The agenda of 1991 economic reforms in still unfinished. Comment. What are the challenges faced by the government in taking reforms to logical conclusion. (15M, 150 Words)

The 1991 economic reforms (Liberalisation, Privatisation and Globalisation) rescued India from a severe balance-of-payments crisis and placed it on a high-growth trajectory, transforming it into a nearly $4-trillion economy by 2026. However, the reform process remains unfinished, as several structural distortions persist.

Unfinished agenda of 1991 Economic reforms:

1.    Incomplete Factor Market Reforms:

• Labour and land reforms remain partial while labour codes are unevenly implemented and land acquisition delays continue to stall infrastructure and manufacturing.
• Manufacturing remains stuck at 15% of GDP, limiting large-scale employment creation.

2.   Persistent State Dominance:

• While strategic disinvestment (e.g., Air India) succeeded, several PSUs continue to incur losses as seen in ₹3 lakh crore losses in 2024.
• Public sector banks still dominate credit allocation, constraining efficiency and competition.

3.   Agriculture left out:

• Nearly 60% of the workforce is trapped in low-productivity agriculture.
• Repeal of the 2020 farm laws highlighted the absence of political consensus on market-oriented agricultural reforms.

4.   Regulatory Rigidities:

• Despite deregulation efforts, over 1,500 obsolete laws persist, and contract enforcement remains slow.
• Multiplicity of clearances and compliance burden dilute ease of doing business gains.

5.   Jobless Growth:

• Growth has not translated into adequate quality employment; youth unemployment remains high.
• Rising inequality as top 1% owning 40% of wealth, has weakened public acceptance of reforms.

Challenges in taking reforms to logical conclusion:

1.    Political Economy Constraints:

• Electoral pressures, coalition politics, and organised interest groups such as farm unions, PSU unions resist reforms perceived as disruptive.
• Populist welfare measures often substitute for productivity-enhancing reforms.

2.   Federal Bottlenecks:

• Key reforms lie in the State List such as land, power, urban governance, leading to uneven adoption.
• GST compensation disputes and fiscal stress reduce state-level reform incentives.

3.   Fiscal Limitations:

• High public debt at 82% of GDP and contingent liabilities of PSUs and DISCOMs limit reform-linked capital investment.

4.   External Headwinds:

• Global protectionism, supply-chain realignments, and climate commitments require agility, while administrative capacity remains uneven.

Way Forward:

1. Complete factor market reforms with safeguards such as social security, skilling, and benefit portability.
2. Second-generation reforms in judiciary, contract enforcement, urban governance, and regulatory quality.
3. Strengthen cooperative and competitive federalism through reform-linked fiscal transfers.
4. Shift from subsidy-led welfare to productivity-led growth via investment in health, education, and infrastructure.

Conclusion:

Completing the unfinished reform agenda demands political consensus, institutional capacity, cooperative federalism, and inclusive growth, to realise the vision of Viksit Bharat 2047.

‘+1’ Value Addition:

• Manufacturing’s stagnation at 15% of GDP contrasts with East Asia’s 25–30%, underscoring unfinished reforms.
• IBC resolved ₹3.5 lakh crore by 2025, demonstrating how effective institutions can unlock reform gains.
• World Bank Ease of Doing Business gains improved entry/exit, but contract enforcement still takes 1,400 days.

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