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Five Reforms Before 1991

Sutanu Guru takes a look at five reform measures that preceded the historic July 22, 1991 Budget speech of Dr Manmohan Singh

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For days, the media has been plastered with memorabilia and analysis of the 1991 economic reforms that fundamentally transformed the Indian economy. Much has been written about how, 25 years ago, Dr Manmohan Singh with the deft political backing of the then Prime Minister P. V. Narasimha Rao set about dismantling a failed command and control socialist structure. Almost all the analysis seems to make us believe that it is 1991 when all economic reforms happened. The suggested conclusion is that absolutely nothing was done before that. Tempting as it sounds, this is plain wrong if you look at facts. Sure, 1991 will always remain a landmark year. But there were many small steps leading up to 1991 that are usually forgotten even by distinguished economists and pundits. Here is a list of five significant reforms that preceded 1991:

1. Cement Decontrol: Till 1982, like much else in the Indian economy, cement was a tightly controlled and regulated industry. Folks had to actually "apply" to local authorities for their quota of cement to build their dream house. The price was fixed by the government and the actual (black) market price was sometimes 10 times the official price. Shortages and corruption were endemic. Not surprisingly, the then Maharashtra chief minister A. R. Antulay was exposed in a cement scam and the then Prime Minister Indira Gandhi had to sack him in 1982. But the result was eventually surprising. A whole raft of controls were removed from the industry. The outcome: production exploded and the black market vanished within five years. This convinced many reluctant "socialists" that markets were often better than the State.

2. Automobile Joint Ventures: Till the early 1980s, Ambassador and Fiat were the only options for car buyers while Bajaj had a stranglehold over the two wheeler market. The average citizen had to pay the full amount in advance and then wait for at least three years for a Bajaj scooter. In a significant ploy shift, the Indira Gandhi government allowed joint ventures between multinationals and Indian companies in the automobile sector. By this time in end 1982, Maruti Suzuki was already a reality. There was an explosion of such projects in the aftermath, including the legendary Hero-Honda partnership that transformed the two wheeler industry. The roots of the auto and auto component revolution do back to that policy change of early 1980s.

3. Color TV and Private Participation: The Asian Games held in Delhi in 1982 is marked as the event that heralded the arrival of color TV in India. This eventually led to a consumer and brand revolution in Indian consumer durable goods markets. An equally significant policy change was to encourage private companies and producers to make shows and serials for the broadcasting monopoly Doordarshan. Starting with the fondly remembered Hum Log, the decision actually led to the creation of a whole new industry. NDTV owes its origins to that era. When the satellite TV revolution actually hit India in the 1990s, a whole range of private players were ready to exploit it.

4: Private Courier: This 1986 policy move had led to a huge controversy across India. There were nationwide strikes by trade unions. Till 1986, delivery of parcels was the monopoly of the state owned India Post. The new policy allowed private companies to collect and deliver parcels across India, and even to overseas destinations. This actually created a whole new "courier" industry that is still thriving and boasts of many home grown brands apart from global powerhouses like DHL. The whole industry was transformed and business efficiency improved dramatically as private companies competed fiercely to deliver on time, and reliably. Most important, far from leading to the closure of India Post and loss of jobs as argued by trade unions, this actually led to creation of millions of new jobs.

5. Consumer Protection Laws: The formation of consumer courts after the new 1986 law is a significant milestone in the Indian economy. Till then, Indian consumers were literally at the mercy of companies and service providers for faulty products and services. Consumer courts offered them a cheap and less time taking legal route to seek redressal. Like much else in India, consumer courts too ha e become part of the decadent legal system of the country. But millions of consumers have actually benefited from consumer courts. More importantly, companies have realized that they can be penalized heavily for taking the consumer for a ride. The Indian con sure is still very vulnerable, but the consumer courts at least made a beginning.