Quantifying Economic Reforms in India: Where Have We Been and What Lies Ahead, 1960 - 2006

We attempt to quantify economic reforms process in India during the period 1960 – 2006 in seven key areas viz., international finance, domestic finance, fiscal, trade and commerce, business regulations, public sector and social sector. Apart from aggregate measure of economic reforms, we also present the reforms index in these seven areas for the period 1960 – 2006. We begin with the methodology adopted to construct these indices and review the history of reforms process in India in general and in seven sectors from 1960 to 2006. We then present some important stylized facts on reforms. They show that reforms process has not always been uniform across the time in all the seven sectors. Reasonably liberal country was reversed back to regulations and restrictions during the mid-1960s – early 1980s. Though reforms process began in the 1980s they were not sufficient to undo the distorting policies adopted for over four decades. Amidst political chaos, economic crisis and social tensions, India began its true journey of reforming its economy. The period after 1990 witnessed a very significant opening of the economy to the world market. The change in reforms indices were the highest during the period 1991 – 2000. By the mid-2000, there was a widespread agreement and policy convergence in all seven sectors. However, there is much less convergence in public sector reforms because the privatization process has significantly slowed down and government control is many public sector undertakings are still reasonably high. Lastly, though there is significant variation in social sector reforms index, still there is a lot which needs to be done to include bottom sections of the society into the growth story of India