page_title: Economic liberalisation in India
section_title: Impact
hierarchical_section_title: Economic liberalisation in India / Impact
caption_attribution_description: English: HSBC GLT Pune
context_page_description: The economic liberalization in India refers to the economic liberalization of the country's economic policies with the goal of making the economy more market and service-oriented and expanding the role of private and foreign investment. Although unsuccessful attempts at liberalization were made in 1966 and the early 1980s, full liberalization was initiated in 1991. Specific changes included reducing import tariffs, deregulating markets, and reducing taxes, all of which lead to an increase in foreign investment and high economic growth in the 1990s and 2000s. From 1992 to 2005, foreign investment increased 316.9% and India's gross domestic product grew from $266 billion in 1991 to $2.3 trillion in 2018 International business analysts argue that Indian government coalitions should continue liberalization. The McKinsey Quarterly stated that "removing major obstacles would free India's economy to grow as fast as China's, at 10% a year".
  However, many debate the extent to which the reforms have been beneficial to the Indian people. Income inequality has deepened in India since 1992, with consumption among the poorest staying stable while the wealthiest generate consumption growth.
context_section_description: The economic liberalization of India had a multitude of impacts. Foreign investment in the country (including foreign direct investment, portfolio investment, and investment raised on international capital markets) increased from US$132 million in 1991–92 to $5.3 billion in 1995–96. On the other hand, it also enabled a number of companies like Enron to invest more easily in India, in over expensive projects. As per the US Senate, the largest share of foreign direct investment in India since 1992 came from Enron (more than 10%).
  Institutions like the OECD applauded the changes:
   Its annual growth in GDP per capita accelerated from just 1¼ per cent in the three decades after Independence to 7½ per cent currently, a rate of growth that will double average income in a decade.... In service sectors where government regulation has been eased significantly or is less burdensome—such as communications, insurance, asset management and information technology—output has grown rapidly, with exports of information technology enabled services particularly strong. In those infrastructure sectors which have been opened to competition, such as telecoms and civil aviation, the private sector has proven to be extremely effective and growth has been phenomenal.
  — OECD
  The election of AB Vajpayee as Prime Minister of India in 1998 and his agenda was seen as a welcome change by some. His prescription to speed up economic progress included possible solutions of the outstanding Cold War related problems with the West and further opening up FDI. In three years, the West was developing a bit of a fascination to India's brainpower, powered by IT and BPO.  By 2004, the West would consider investment in India, should the conditions permit. By the end of Vajpayee's term as prime minister, a framework for the foreign investment had been established. The new incoming government of Dr. Manmohan Singh in 2004 further strengthened the required infrastructure to welcome the FDI.
  The fruits of liberalization reached their peak in 2006, when India recorded its highest GDP growth rate of 9.6%. With this, India became the second fastest growing major economy in the world, next only to China. The growth rate has slowed significantly in the first half of 2012. An Organisation for Economic Co-operation and Development (OECD) report states that the average growth rate 7.5% will double the average income in a decade, and more reforms would speed up the pace. The economy then rebounded to 7.3% growth in 2014–15.
caption: HSBC GLT, Pune
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