Economic Reforms are the measures which aim at radically changing the very basic character of the economy. It means a change from “regulated economy” to a “liberalized economy”. The State will no longer play the role of a “controller” and “regulator”. But will act as a “facilitator”, “coordinator”, “inspirer”, and “supervisor”. It will assist in pushing through the policies which deal with all the segments of the economy such as agriculture, industry, trade finance, education health etc.
Efforts were made by our late Prime Minister Shri Rajeev Gandhi as early as 1985 to reform the Indian economy however the process came to a halt in 1987.
In 1991, after India faced a balance of payments crisis, it had to pledge 20 tons of gold to Union Bank of Switzerland and 47 tons to Bank of England as part of a bailout deal with the International Monetary Fund (IMF). In addition, IMF required India to undertake a series of structural economic reforms.
As a result of this requirement, the government of our late Prime Minister Shri P. V. Narasimha Rao and his finance minister Dr Manmohan Singh (currently the Prime Minister of India) along with his colleagues like Montek Singh Ahluwalia, P Chidambaram etc started breakthrough reforms, although they did not implement many of the reforms IMF wanted.
The new neo-liberal policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalisation has since remained the same, irrespective of the ruling party.
The fruits of liberalisation reached their peak in 2007, when India recorded its highest GDP growth rate of 9%. With this, India became the second fastest growing major economy in the world, next only to China. The growth rate has slowed significantly in the first half of 2012, it is however expected to be about 7.5% and will double the average income in a decade, and more reforms would speed up the pace.