India’s Economic Metamorphosis: Unveiling Reforms and Celebrating Triumphs
Ira Singh
19 Aug’23
India, after gaining independence in 1947 from British rule, has evolved into the world’s largest democracy. What was once labeled a “third-world country” has now emerged as a global economic powerhouse. Notable milestones in India’s economic journey unfolded during the crisis years of 1966, 1981, and 1991. Yet, India’s impressive rebound led to its distinction as the fastest-growing major economy worldwide.
Over the decades, India has undergone a profound economic metamorphosis, marked by a series of reforms and triumphs that have propelled it from a struggling newly – independent nation to one of the world’s fastest- growing economies.
Diving deeper, let’s explore some significant economic reforms that successive governments have undertaken in recent decades, shaping India’s economic landscape and setting it on a path of unprecedented growth.
Revolutionizing India’s Telecommunications: The Transformational Journey of 1992-93
The period around 1992-93 witnessed a series of transformative steps that paved the way for a telecommunications revolution, connecting millions of Indians and propelling the country into the digital age.
Breaking the Monopoly: The Winds of Change
Prior to the reforms of 1992-93, India’s telecommunications sector was characterized by a state-controlled monopoly, with limited access to telecommunication services and a lack of technological innovation. The situation called for radical change, and the Indian government, led by then-Prime Minister P.V. Narasimha Rao, recognized the need to usher in competition and private investment to spur growth.
The National Telecom Policy of 1994
The National Telecom Policy (NTP) of 1994 marked a turning point in India’s telecommunications history. The policy aimed to liberalize and modernize the sector, enabling private participation, foreign investment, and the introduction of advanced technologies. It set the stage for the entry of private players and the dismantling of the state monopoly, leading to increased competition and improved services.
The 1990s witnessed escalating demand for telephones, nudging India toward embracing private participation as part of the liberalization-privatization-globalization agenda.
Moreover, the separation of the Department of Telecom (DoT) from the Indian Post and Telecommunication Department transpired as a significant development in 1985. Entities such as Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL) emerged independently from the DoT’s umbrella.
Presently, India’s telecom industry boasts a staggering 1.17 billion users, achieving a national tele-density of 84.86 percent. Remarkably, it ranks third in attracting foreign direct investment (FDI), directly employing 2.2 million individuals and indirectly supporting an additional 1.8 million.
Furthermore, in 2022, the Ministry of Communications unveiled the draft of the Indian Telecommunication Bill, which addresses sector achievements and challenges, affirming the government’s commitment to a thriving telecommunications landscape.
Empowering India’s Capital Market: SEBI’s Visionary Stewardship in the Period of 1988
In the late 1980s, India’s capital market underwent a profound transformation under the visionary leadership of the Securities and Exchange Board of India (SEBI). The period around 1988 marked a turning point in India’s financial landscape, as SEBI embarked on a journey to empower and regulate the capital market, instilling investor confidence and setting the stage for sustained growth.
SEBI was initially established as a statutory body to oversee the securities market, gaining autonomy on January 30, 1992. This move endowed it with statutory powers that fortified its regulatory control over the financial market. Before SEBI’s advent, the Controller of Capital Issues administered the capital market under the Capital Issues (Control) Act, 1947.
SEBI’s impact on India’s capital market has been profound. The introduction of an electronic trading system and the creation of a robust market surveillance mechanism stand as pivotal milestones that underscore its commitment to transparency and efficiency.Moreover,SEBI faced criticism for its sluggishness in addressing corporate violations. The IL&FS crisis serves as a prime illustration, wherein the infrastructure finance corporation grappled with financial upheaval for years before its collapse in 2018.
India’s Special Economic Zones (SEZs) of the 2000s Propel Global Competitiveness and Foreign Investment
In the early 2000s, India embarked on a transformative journey to accelerate economic growth and attract foreign investments through the establishment of Special Economic Zones (SEZs). This visionary initiative aimed to create a conducive environment for trade, investment, and exports, propelling India onto the global stage as a competitive player in the international trade landscape.
The SEZ initiative has demonstrated its merits for the nation, evident in the impressive surge of exports from Rs. 22,840 crore in 2005–06 to Rs. 7,59,524 crore in 2020–21, along with a rise in investments from Rs. 4,035.51 crore in 2005–06 to Rs. 6,17,499 crore in 2020–21.
However, the trade ministry’s recent research highlights two factors that impede the envisioned success of SEZs. These factors pertain to incentives provided under the foreign trade policy to exporters outside SEZs and disadvantages arising from free-trade agreements (FTA), both of which have impacted the SEZ program.
Furthermore, the exclusion of SEZs from the country’s domestic tariff zone grants them the advantage of duty-free access to manufacturing inputs. However, India’s free-trade agreements with nations that have eliminated or substantially reduced taxes on various items have compromised this advantage.
India’s Historic Goods and Services Tax (GST)Implementation Unifies Tax Structure on July 1st, 2017
On July 1st, 2017, India embarked on a historic journey to revolutionize its taxation landscape with the implementation of the Goods and Services Tax (GST). This transformative tax reform aimed to create a unified and simplified tax structure across the nation, fostering economic integration, reducing inefficiencies, and enhancing ease of doing business.
The GST implementation had both positive and negative consequences for the Indian economy. The primary aim was to simplify the intricate tax landscape by eliminating cascading tax effects. Additionally, it aimed to expand the taxpayer base, foster a corruption-free environment, and reduce instances of tax evasion.
However, GST encountered criticism for its complex structure and varying interpretations across states. Furthermore, there is a call for GST to encompass all sectors, including petroleum products currently exempt from the tax. Bringing petroleum products under the GST ambit could yield significant benefits, enhancing flexibility and reducing costs.
India’s economic metamorphosis stands as a testament to the power of reforms, determination, and collective action. The nation’s triumphant journey from challenges to opportunities serves as an inspiration to the world and reaffirms the belief that sustainable and inclusive growth is attainable with the right vision and concerted efforts.According to the IMF’s calculations, India will move into fourth place in 2025 and into the third place in 2027 as a US$ 5.4 trillion economy.