Twenty-five years ago Dr. Manmohan Singh presented, what is now described as a path breaking budget unleashing a spate of economic reforms. He opened the doors of our country to the world and India began its transformation from a third world country to a significant player in the global economy. It is said that the government of the day was left no choice but to embark on these reforms such was the state of the economy then. However, credit for taking the plunge must also be given to the then Prime Minister – Mr. P.V.Narasimha Rao. A mention of the Long Term Fiscal Policy presented by Mr. V.P. Singh as the Finance Minister is also not out of place.
Since then, there have been changes of those who have enjoyed power, and India has been ruled by different political parties or political combinations. By and large, there has been a consensus on the direction of economic reform, though on account of political compulsions the parties in power and opposition have made different noises for public consumption. There has certainly been a difference in the pace in which the liberalisation process has moved and at times there has been a derailment on account of reservations of the left parties, whenever they have had a say in policy making.
There is no point in dealing with numbers as each set of statistics, published or relied on by one group of experts would be doubted and challenged by another group. On the ground, the reality is that GDP has grown consistently, purchasing power in the hands of a large majority of the population has increased and the number of those below the poverty line has decreased.
In certain areas there has been a sea change. Communication is one such area. From the time that we applied for a telephone connection and waited for the Black beauty to enter our homes, we are now in a situation where even in the remotest of rural areas a person uses a cell phone. He may not be literate but is a user of this technology. This one single development has been an absolute game changer.
Inbound and outbound foreign investment has increased manifold. 25 years ago, foreign investors were wary of investment in India. Apart from the bureaucratic hurdles, they were not certain about the soundness of the Indian economy. Today, possibly on account of the fact that the investment options in the other parts of the globe have reduced, every investor looks at India with keen interest. In those days the flow was one-way with foreign entities investing in India. Today Indian corporations have also become multinational. Large Indian houses today acquire companies across the globe, going in for mergers and amalgamations even in developed countries.
The movement of skilled labour has also become easier. Till a few years ago IT professionals found lucrative jobs abroad either on account of their own employers in India setting up businesses across the world or even foreign companies hiring these talented individuals. The pace may have reduced somewhat, on account of economic slowdown in those countries, but even today there are job opportunities to be seized. Along with the movement of human resources, the flow of trade has also become smoother. On account of increasing e-commerce, Indian consumers have access to commodities and services from all across the globe and the same is true of consumers of the world who are now able to enjoy Indian goods and services.
There are certainly certain weaknesses and hurdles. Lack of infrastructure remains one serious cause of concern. The quality of road, rail and air transport is a far cry from those in developed countries. The lack of infrastructure seriously hampers India’s economic growth. While successive governments have tried to give a fillip to the sector, both by way of investment and tax reliefs, this sector needs substantial improvement.
The second area that needs attention is the bureaucratic stranglehold on policy-making. Apart from the fact that the speed of decision-making is still extremely slow, what is worrying is the mind-set. More than six decades after independence, the overhang of the”Raj” still remains. While an independent bureaucracy is certainly strength, one with the mind-set that prevails today is certainly an impediment.
The third problem area is that of distribution. The fruits of economic growth have not reached a large part of the population. While successive governments have undoubtedly announced a large number of schemes to help the poor, their implementation is slow and tardy. The uneven distribution is creating economic disparity leading to political unrest which in turn will reduce or halt economic progress.
Our profession has also undoubtedly benefited from economic liberalisation. Apart from the traditional areas of tax, accounting and audit, we now deliver a range of services. There are many chartered accountants who now act as strategic consultants in mergers acquisitions and other forms of business reorganisation. Even in the traditional areas of taxation, international tax has gained importance. Since business has become global, the language of business that is accounting has also attained an international perspective. Ind As, that is IFRS with Indian flavour have become applicable to certain entities with effect from 1st April 2016 and thereafter there will be a gradual adoption by others. The implementation thereof provides an opportunity and a challenge at the same time.
In the balance, this silver jubilee of economic liberalisation deserves celebration. India has undoubtedly come a long way, though the distance to be travelled is also significant. Let us hope that with the passing of the much awaited GST bill, a milestone in India’s economic progress will be reached. We will then take a giant step in the transformation from being a developing country to a world leader!
