A decade has passed since the reforms were introduced and now it is time to take stock of the directions in which the economy is headed. In terms of the GDP growth rate, we find that after an initial slowdown during 1992-94 (5 per cent per annum), growth picked up to over and above 7 per cent per annum during 1994-97. Subsequently, the growth declined to 6.3 per cent during 1997-2000.

    Looking at some other aggregates we find that at the end of January, 2000 the country’s total foreign exchange reserves amounted to US$ 34.90 billion, enough for 8 months of imports in 1999-2000. The rupee has been convertible on the current account and reforms for capital account are being undertaken almost every year. The exchange rate has remained reasonably stable and is in the neighborhood of Rs.45 (± 0.5) per US dollar. This is in spite of the South-East Asian crisis of August, 1997. Thus, fears of default on balance of payments are no longer valid.

    Other macro-variables also indicate that the short-run growth is appropriate. The debt-GDP ratio declined from 41 per cent (1991-92) to 23.5 per cent (1998-99), indicating that we are no longer on a path of debt accumulation. The debt-service to current receipts ratio declined from 30 per cent (1991-92) to 18 per cent (1998-99), indicating that a larger share of current receipts is free for allocation in a more productive manner than on interest payments. the short-run debt declined from 10.5 per cent of total debt (March 1991) to 4.7 per cent (September 1999). Internal liabilities of the government that had burgeoned to 52 per cent of GDP (1990-91) has stabilized at about 46 per cent of GDP. It is reasonable to suggest that the current stock of liabilities is no longer mounting and with improved economic performance the stock of the debt would begin to decline.

    Inflation rates in India are sensitive to agrarian production and since this has been reasonably stable, inflation too has tended to remain under check current estimates suggest that the long-term value around which the inflation rate is likely to float is 6 per cent. Industrial production has tended to vascillate and is currently in the process of recovery from a two-yearrecession. On the whole, however, the Index of Industrial production (IIP) registered a 6.1 per cent per annum growth rate over 1993-2000. The recession in industry was also reflected in a slump in exportswhich recorded a negative growth rate of 3.9 per cent in 1998-99. This year its performance is expected to be better as it has been growing at 12.9 per cent over April to December, 1999, in the same period last year the export growth had been 2.9 per cent. Finally, the most politically-charged macroeconomic variable, the fiscal deficit, is down from 7 per cent of GDP (1990-91) to 4.1 per cent of GDP (1998-99). We find, however, the revenue deficit unabated at 3.7 per cent of GDP (1998-99), up from 3.5 per cent of GDP (1990-91), a worrying factor.

    The mainstay of the country’s economic performance has been agricultural production. With the support of 14 consecutive normal monsoons it has checked inflationary pressures on the wage-goods sector. During 1993-99 investments in agriculture have been growing at 3.33per cent per annum.Close to 70per cent of this is from private sources. In keeping with the changes in world trade, India has opened up for agrarian exports and has developed into a major exporter of basmati and non-basmati rice. The other sub-sector performing outstandingly has been software development and its exports. During 1992-97, software exports registered a 43 per cent growth and this rate of growth has continued.

    The main benefits of the second phase of economic reforms would be in terms of high rates of growth combined with reduction of inequity in income distribution and an improved quality of life. Meeting this demand for a balanced growth will be contingent on how the government chooses to allocate its meagre resources. As envisaged, the reforms will help settle the structural changes that began in 1991. The commoners will not be left unaffected by these changes as with greater integration with world economy, goods and services that were not available earlier will now be within easy reach. More importantly, in the light of the strong performance of the software industry, changes in the skilled labour market are also evident. Not only is the skilled labour in this sector able to meet the high quality standards of the advanced nations, it is also able to command salaries which are commensurate with their abilities. With such changes gradually spreading in to other sectors, it is expected that domestic wages would tend to rise sharply as quality of work begins to determine salaries. In terms of the day-to-day existence the other changes that reforms have brought about are greater awareness of quality control and the need for transparency. Hence, regulations in polluted cities have begun to demand not only pollution control but also pollution control at the Euro II levels of emission. Thus, standardization is the order of the day assuring people of the quality of daily existence that is available elsewhere.

    The emphasis in this phase of economic reforms in India must be on resource creation and management rather than demand management. The suggested economic reforms are all geared towards making more resources available to the government for investment in social sectors and in infrastructure. Public sector disinvestment would raise current revenues besides reducing government liabilities. Broadening its base for tax reforms would add to revenue receipts. At the other end restructuring of expenditure would curb the unnecessary consumption liabilities and make them more sensitive to public investment needs. A rationalization of the revenue account and restructuring of the government’s capital account is a pre-requisite for success in this second phase of reforms.