02 March 2010

India 1991: Economic Reforms, Liberalisation, Capitalism

When the Industrial Revolution (1775–1850) happened, India was under British rule (1757–1947). The British did not bother to industrialise India. Nor did they allow Indians to industrialise on their own. As a result, India could not industrialise, and was stuck in the Agricultural Age. In 1947, India finally overthrew the British and became independent. Now she was free to industrialise/modernise and enter the Industrial Age.

There were two industrial systems: capitalism and socialism. In capitalism, industries are owned by individuals and enterprises. In socialism, industries are owned by the government. Jawaharlal Nehru, India's first Prime Minister (1947–1964), chose socialism. With socialism, India's economy grew at about 3% per year. In other words, India industrialised/modernised at the rate of 3% per year. This went on for 40 years. Nehru's daughter Indira Gandhi (1966–1984) and grandson Rajiv Gandhi (1984–1991) continued with socialism.

Then, in 1991, India became bankrupt. Things could not go on as before. Something had to change. P V Narasimha Rao, the then Prime Minister, did the unthinkable. He changed India's industrial system from socialism to capitalism. He dumped socialism and adopted capitalism. As a result, India's economy started growing at 6% per year – double the earlier rate. Later it started growing at 9% per year – triple the earlier rate. That is, after adopting capitalism in 1991, India's rate of industrialisation/modernisation has now tripled. India is now industrialising/modernising thrice as fast as she was doing during the period 1947–1991.

That is what is happening today. And that is the significance of 1991. People call it "economic reforms" or "liberalisation". In fact, the switch from socialism to capitalism was nothing short of a revolution*. As a milestone in modern India's history, 1991 is second in importance only to 1947.

*China had carried out its own revolution in 1978, in a much more decisive manner, with much more spectacular results.


Anonymous said...

kis gadhe ne bakwas likhi hai. na koi fact na koi example sirf bacho ki kahani.....kya reforms the kaise reforms the advantages kya the....... kuch nahi.........arre mere bhai ise likha hi kyun

Indian said...

The scope of an article is decided by the writer, not the reader.