India’s macroeconomic performance since 1970: is there any change under the regime of liberalisation?

India’s macroeconomic performance since 1970: is there any change under the regime of liberalisation?

Has macroeconomic performance improved in India after liberalisation?

Since the beginning of the last decade India started the process of trade and financial liberalisation after decades of import-substituting industrialisation. After a decade of this liberalisation, the author raises the question of whether there is a change in the trend-growth path of the major macroeconomic variables of India such as real GDP, real agricultural and industrial output, exports and imports…etc

This paper examines trends in Indian macroeconomic series since 1970 and changes during the regime of liberalisation since 1991 and until 2002.

With the aid of modern econometric techniques, the paper finds no significant change in India’s macroeconomic performance under liberalisation as:

  • growth in export earnings did not pick up
  • real sectors (industry and agriculture) did not experience any accelerated growth
  • there is huge accumulation of FOREX reserves in the coffers of India Government

The trend-growth of FOREX reserves over the whole pre-liberalisation period was not much spectacular, giving the liberalisation phase a fairer chance to exhibit an accelerated growth. However, the author observes that this accumulation of FOREX reserves took place through increasing foreign indebtedness.

Finally, the author concludes by stating that the impact of increased foreign indebtedness on real economic performance is yet to show. Moreover, since export earnings showed no sign of acceleration, facing debt crisis in the long-run cannot be ruled out.