Liberalisation & Economic Reforms

Every BoP crisis forced a policy shift — 1991 forced the big one. 1957–58 → 1965–66 → 1973–74 → 1980–81 → 1990–91 → LPG. Aid India Consortium · devaluation & plan holiday · IMF oil & Trust facilities, NRI deposits

Import substitution & its limits

Rational at first (low savings, no domestic capital goods, poor terms of trade). But it produced low export earnings, rising import bills, high tariffs, inefficient industry, licensing, excess capacity and expensive consumer goods. Jagdish Bhagwati and T.N. Srinivasan highlighted the inefficiency — some tariffs reached 400%, protecting weak industry at huge consumer cost.

1991 reforms — Liberalisation, Privatisation, Globalisation: Delicensing · Lower tariffs · End of QRs · Trade liberalisation · Deregulation · FDI · Financial-sector reform · Disinvestment · Exchange-rate adjustment

Maximum tariff fell from about 400% to 40–50%; average tariff from about 100% to 20%. QRs on manufacturing imports ended after a WTO dispute; QRs on agricultural imports ended under Uruguay Round commitments.

Achievements & limitations

• Narayana Murthy — IT growth flowed from import delicensing, financial liberalisation and current-account convertibility.
• Montek Singh Ahluwalia defended reforms for growth and poverty reduction; Jagdish Bhagwati and Arvind Panagariya saw them as positive for growth and democratisation; S.D. Tendulkar noted complex employment patterns behind poverty decline.

Inadequate complementary reforms

Liberalisation was not matched by reform in governance, education, health, legal institutions, agriculture, labour, land, credit and social security. India stayed hobbled by corruption, red-tapism, poor delivery, slow courts, weak public education/health, bad loans and unreformed PSUs.

“institutional quality decides long-term success” — **Daron Acemoglu & James Robinson, Why Nations Fail

India must avoid the “middle-income trap”

C. Rangarajan — continue banking and labour reform; Raghuram Rajan — better regulation and broader benefits; Sudipto Mundle — both growth and fiscal-financial challenges.

Social Development Outcomes

Growth rose after reforms; social development improved only modestly — growth was services-led and skill-intensive (not labour-intensive), manufacturing employment did not expand as in East Asia, agriculture stagnated, investment favoured richer states, poorer states had weak fiscal capacity, and public spending on health and education stayed low.

“India neglected human capabilities” — **Amartya Sen & Jean Dreze, An Uncertain Glory

growth alone cannot ensure human development

But real progress too

• Absolute poverty declined; more than 90 million people left extreme poverty between 2011 and 2015.
• Midday-meal scheme improved attendance, nutrition and learning; NFHS-4 showed faster progress on stunting, underweight children, youth literacy, child and maternal mortality.
• The Global Multidimensional Poverty Index reported a large decline (2005–06 to 2015–16); NITI Aayog’s discussion paper reported 24.82 crore escaping poverty in nine years.

Gaps persist — poor service delivery, regional social disparity, exclusion of SCs/STs, low employment quality, malnutrition and sanitation.

Politics of Economic Growth

Growth is political because it shapes class relations, regional inequality, state capacity, welfare, jobs, social movements, tribal displacement, environmental conflict and electoral competition.

• Atul Kohli (State & Redistributive Development in India) — pro-poor redistribution stayed limited because the ruling alliance is largely an alliance of state and capital for growth: weak land redistribution, poor education/health for the poor, thin public works, weak bureaucracy, elite resistance.
• Francine R. Frankel — weak elite commitment; Gunnar Myrdal — poor peripheral bureaucracy; India a “soft state.”
• Myron Weiner (Politics of Scarcity) — the state could not protect all interests equally; business interests overrode tribal land rights, forest livelihoods and ecological security — feeding alienation and Left-Wing Extremism.
• Madhav Gadgil and Ramachandra Guha — ecosystem people, omnivores, ecological refugees: growth pressures ecosystem people; the displaced become ecological refugees supplying cheap labour to construction, mining, quarrying and domestic work.

Growth episodes & the political use of reform

Three post-reform phases: 1993–2002 “ordered deals” between elites; 2002–2010 increasingly closed deals with negative feedback from accountability institutions; after 2011 deceleration and “disordered deals.” Post-2014: demonetization (against illicit cash, for formalisation) and GST, July 2017. Job creation stayed weak — capital-intensive trade regime, stringent labour rules, infrastructure and power bottlenecks, high formalisation costs, weak SMEs.

Growth cut poverty but widened inequality and regional disparity — the triple bottom line of people, planet and profit stays central.

