In a forthcoming paper for the Cato Institute, I have summed up the 25 years of economic reform as an era of private sector success, government failure, and eroding institutions.
In 1991, many analysts warned that opening up the economy would mean industrial domination by multinational corporations, with Indian companies going bust or becoming mere suppliers to the MNCs. In fact Indian companies blossomed as never before, and hundreds of them became multinationals themselves. These included world-class players in software, small cars, auto components and pharmaceuticals. India failed in labour-intensive industries but blossomed in brain-intensive industries and services, and that’s where the future lies. There has been plenty of crony capitalism, yet new companies without political godfathers have flourished as never before.

Sun Pharmaceuticals, unknown in 1991, has become India’s largest pharma company and a global power. Its owner Dilip Shanghvi has risen from nothing to become India’s richest person. The software industry has spawned thousands of millionaires, and the same is happening with start-ups like Flipkart and Ola. As Manmohan Singh once said, these are not the children of the rich; they are the children of economic liberalization. The private sector has driven India’s rise to a miracle economy, while old public sector giants have wilted or fallen. The main problem is lack of smooth exit for failures. The creative destruction of capitalism requires easy exit no less than easy entry.