TRANSFORMATION OF THE INDIAN ECONOMY: AN ASSESSMENT OF POLICY REFORMS, MACROECONOMIC TRENDS, AND RECOVERY PATHWAYS IN THE POST-LIBERALIZATION ERA

Over the 33 years from 1991 to 2023 India's economy grew about seven-fold in real terms and became one of the largest in the world. Throughout four phases of policy with widely divergent priorities, analysis in this article indicates the growth has continued at a fairly consistent average rate. There are differences between the phases in terms of what accompanied growth. First established external stability and opened the economy. The second peaked investments and trade and concluded with high inflation and a large external deficit. The third reduced inflation and revamped the indirect tax regime, with reduced investment rate. The fourth took the biggest hit in recent economic history in this country, and brought growth back on board by putting out public capital spending, while at the same time working on reducing the fiscal deficit. Two aspects have remained throughout the four phases and characterize the agenda that remains. No increase has been achieved in the shares of manufacturing in the output, and the economy has been transformed from agriculture to services without large-scale creating of industrial jobs. And growth has depended on rising investment, which in recent years has come mainly from the public sector. The effects of policy up to 2023 have been to secure macro-economic stability in prices, external accounts and increasingly in the public finances. The challenge for the coming years is to leverage that stability to create the growth in private investment, manufacturing and jobs that the previous stages failed to deliver.

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