Thread by @sunitarora

Exactly three decades ago in the summer of 1991, I graduated. A year later, I started working at a recently-launched business magazine. I’ve had a ringside view of sorts of India's reform years. So, here are my two bits. #thread #reforms

While history rightly records the necessity of reforms thanks to the balance of payments crisis in 1991, many of the younger lot already knew the country was changing — our hopes and aspirations were vastly different from the earlier generation. #thread

The 80s were the springboard of economic change. The IT story had already begun, exporters were the new rich, and real estate was perking up. Despite massive political churn—Punjab, Kashmir, Mandal — a new economic rhythm was evident. India, or at least part of it, was impatient.

With the disintegration of the Soviet Union (1988-91) and the collapse of the Berlin Wall, which Francis Fukuyama dubbed as the end of history, the Left doctrine was derided. This blunted opposition to reforms when Left parties were still a force in Indian politics. #thread

The reforms brought in by Manmohan Singh were sold as the “trickle-down effect” — that benefits of high economic growth will percolate to those at the bottom of the pyramid. Of course, high growth has not bridged the widening divide between the haves and have nots.

Funnily enough, even the IMF has had a rethink. Growing inequality in India has been the big failure. The state ignored crucial investments in education and healthcare, choosing instead to focus on infra development with larger private participation. We are all paying the price.

The bottomline: India has only covered a third of the journey of an economy that is free of poverty. Malnourishment has been a big failure and education system is not serving up capable people for the workforce. There are huge implications for the demographic dividend. #thread

Lest you feel I’m a party pooper, India has sustained growth for 3 decades. Average incomes have increased from $308 to $2,097. It is now a lower middle-income country. Poverty has come down too, though covid has struck off many of those hard-fought gains. #thread

On the other hand, many in my generation have become richer beyond our wildest dreams. We are the new “rajas” of India. According to Piketty and Chancel, to get in the top 1% of earners, an Indian needs to make just over $20,000 (equating to over $75,000 in America).

While India’s middle class hasn’t turned out to be the 200m many thought, it is around 80m. That is a decent number. But the strength of this market will be tested in these post-covid times. Many are seeing the distressing impact of living on credit in uncertain times. #reforms

There have been fantastic success stories in IT and services, but the structural transformation of the economy is undercooked. Manufacturing is capital intensive and is not serving up adequate jobs. Exports have also not delivered in recent years. That’s a big hole.

The past three decades has witnessed many asset bubbles. The dramatic chase for real estate has led to many battles. Realty has made many millionaires but has run its course. The stock market is no longer shallow, perhaps, but is dangerously inflated. Buyer beware. #thread

Finally, the biggest legacy of reforms has been the rise of crony capitalism. Big business has grown, on the back of public money and often thanks to state assets, and controls huge amounts of wealth and drives the media discourse and politics today.

It is a desi version of capitalism -- while they may genuflect to the powers that be, our oligarchs, big and small, are in the driver’s seat of this country today. Big brother as well as big business are running this country. This is a legacy of reforms too. #thread

There is still time to sort out the mess, I hope. Till demon, all the economy ever needed was gentle steering. Two things now give cause for concern: the push towards import substitution over exports and the brutal attack on the unorganised economy. #reforms

What next? There are so many things one would like to change. But the holy grail of reforms is an inheritance tax that is used to fuel massive state investments in education and healthcare. India must have a debate around this measure that has been adopted by many countries. end