Newspaper article The Christian Science Monitor

The Threat to India's Economic Reforms

Newspaper article The Christian Science Monitor

The Threat to India's Economic Reforms

Article excerpt

ON Dec. 6 a mindless mob of more than 250,000 Hindus attacked and destroyed a 16th-century mosque in Ayodhya, northern India. Ignoring a supreme court directive against any action that might cause harm to the disputed mosque, the crowd of Hindus leveled the Babri masjid (mosque). The action focused the world's attention on one n the aftermath of the heinous crime was enough to raise the specter of India's partition in 1947. An estimated half a million people were slaughtered during the partition that led to the creation of Muslim Pakistan. For the first time since independence, sectarian conflict between Hindus and Muslims (constituting 83 percent and 11 percent respectively, of the population) now threatens to undermine the secular nature of the world's largest democracy.

The timing of the present crisis could not have been worse. Only a year and a half ago India had launched its most ambitious liberalization program. With a middle class of about 250 million people, India is a significant market, and the opening of the country to foreigners was greeted with widespread euphoria around the world. Just as the country was beginning to respond to the new economic initiatives, the liberalization package faces possible extinction because of the recent crisis.

For more than 40 years since independence, India has failed repeatedly to capitalize on a multitude of global opportunities. Nearly all governments since 1947 have managed to downplay their inefficiencies, bad policies, and corruption, while keeping the country in virtual isolation from the world by invoking the anti-colonial sentiments associated with the British. The goal of self-sufficiency only led to a web of intricate, inward-looking policies, a heavy reliance on socialism, and the rise of a counterproductive bureaucratic reserves had plummeted to $1 billion - barely enough to finance two weeks of imports - and total foreign debt had amassed to $71 billion. Given the pathetic state of the economy, foreign investment fell earlier in the year, and non-resident Indian (NRI) money flowed out at an alarming rate of $310 million a month between April and June 1991. The downgrading of India's credit rating only compounded the problem.

It was a combination of external reactions to the domestic crisis and the outright rejection by the World Bank and the International Monetary Fund of any help prior to economic restructuring that forced India to identify pockets of inefficiencies. Last year, the world witnessed fresh thinking from the otherwise parochial Indian planners. The year carried with it the hope that at last India was making a concerted effort to break free from its economic past. Prime Minister Narashimha Rao, along with Finance Minister Manmohan Singh, unleashed a spate of deregulation measures and initiatives to enhance India's economic growth. …

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