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The turning point in Indian economy- 1991 reforms
Winston Churchill truly asserts that ‘to improve is to change; to be perfect is to change often.’ In 1991, India went through some major changes. Especially in its economy. Major decisions were taken that had a huge impact on the growth of the nation.

 

Need for reform

After independence, India adopted a closed economic policy in its five-year plan. From 1947 to 1991 it followed the same, that is restrictive economic policies. There were many reasons which led to the 1991 economic reforms. Few of them were very huge. India had a low growth rate in the first decade after independence. Sometimes, it is characterized as a ‘Hindu rate of growth. Although, there were times, when the growth rate increased but overall, it was stagnant. Here we will discuss the factors which lead to reform.

Drought- 1965-67

India in the 1960s was pathetically dependent on US food aid. Then it was hit by twin droughts in 1965 and 1966. In that drought, grain production crashed by one-fifth. It was one of the evident reasons which contributed to the reform. During that period, India’s goal of self-sufficiency failed. Meanwhile, it got dependent on different nations. 

People were hungry and poor. But the government had no budget to feed them. Foreign experts opined that India could never feed itself

Bad performance of PSUs

PSUs are enterprises wholly owned by the government. They have invested crores of Rs. in these enterprises. Since independence, public sector units or PSUs have been running the economy. As there were huge restrictions on private sectors. But there came a time when the performance of PSUs started to diminish. 

Public sector employees became lethargic. The employees did not feel the need to be either competitive or effective because their jobs were secure. The whole public system got corrupt. This ultimately led to the slowdown of the economy....read more