Economic reforms refer to changes introduced by the government to bring an improvement in the economy of a country through various reforms and policies to solve the prevalent economic problems. A transformation is a complete change in the appearance or character of something or someone, especially so that that thing or person is improved. Economic transformation involves shifting resources between sectors to higher-value activities (for example, from agriculture to manufacturing) and within sectors (for example, from subsistence farming to high-value crops).
India’s economic reform transited the economic landscape of India when P.V.Narashimha Rao was Prime Minister of India and the Finance Minister Manmohan Singh led economic reforms in 1991. The liberalization reforms of 1991 reduced bureaucratic barriers, opened up the economy to foreign investment, and allowed for greater private-sector participation. The far-reaching changes in the Indian economy since liberalization have had a deep impact on the Indian financial services sector. Financial sector reforms that were initiated by the government in the early ‘90s have been to meet the challenges of a complex financial architecture. This has ensured that the new emerging face of the Indian financial sector will culminate in a strong, transparent, and resilient system.
Some of the reforms in the agriculture sector undertaken by the Government are the free movement of agricultural commodities, the APMC Act permitting farmers to bypass the mandatory requirement of sale in regulated markets, and the relaxation of restrictions under the Essential Commodity Act, 1955. Besides the above measures, the introduction of futures trading brought major changes in the pricing mechanism from manipulation by local traders. Commercial Banks in India are lending to farmers at a concessional rate of interest for agriculture and allied activities.
In the last four decades, India’s economy has transitioned from a strictly regulated, slow-growth state enterprise to one of the fastest-growing economies in the world. India’s rapidly increasing population, along with its rising middle class, offers a huge domestic market with tremendous consumer demand. The demand for consumer goods, automobiles, and housing has fueled growth in industries such as manufacturing, retail, and construction activities. Residential real estate is the key driver of the construction sector in India. The residential real estate market catalyzes infrastructural development in the vicinity, including roads, utilities, schools, and other amenities, and impacts the country’s economy. India’s services sector, particularly Information Technology (IT) and IT-enabled services (ITES), has expanded with remarkable growth. This sector, with specialists in software development, call centers, and other IT-related services, has made India a global outsourcing hub, serving international clients and generating significant export revenue.
India possesses a multitude of strengths that underpin its potential to become a global economic powerhouse. According to IMF figures, India surpassed the United Kingdom in 2021 to become the fifth-largest economy in the world with a consistent average GDP of around 6-7% in the last two decades. Projections suggest that India could surpass Germany and Japan to become the world’s third-largest economy by 2030. India now become an attractive destination for foreign direct investments (FDI) with the inflow of US $80 billion annually in recent years and fuelled growth of various domestic productions.
However, the nation faces many challenges that require continuous attention and strategic solutions concerning the following;
1. Inadequate infrastructure impacting productivity and competitiveness.
2. Skill mismatch between availability of skilled workers and industry demand.
3. Economic development remains unevenly distributed across the country, with significant disparities persisting between rural and urban areas.
4. Women’s participation in the workforce remains low due to a lack of female education and access to childcare facilities.
5. India faces challenges with pollution, resource depletion, and climate change.
Given the above, besides the government, both public-sector and private-sector enterprises should concentrate on strategic investments in critical infrastructural development, provide skill improvement training, facilitate women’s workforce, and promote renewable energy sources to make India a global economic powerhouse. Adopting sustainable practices, promoting renewable energy sources, and fostering environmentally conscious economic development are crucial for long-term success.
