1991. The year when a wave of liberalization hit the Indian economy and old economic policies made way for the new. It was not an easy transition. But it was required nonetheless on account of severe economic crisis that hit the economy. On hindsight, the change was for the better and it did pay us as seen from the period of growth in the following years.
Around two decades have passed since then. We have another crisis staring us in our faces. And it is time to learn another lesson and take further strict measures. The Indian economy has hit a rough patch with GDP growth touching new lows and inflation at all time highs. To make things worse, the country is stuck with the problem of twin deficit - fiscal deficit and current account deficit (CAD). With limited resources, hampered productivity and policy bottlenecks, the future prospects look quite grim.
All this has not happened in a day. The Government has been well aware of the long term consequences of absence of proper planning, lack of right policy framework and fiscal profligacy. However, it has been shying away from biting the reform bullet to protect political interests. It is only over the period of last six months that some action on long pending issues such as fuel pricing has been taken to avoid ratings downgrade. However, these are not enough to bring the economy out of the woods.
For the economy to grow without inflation rearing its ugly head, we need to bring in reforms so that the investment in the country gets a boost and we have enough production capacity to meet growing consumption. Unfortunately, what has been happening so far is quite the contrary. The Government has been focusing more on welfare programmes, even at the cost of investment leading to an economic imbalance. Now that the first few steps on the reform front have been taken, we believe the Government should focus on effective implementation of the same. Otherwise, the country has very little hope.