India’s major economic reforms were spurred on by a foreign exchange crisis. It was the summer of 1991 when foreign exchange reserves went to nearly zero. An emergency loan from the IMF was taken, and a slew of reforms were initiated. Exchange rates, import duties and banking were deregulated, and foreign direct investment was permitted.

The biggest bang reform was the end of the licence raj in manufacturing and industrial production. Economic growth picked up, and foreign investment poured in. The IMF loan was repaid in less than two years. The stock market and capital markets took off.

Ten years later, a second generation of reforms was unleashed in the telecom and power sectors. This too led to remarkable growth and dynamism. To this day we are reaping the harvest of the telecom revolution, which is still unfolding.

The economy is now more than ten times bigger than in 1991. India is a software powerhouse in the world. But one big promise of the 1991 reforms remains unfulfilled. If the biggest bang was industrial delicensing, then we should have seen the manufacturing sector grow exponentially. It did grow but only at the same pace as the GDP.

The share of manufacturing in India’s GDP is roughly the same in 2025 as it was in 1991, around 16 or 17 per cent. The aspiration is to reach at least 25 per cent of the GDP, as per the National Manufacturing Policy, the Competitiveness Project, and even Make in India. But manufacturing is stubbornly stuck, and, as a result, industrial employment also has not taken off.

The share of formal employment, i.e., those who are covered by a contract and get pension and health benefits, is a stagnant........

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