes that, it heralded the end of the welfare state. State’s role confined to that of a facilitator for capital. This according to them has strengthened the state in several ways. They cite the example of state’s dealings with various social movements of the victims of liberalisation like the state’s attitude  towards protest against the land acquisition. Safety net provided to labourers are being taken away under the grab of reforms inviting huge protest from workers.

Citing the strengthening of the Hindutva forces, and regional and other communal forces  the critics argues it as the result of the social change that liberalisation brought.  Neo liberalism, they argue defines citizens as just a consumer. Their democratic choices ends with buying and selling. It believes market as a natural force which will never falter. Freedom is understood in marketing language. Any amount of planning or state interference are considered as  inimical to natural marketing forces and by extension to ‘liberty’.   The increased farmers  suicides ever since economic liberalisation began is cited by the critics as a proof of the the detrimental effects of what they call as neo liberalism. From 1995  to 2013 about three lakh farmers have committed suicide. The main reason being drought and  government cutting funds for agriculture.

Now according to Manmohan Singh  now there is no crisis. During these kind of period status quo will prevail. He was pointing towards the inability to carry forward the reforms. But who is the beneficiary of the status quo? And who will become more resourceful if  reforms are taken forward? The answer depends on how one views reforms and liberalisation .