Economic inequalities and rationale for second generation reforms

After pursuing an inward looking development strategy with the state assuming an important role for more than four decades, India decided to take a historic step of changing tracks in 1991. The essence of economic reforms is the dismantling of controls over the economy with the state yielding to market forces. Infact, the pillars of these reforms have been privatization, marketisation, liberalization and globalization. The imperatives of economic reforms are ‘deregulation ’‘ decontrol ’‘delicensing ’and ‘ devaluation ’. The pro development literature enforces that with rapid industrialization economic inequalities will be reduced substantially. It was thought that poverty will automatically reduce. In context of inequalities growth story is impressive in the service sector and in particular in Information Technology, the rural agricultural economy has shown negative growth and unemployment among the rural poor has increased. The second generation reforms are needed to focus on ‘inward looking strategies ’keeping in mind that India being a developing economy, too much dependence on foreign capital and technology will expose it to open international competition which it cannot withstand due to certain structural bottlenecks.