The 1991 Reforms, Indian Economic Growth, and Social Progress

This paper analyzes the effects of the reforms initiated in India following the balance of payments (BOP) crisis of 1991 on economic performance. We do not find persuasive the contention of many analysts that growth accelerated after the mid-1980s when reforms were initiated. Nor does statistical analysis support the contention that reforms in the mid-1980s resulted in a growth acceleration. We show that there is an accelerating rate of growth of GDP after the mid 1970s and it is difficult to relate this gradual acceleration to specific policy changes. The changed policies in the 1980s did not mean a basic change in the policy framework. Furthermore, since corporate investment as a share of GDP did not increase in the 1980s it is difficult to identify the mechanism by which the more pro-business policies of the government were translated to higher growth. We also find that the differences with East Asia and particularly China depend on the basis of the comparison. We compare changes in performance since the reforms, which started in China in 1979 and in India in 1991. Such a comparison shows more similarities than differences. We finally examine social progress. We find that South Asia lags behind other regions in making progress towards the Millennium Development Goals (MDGs) and India lags behind other South Asian countries. The responsiveness of the improvement in the MDGs to increases in per capita income is usually low in Asia and particularly in India.