Beyond GDP: India's tryst with reforms

In a compelling conversation, noted economist Montek Singh Ahluwalia, one of the key architects of India's 1991 economic reforms, has shared his insights on India's policy transformations, ongoing economic challenges, and the road ahead.

- SABYASACHEE DASH

His reflections provide a rare glimpse into the behind-the-scenes decision-making that helped shape modern India's economic trajectory.

Ahluwalia began by recalling the economic turmoil India faced in 1991, marked by a severe balance of payments crisis. At the time, foreign exchange reserves had dwindled to a precarious level, and a radical shift in economic policies was the only way forward. The reforms that followed, including trade liberalization, delicensing of industries, and opening up to foreign investment, were a watershed moment in India's history.

While the reforms were spearheaded by then Prime Minister P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh, Ahluwalia emphasized that their success lay in a collective effort. He dismissed claims that the World Bank and IMF dictated India's economic policies, clarifying that discussions on structural reforms had already been taking place within the government. The crisis merely acted as a catalyst, allowing long-pending reforms to materialize.

He also recounted how his policy paper, later dubbed the M Document, influenced the government's approach to economic restructuring. He highlighted that resistance to change existed even within the bureaucracy, but strong leadership and a strategic approach helped push reforms forward.

Shifting focus to current economic challenges, Ahluwalia addressed India's fiscal health, particularly the rising debt-to-GDP ratio. While India's public debt remains below that of many advanced economies, he cautioned that sustaining long-term growth requires a disciplined fiscal policy.