The Indian economy has undergone substantial changes since the introduction of economic reforms in 1991. These reforms were a comprehensive effort consisting of three main components namely, liberalisation, privatisation and globalisation. They included various measures like deregulating the markets and encouraging private participation; trade liberalisation; dismantling the restrictions on domestic and foreign investments; reforming the financial sector and the tax system, etc. All such policy initiatives radically changed the economic set-up of the country and integrated it with the rest of the world. Thus, India was placed in a globally competitive position so as to fully utilise its potentials and opportunities for rapid growth of the economy.
Net National Product (NNP) at factor cost (at 1993-94 prices) increased from 0.5 per cent in 1991-92 to 6.3 per cent in 1999-2000. It increased to 8.8 percent in 2003-04 at 1999-2000 prices. Similarly, per capita NNP increased from -1.5 per cent to 4.4 percent and then to 7.0 percent during the same period. Gross National Product (GNP) at factor cost (at 1993-94 prices) increased from 1.1 per cent in 1991-92 to 6.2 percent in 1999-2000. It increased to 8.7 percent in 2003-04 at 1999-2000 prices. Gross Domestic Product (GDP) at factor cost ( at 1999-2000 prices) has increased from 4.4 percent in 2000-01 to 7.5 per cent in 2004-05.
The industrial sector has been going through a process of restructuring and consolidation after liberalisation. The industries have responded to the reforms through mergers and acquisitions, adoption of cost cutting measures, foreign collaboration, technology upgradation and outward orientation in sectors such as cement, steel, aluminium, pharmaceuticals, and automobiles. Industrial growth increased sharply in the first five years after the reforms, but then slowed to an annual rate of 4.5 percent in the next five years. From low growth rate of 2.7 per cent in 2001-02, the industry sector grew at a rate of 7.1 per cent in 2002-03 and further to 9.8 per cent in 2004-05.
There has been steady and continuous rise in supply of money in the economy since initiation of reforms. Reserve Money(Mo) has increased from Rs. 99,505 crores in 1991-92 to Rs. 573066 crores (Provisional) in 2005-06. Narrow money (M1) has increased from Rs. 114406 crores to Rs. 825245 crores (Provisional), while, broad money (M3) has increased from Rs. 317049 crores to Rs. 2729535 crores (Provisional) during the same period.
Low and volatile growth rates in Indian agriculture and allied sectors was reflected in the average annual growth rate of value added in the sector declining from 4.7 per cent during the Eighth Plan (1992-1997) to 2.1 per cent during the Ninth Plan (1997-2002). From negative growth rate of -7.2 percent in 2002-03, the agriculture sector grew at a rate of 10.0 per cent in 2003-04 and at a rate of 6.0 per cent in 2005-06.
As a proportion of GDP, the share of exports, which had grown from 5.8 per cent in 1990-91 to 12.2 per cent in 2004-05, grew further to 13.1 per cent in 2005-06. The corresponding rise in imports was from 8.8 per cent in 1990-91 to 17.1 per cent in 2004-05 and further to 19.5 per cent in 2005-06. Thus, trade deficit as a proportion of GDP, which had declined from 3.0 per cent in 1990-91 to 2.1 per cent in 2002-03, widened to 4.9 per cent in 2004-05 and further to 6.4 per cent in 2005-06.
Performance of the Indian economy on the inflation front, with price stability as one of the prime objectives of the reform process has been satisfactory, particularly after the mid 1990s. The annual average inflation rate based on Wholesale Price Index (WPI) was 10.6 per cent between 1991-96, which fell down to 5.1 per cent in the period 1996-2001 and then to 4.7 per cent in 2001-06.
There are various economic indicators which highlight the performance of the economy since 1991