Impact of Liberalization on Indian economy and Vision 2020

In 2015, looking ahead at the next five years, India is on its way to become a developed country. India will not just have to endure the challenges of development in rural areas, sustainability of urban areas, development of national infrastructure, overpopulation and battle against them, but the country would also be adding millions more in the years ahead. The cities needs to have proper security, good living conditions, supported by proper infrastructure and basic amenities (electricity, drinking water and sanitation). In short, India needs to have sustainable cities with large scale job opportunities, optic fiber connectivity, inter-connected means of transport, with population stabilization and effective health facilities. Moreover, in the education department, there must be an improvement in quality of education, with special priority to improve teaching and learning outcome, so that education-to-job progression is smooth and fruitful. India is ushering into the era of sustainable development. The emphasis must not be on growth alone, but alongside it should also be on triple bottom line of rapid economic growth, social equity and inclusion, and environmental sustainability. India has to overcome a lot of issues, if it has to attain Late Dr APJ Abdul Kalam’s vision of India becoming a developed country by 2020.

The 1991 economic reform happened amidst two acute crises involving the financial sector-

1.         The balance of payments crisis that threatened to push India to the brink of default

2.         The grave threat of insolvency confronting the banking system

Financial sector reforms have been an important part of the overall reform process of Indian economy. The hopes that were raised by the impressive progress in the initial reform years couldn’t be replicated. Opening up of the economy to foreign capital helped to combat the issue of the balance of payments position. There was a serious need to streamline the process, upgrade technology and have structural changes in the financial system.

In the last decade, there has been a significant improvement in the financial markets with the introduction of numerous new products in the sector of banking, financial services and insurance. The new private players, which included foreign companies, adopted modern technology to offer a more sophisticated range of financial services to the customers. This resulted in innovation and efficiency in the financial sector in India. India is thinking of opening its pension sectors also to foreign investors. Financial sector regulators ensured that the new regulations were in tandem with the growth in the financial sector. The Indian economy has witnessed an outbreak of numerous foreign banks, insurance companies and investment institutions.

The Indian economy is being boosted by positive policies of RBI, fall in gold imports, lower global oil prices. The investment cycle needs to be revitalized, financial sector health bolstered and the structural reforms accelerated. Though the economy is at a stage to cope up with the deluge from volatile global financial markets, there are still potential risks on the horizon. Any unexpected developments in China or United States could cause a ripple effect, disrupting numerous economies including India. On the domestic front, the worsening bank asset quality and the weaknesses in corporate balance sheets might prove to be a downer.

Within the next decade, India will have the largest workforce in the world, and will need to create about one hundred million jobs for the countrymen. Deep structural reforms are needed to generate the required jobs despite the fact that the Government of India’s ‘Make in India’ campaign to improve the business environment has gained momentum. Nevertheless, there are many key areas that need improvement which are as follows:

a)         addressing hindrances in the energy and power sectors

b)         increasing foreign investment to improve the country’s infrastructure

c)         expediting the process of land acquisition

d)         improving the education system to combat the shortage of skilled labour

e)         reforming the agriculture sector to improve efficiency in food distribution, and storage

f)          making labour markets more flexible to boost women labour force participation

This blog post is inspired by the blogging marathon hosted on IndiBlogger for the launch of the #Fantastico Zica from Tata Motors. You can  apply for a test drive of the hatchback Zica today.