Thirty-five years after India launched its landmark 1991 economic liberalisation, the reforms remain one of the most defining moments in the country’s modern history. By dismantling license controls, opening markets, and integrating India with the global economy, the reforms fundamentally altered how India grows, produces, and competes. Yet, despite undeniable gains, the liberalisation story is far from complete.
The Economic Transformation Since 1991
India’s post-reform journey has delivered visible progress. Indicators of prosperity have expanded rapidly — from the sharp rise in vehicle ownership and mobile phone penetration to the exponential growth in foreign exchange reserves, stock market capitalisation, and formal savings through provident funds. These changes reflect how liberalisation reshaped consumption, investment, and financial participation across large sections of society.
From a tightly controlled economy, India has evolved into one of the world’s fastest-growing major economies. Economic reforms in India enabled the private sector to expand, services to flourish, and global trade links to strengthen. However, headline growth masks deeper structural imbalances that continue to limit inclusive development.
The Employment and Structural Challenge
One of the most persistent gaps in India’s growth story lies in job creation. Nearly half of India’s workforce still depends on agriculture, even though the sector contributes a much smaller share to GDP. Manufacturing — traditionally the engine of mass employment in developing economies — has not expanded its workforce at the scale required.
Most Indian enterprises remain small and informal, with limited capacity to generate stable, formal jobs. The challenge is not growth alone, but productive, non-farm employment, particularly for India’s young and expanding labour force. Without addressing this, economic growth risks becoming narrow and uneven.
India and China: A Diverging Growth Path
In 1991, India’s per capita income was broadly comparable to China’s. Today, China’s per capita GDP is roughly five times higher. While China followed a distinct state-driven development model, the gap highlights how India’s reform momentum slowed or remained partial in critical areas such as manufacturing scale, urbanisation, and labour mobility. This comparison underscores an uncomfortable reality: while liberalisation in India succeeded in boosting efficiency and integration, it did not fully unlock large-scale industrial employment or rapid income convergence.
Mindsets That Shape Economic Outcomes
Beyond policy design, economic outcomes are shaped by ideas. A lingering discomfort with wealth creation continues to influence public discourse. Economic success is often viewed as zero-sum where one person’s gain is assumed to be another’s loss. Such thinking discourages entrepreneurship and risk-taking, both essential for sustained growth. To move forward, India must embrace a more confident growth narrative — one that recognises that poverty reduction depends on wealth creation, not just redistribution.
Five Ideas for the Next Phase of Reform
Completing the unfinished agenda of 1991 will require more than incremental policy tweaks; it demands a fundamental shift in how India thinks about growth, markets, and enterprise. The next phase of reform must move beyond deregulation alone to address deeper mindsets that shape economic decision-making — from attitudes toward wealth creation and inequality to comfort with experimentation and risk. These five ideas offer a framework for re-energising reform, accelerating job creation, and ensuring that economic growth translates into broad-based prosperity.
1. Normalising Wealth Creation: Wealth creation should be seen as a legitimate and necessary outcome of enterprise. Expanding prosperity requires rewarding initiative and innovation.
2. Rethinking Inequality: Differences in outcomes are inevitable in a growing economy. The focus should be on lifting incomes and expanding opportunities, not enforcing artificial equality.
3. Encouraging Policy Experimentation: Economic progress depends on trying, learning, and adapting. Flexible, evidence-based reforms matter more than rigid ideological positions.
4. Prioritising Outcomes Over Ideology: Growth can come from multiple paths — manufacturing or services, domestic firms or global investors, large corporations or MSMEs. What works should be scaled.
5. Accepting Imperfect Transitions: Market expansion involves risks, including occasional failures and misconduct. These should be addressed through enforcement, not by reversing reforms or over-regulating enterprise.
Carrying Forward the 1991 Legacy
The global environment is also shifting. China is recalibrating its growth model, while the United States faces internal challenges to its long-standing economic dominance. These transitions create opportunities for India — but only if domestic reforms enable scale, competitiveness, and productivity.
India’s upcoming reform agenda — focused on deregulation, ease of doing business, digitisation, decentralisation, and accountability — signals recognition that the reform journey must continue. The true success of India’s economic reforms will depend on whether they translate into jobs, rising incomes, and broad-based prosperity.
Thirty-five years after liberalisation, the lesson is clear: 1991 was not an endpoint, but a beginning. Completing that unfinished story requires confidence in markets, faith in entrepreneurship, and the political will to keep reforming — patiently, pragmatically, and persistently.
This article is based on an OpEd by Manish Sabharwal in the Indian Express
