These measures proved successful in averting the balance of payment crisis. It enhanced Singh's reputation globally as a leading reform-minded economist. The Congress Party did poorly in 1996 elections and finally lost power to the National Democratic Alliance (NDA) in 1997.
However, the NDA Government under Mr. Atal Bihari Vajpayee continued the reform process. In 2004, when the Congress-led United Progressive Alliance (UPA) returned to power, Dr. Manmohan Singh became the Prime Minister. The Indian Government has been continuing economic liberalization to date. This article seeks to examine what India has gained by following the policy of economic liberalization.
The Indian Rupee in 1991
India had a serious balance of payment problem. Its foreign exchange reserves were very low. At this stage, when economic liberalization was initiated one US dollar was equal to about Rs 17.50. By 2006, the Rupee had fallen to Rs 48 to a dollar and on August 16, 2013, it touched Rs 62 to an US dollar. In other words, 22 years of economic liberalization has reduced the value of the Rupee to one quarter of its 1991 value.
Trade Deficit in financial year 1991-92
India had a trade deficit was US$ 1.546 billion during 1991-92. By 1999-2000 it had risen to US$ 12.846 billion (Source Department of Commerce, Government of India). In financial year 2004-05, when Manmohan Singh became Prime Minister, the trade deficit had risen to US$ 27.981 billion. By 2009-10, the deficit had risen to US$ 109 billion. At the end of 2012-13, the deficit was US$ 180 billion. In other words, 22 years of economic liberalization has increased India's trade deficit about 120 times.
Current Account Deficit in 1991-92
India's current account deficit was about 3% of its GDP in 1991-92. In 2012-13 it was 6.7%. The rate is constantly rising. In the 22 years of economic liberalization, the current account deficit has more than doubled as a percentage of GDP.
On September 16, 1992, the price of diesel in Delhi was Rs 6.11/lt. An LPG cylinder was costing Rs 82.75. On February 28, 1999 the price of diesel had risen to Rs 9.94 and an LPG cylinder cost Rs 145. June 16, 2004, the price of diesel was Rs 22.74 and an LPG cylinder was Rs 261. In August 2013, the diesel price is about Rs 65 and an LPG cylinder is about Rs 400.
In other words in the 22 years of economic liberalization, the cost of diesel has risen more than 10 time and the cost of an LPG cylinder about 5 times. This is in spite of large scale subsidization of these products by the government of India through the state owned oil companies which are on the verge of collapse.
Price of onion in the whole sale market of Delhi in 1991-92 was about Rs 400 per quintal. In August 2013, the price is about Rs 6500 per quintal. In other words, 22 years of liberalization has increased the price of onion about 16 times and put this humble vegetable out of reach of the common man.
Dr. Manmohan Singh is the darling of the US, EU and China as their multinational companies are making more money in India than they had ever done before. Multinational companies of thises countries along with Indian multinationals and investors are getting richer while the ordinary Indians struggle to make both ends meet.India's foreign exchange reserves are dwindling at a rapid rate. The Indian rupee and the Indian economy are again in crisis.
I know of two kinds of doctors. The first kind diagnoses the problem; prescribes a medicine and repeats the medicine till the patient dies. The other kind changes the medicine when the patient does not respond to the treatment. I wonder what kind of doctors are attending to India's economic problems. May God save India.