6.6         ndian     onom
     politics of economic reforms damaged India more        IMF was to help India bring about equilibirium
     than the reform has benefitted the country. It         in its BoP situation in the short-term and go for
     would not be an exaggeration if we conclude that       macroeconomic and structural adjustments so
     economic reforms had no political consensus.           that in future the economy faces no such crisis.
     Political parties in India are divided on the issue          There was enough scope for the critics to
     of reforms—the parties together with the masses        criticise India’s economic reforms as prescribed
     lack the level of political maturity required for      and dictated by the IMF. The process of economic
     the success of the reform programme. It is right,      reforms in India had to face severe criticism from
     democratic maturity comes to a multi-party             almost every quarter of the economy concerned,
     political system, but it takes time. It takes even     although the reforms were aimed to boost growth
     more time where masses are unaware and ignorant.       and deliver competitiveness to the economy.13
     The emotional issues of religion, caste, etc., play
     their own roles in such situations.                    reform meAsures
          The IMF conditions put forth for India were       The economic reform programme, that India
     as under:                                              launched, consisted of two categories of measures:
          (i) Devaluation of the rupee by 22 per cent
               (which was effected in two phases and the    1. Macroeconomic Stabilisation Measures
               Indian rupee fell down from Rs. 21 to Rs.    It includes all those economic policies which
               27 per US Dollar).                           intend to boost the aggregate demand in the
         (ii) Drastic reduction in the peak import          economy—be it domestic or external. For the
               tariff from the prevailing level of 130 per  enhanced domestic demand, the focus has to be
               cent to 30 per cent (India completed it by   on increasing the purchasing power of the masses,
               2000–01 itself and now it is voluntarily     which entails an emphasis on the creation of
               cut to the level of 15 per cent).            gainful and quality employment opportunities.
        (iii) Excise duties (i.e., CENVAT now) to
               be hiked by 20 per cent to neutralise the    2. Structural Reform Measures
               revenue short falls due to the custom        It includes all the policy reforms which have been
               cut (a major tax reform programme was        initiated by the government to boost the aggregate
               launched to streamline, simplify and         supply of goods and services in the economy. It
               modernise the Indian tax structure which     naturally entails unshackling the economy so that
               is still going on).                          it may search for its own potential of enhanced
        (iv) All government expenditure to be cut           productivity. For the purchasing capacity of
               down by 10 per cent, annually (i.e., cutting the people to be increased, the economy needs
               the cost of running the government and       increased income, which comes from increased
               denotes, interests, pays, pension PF and     levels of activities. Income so increased is later
               subsidies. A pressure on the government      distributed among the people whose purchasing
               to consolidate the fiscal deficit and go for power has to be increased—this will take place by
               fiscal prudence).                            properly initiating a suitable set of macroeconomic
          Though India was able to pay back its             policies. For the income to get distributed among
     IMF dues in time, the structural reform of the
                                                               13.  Ministry of Finance, Economic Survey 1991–92: Part II
     economy was launched to fulfil the above-given                 Sectoral Developments & New Industrial Policy, 1991,
     conditions of the IMF. The ultimate goal of the                GoI, New Delhi.