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Questions raised on anniversary of Indian reforms
Agence France Presse - July 24, 2011
"We shall make the future happen," declared Singh, who was then finance minister, in presenting his landmark budget on July 24, 1991, that opened up India's markets and cut through the country's infamous red tape. "Let the whole world hear it loud and clear – India is now wide awake."
Today, Singh is battling accusations of drift and criticism that the process of gradual reform has now stalled. "The 1991 reforms had a major impact on the economy, but there have been precious few in recent years," said Surjit Bhalla, chairman of Oxus Investments.
Bribery remains rife in the 1.2-billion-strong nation, particularly in government offices with officials seeking money for everything from school entrance to marriage certificates, and the economic boom has bypassed hundreds of millions of Indians.
Some 42 percent of the population, or 455 million people, still live on less than $1.25 a day, according to the World Bank. Statistics on health, infant deaths and malnutrition are worse than those for some countries in sub-Saharan Africa. And 20 years on, India's reforms program is at a standstill.
Singh's stint as prime minister has disappointed businesses who hoped he would execute a "second generation" of changes to propel growth into double digits. Long-pending proposals include introducing a nationwide tax structure to cut business costs, simplifying land acquisition for industrial projects and fully opening up the vast retail sector to foreign investors.
Twenty years ago, Singh ignited the fuse for rapid growth at a time when the economy was teetering on bankruptcy. India had just two weeks of foreign exchange reserves to pay for food and fuel imports and had just flown 47 metric tons of gold to London to be stored at the Bank of England as collateral for an emergency loan.
Singh, a former World Bank economist, switched the country's course from inward-looking socialist policies to a more market-friendly approach in the budget which had its 20th anniversary on Sunday. He simplified tax collection, slashed customs duties, invited foreign investment, initiated privatization of government-owned companies and lifted the shackles on Indian industry by abolishing stifling production quotas.
The move to a more capitalist-style economy triggered a surge in economic growth as exports zoomed and foreign investment that cured India's fiscal crisis boosted incomes and dramatically expanded the country's middle class.
All these changes, though, may not be enough to burnish a lasting legacy. Singh has spent much of the last 18 months fighting major corruption scandals linked to the Commonwealth Games last October and the sale of telecommunication licenses in 2008.
"In China, the economy grows because of the government, but in India, the economy grows despite the government," Bhalla said.
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