Developmental vs Ascriptive Politics

Ascriptive politics rests on caste, religion, region, birth, ethnicity and social status. Post-liberalisation, development issues moved centre-stage: jobs, entrepreneurship, FDI, infrastructure, business sentiment, inflation, welfare delivery.

• Changes — ideological dilution of parties; wider acceptance of the growth agenda; rise of pocket-book voting; leaders judged on economic performance; higher turnout; a shrinking gender gap; social media diversifying political information.
• But ascription persists — caste and religious mobilisation, dynastic parties, weak rule-of-law institutionalisation, poor representation of weaker sections, findings of the Sachar Committee.
• Kanchan Chandra — ethnicity has been modernised, not eliminated, by technology and modernisation.

Developmental politics has expanded — it has not displaced ascriptive politics.

DPSP in the Era of Liberalisation

Directive Principles — Part IV, Articles 36–51: the welfare state, positive liberalism, social and economic justice, democratic socialism, Gandhian ideals, directions to legislature and executive. Sir B.N. Rau — moral precepts for state authorities; L.M. Singhvi — the philosophy of social justice.

“conscience of the constitution”

Granville Austin (on Fundamental Rights & Directive Principles)

“The frontiers of Indian democracy have been widened like never before”

Neerja Gopal Jayal (after LPG reforms)

Relevance after 1991

The state moved from protector of the public sector to regulator/facilitator; market fundamentalism grew; inequality rose; welfare retrenchment and rising private education/health costs became a worry. DPSP hold the welfare character against the “rolling back of the state”, supplement rights with socio-economic rights (health, work, education, food, clean environment) and protect the vulnerable. Robert Cox’s “internationalisation of the state” makes them more important; Suhas Palshikar (“democratisation of democracy”) and Ronald Dworkin (“democracy of fairness”) fit their logic.

Implementation & the courts

Land-reform laws, bank/industry nationalisation, welfare schemes, Panchayati Raj, Equal Remuneration Act, RTE, National Food Security Act, MGNREGA, Maternity Benefit Act, Sexual Harassment at Workplace Act 2013.

• Air India Statutory Corporation v. United Labour Union — DPSP as forerunners of the UN right to development, part of fundamental human rights.
• K.K. Verma v. Union of India — growth must benefit all, especially the vulnerable; M.C. Mehta v. Union of India — balance environment and industry; Tata Power Co. v. Maharashtra ERC — tariffs must consider low-income consumers.

In globalisation, DPSP ensure that growth does not override social justice and democratic fairness.

Environmental Movements after Liberalisation

Roots in colonial forest management, tribal displacement, post-independence dams, mining and state-led projects. Major mobilisations: Chipko · Appiko · Narmada Bachao Andolan · Silent Valley

After liberalisation, industrial and mining activity expanded and FDI accelerated resource extraction; tribal areas in Jharkhand, Odisha, Chhattisgarh and Andhra Pradesh faced deforestation and displacement. K.B. Saxena and Rajkishor Meher link LPG development with displacement, dispossession and unrest among indigenous communities.

Why movements weakened

State–corporate nexus; economy over ecology; weak legal enforcement; corrupt permissions; fast industrial clearances; fragmented movements; limited citizen participation; expert-dominated discourse; a consumerist culture. Arun Kumar — the state–MNC nexus suppressed recent environmental movements.

“environmentalism was never an organized ‘movement.’”

Donella Meadows

Judicial jurisprudence

Built through Vellore Citizens Welfare Forum (tanneries), the Fertilizer Gas Leakage case, S. Jagannath (coastal management), Goa Foundation v. Konkan Railway, Narula Dyeing and Indian Council for Enviro-Legal Action — giving the public liability, polluter-pays and precautionary principles and the “right to environment” within “right to life” under Article 21. Consumption after liberalisation brought hyper-consumerism, food waste, urban pollution, a rising Gini and SDG 11–12 concerns.

Overall Assessment & Conclusion

Four phases of India’s development story. Early planning (mixed economy, heavy industry, welfare) → Agrarian change (land reform, Green Revolution, farmer politics) → Liberalisation (markets, services growth, jobless growth) → New architecture (NITI Aayog, cooperative federalism, FC devolution)

Neither the state nor the market alone can produce just development. Planning is still needed — but as guidance, not command; markets raise efficiency — but need regulation; welfare cannot be left to trickle-down; agriculture needs structural reform, not only technology; environmental justice must be part of growth; federalism needs rule-based transfers; local planning is essential for real inclusion; human capabilities are central; growth must stay tied to justice, liberty, equality and fraternity.

Nehru’s industrial base and scientific temper → Gandhi’s decentralisation, sustainability and moral economy → Ambedkar’s social justice → Sen’s capability approach — planning institutions that guide rather than command, markets that work within constitutional welfare commitments.