5.1 Introduction

India adopted comprehensive economic reforms from the early 1990s in response to the BOP crisis of 1991. The reform initiatives included measures such as liberalisation of industrial policies removing entry barriers and government control on industrial expansion, outward orientation policies promoting foreign trade and investment, overall macroeconomic stabilisation including fiscal reforms and policy initiatives towards developing a broad-based financial sector. As a consequence of these initiatives, India witnessed significant improvements in overall macroeconomic performance during the post-reform period.

For nearly three decades after the introduction of the reforms, the average economic growth was close to 6.5 per cent. This is nearly double the average growth of around 3.5 per cent experienced during the first three decades following India's independence in 1947. Despite an economic slowdown in 2008–09 as a fallout of the GFC, the average growth during 2003–11 was estimated to be 7.4 per cent. This extended period of high and stable economic growth was unprecedented. The percentage of people living below the poverty line gradually declined from 35.97 per cent in 1993–94 to 29.80 per cent during 1999–2000 and further to 21.92 per cent in 2011–12 (as per various issues of the Economic Survey published by the Government of India). Notwithstanding debates on figures relating to the number of the poor, various official committees and working groups—such as the Alagh Committee (1979), the Lakdawala Committee (1993), the Tendulkar Committee (2009) and the Rangarajan Committee (2014), among others—have broadly confirmed the declining trend of the poverty ratio (Planning Commission, 2009, 2014).

The exports-to-GDP ratio substantially improved from less than 6 per cent in the pre-reform period to around 11–17 per cent in the late 2010s and early 2020s. The ratio of current account deficit to GDP has largely been contained within the range of 1–2 per cent during the post-reform period.