Neo-liberal Macroeconomic Policy and Structural Transformation of Indian Economy: Impact on Income, Employment and Distribution

Abstract

Predominant objective of macroeconomic policies in developing countries has been to achieve higher level of potential economic growth and sustain it once it is achieved. Macroeconomic policy in India, on the backdrop of severe balance of payment crisis, has witnessed major shift in the early 1990s when neo-liberal economic policy on the pressure of IMF and World Bank has been adopted abandoning the socialist pattern of economic policy pursued in the post-independence period. Since implementation its scope has been consistently widening in terms of economic reform in different sectors of the economy, now its impact both positive and adverse is clearly visible. Since the last two and half decades, the serious adverse implication of the new economic policy is visible, particularly on the widening income inequality, although there has been positive effect on achieved higher aggregate economic growth. The major channel through which it is manifested is less than desired performance on labour market as employment generation has slowed down drastically when compared to the long-term trend in employment generation. In post-1991 period during 1993–1994 and 2011–2012, the growth in employment has been around 1.3% per annum against long-term growth rate of 2.11% per annum between 1977–1978 and 2011–2012. Even those employments generated are mostly in construction and low-productive services sector and are precarious and casual in nature. The paper has contributed in understanding the phenomena of rising inequality in the nature of production, through examination of structure and composition of output, employment and emerging wide disparity across sectors. We have shown by examining output per worker and concentration of workforce across sectors the problem of existing and rising income inequality.