The economic liberalization in India refers to ongoing reforms in India. After Independence in 1947, India adhered to socialist policies. The extensive regulation was sarcastically dubbed as the "Licence Raj"; the slow growth rate was named the "Hindu rate of growth". In the 1980s, the Prime Minister Rajiv Gandhi initiated some reforms. His government was blocked by politics. In 1991, after the International Monetary Fund (IMF) had bailed out the bankrupt state, the government of P. V. Narasimha Rao and his finance minister Manmohan Singh started breakthrough reforms. The new policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalization has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labor laws and reducing agricultural subsidies.[1]
As of 2009, about 300 million people — equivalent to the entire population of the entire United States — has escaped extreme poverty.[2] The fruits of liberalization reached their peak in 2007, with India recording its highest GDP growth rate of 9%.[3] With this, India became the second fastest growing major economy in the world, next only to China.[4] 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.[5]
Indian government coalitions have been advised to continue liberalization. India grows at slower pace than China.[6] McKinsey states that removing main obstacles "would free India’s economy to grow as fast as China’s, at 10 percent a year".[7]
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