25 Years of Reforms

What does a retrospective view look like?

Year 2016 marks the 25th anniversary of the ushering in of economic reforms. When the duo of Narasimha Rao and Dr. Manmohan Singh turned the License Raj upside down, few gave it a chance of survival. But reforms have stood the test of time and almost become irreversible. As we look back at 25 years of reforms, what are the key takeaways for corporate India?

Creating global companies…

One of the key achievements of the reforms process has been that India has been able to create companies that are globally competitive in terms of scale, technology and financial muscle. Today an iconic global brand like Jaguar Land Rover is owned by Tata Motors. Tata Group is the single largest employer in the United Kingdom. Bharti has emerged as a key player in the telecom space in Africa. Reliance has set up a refinery that is one of the most efficient by global standards. India’s outreach has not just been about size and scale. It has also been about value. HDFC Bank has a market cap that is more than the combined market cap of Deutsche Bank and Credit Suisse. All these global achievements would have been inconceivable without reforms.

Home grown entrepreneurs

One of the key takeaways of the reforms process has been the army of home-grown entrepreneurs that it has been created. Sunil Mittal has single-handedly redefined the telecom space in India. Uday Kotak began as a first generation entrepreneur and today Kotak Bank has a higher valuation than ICICI Bank and even higher than Deutsche Bank. That is the old economy. The new economy has produced home-grown entrepreneurs like the Bansals of Flipkart, Kunal Bahl of Snapdeal as well as iconic figures like Dr. Anji Reddy, Dr. Pratap Reddy and Dr. Devi Shetty. The most valuable pharma company in India, Sun Pharma, itself is a child of economic reforms.

No Hindu rate of Growth…

But, the biggest achievement of 25 years of reforms has been that the Indian economy has got out of its Hindu rate of growth of 3.5%. Skewed tax structures, license and inspector Raj as well as government interference had virtually killed the ease of doing business. With reforms, the average GDP growth rate has been catapulted into the 7-8% bracket. That is a big achievement for a $2 trillion economy.

But not all is hunky dory. China and India started with similar per capita GDP in 1992 but China has raced ahead. India still ranks abysmally low in social indicators like health, nutrition, education, women’s rights etc. However, these challenges do not detract from the core benefit of reforms. Capitalist India is finally here to stay! ©

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