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India’s Economy: The 1991 Reforms and Caste System


The Indian economic system is unique because of an interaction of social and political factors that have occurred there. The 1991 reforms, as well as the caste system, are key factors in understanding India’s economy and they shall be examined below.

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How the economic policies of the Indian government were changed by the reforms of 1991

It should be noted that prior to the 1991 reforms, India was on the brink of financial insolvency owing to its large financial deficits both in the local financial markets and in foreign markets. However, after the reforms, the country witnessed a change in its import sector. First of all, the country eliminated import licensing and this implied that more foreign investors were drawn to do business within the country. These changes were followed by a number of measures to protect the Indian economy and they included safeguard duties as well as anti-dumping duties to ensure that consumers were looked after. (Kurian 345)

Not only has this country changed the external trade sector, but it also reported changes in its balance of payments as well as its foreign reserves. After the reforms, the Indian government unified its exchange rate thus allowing conversion of the rupee into capital. Besides that, external debts were substantially reduced and this eventually led to a lower balance of payment. Foreign exchange reserves after the 1991 reforms expanded rapidly and were able to account for one and a half years worth of imports. This was a very high boost compared to what they were undergoing before the reforms.

The latter reforms also created abolition of industrial restrictions as this lead to greater investment both from local investors and foreigners. However, there have been problems with implementation of the latter system owing to the fact that larger investors can take advantage of economies of scale while others may not.

Ways in which the caste system corresponds and differs from a division of social class in the form of Marx’s two main classes of employers and workers.

In the caste system and Marx’s social class theory there exist two major categories of people i.e. those with power and those without. Persons in powerful positions attempt to maintain their status as they can only reap benefits if they remain in those positions. However, the major difference between the Indian model and the Marxist model of social class is that the caste system disallows upward mobility and can hence be regarded as a highly rigid system. On the other hand, it is possible for a member of the lower class to gain upward mobility in the Marxist school of thought (Aronowitz, p. 37).

Another common element between these two concepts is the issue of difference. In Marxism, persons differed from one another as a result of their position in the means of production. Similarly, within the caste system, different castes had different responsibilities and skills in production. For instance, the Brahmin is a priest (the elite), most middle castes are merchants, farmers and artisans while the lower caste is composed of laborers. In the social class theory, persons in the lower class are laborers while the elite are the strategic planners or thinkers (Geoff, p. 180). However, the Indian model is derived from a religious standpoint while the Marxists one is largely social. This is the reason why revolution or change is possible in the latter rather than in the former.

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The 1991 Reforms propelled India out of fiscal turmoil and onto economic growth as it has yielded tangible reforms. On the other hand, the caste system possesses more similarities than differences to the Marxist social class theory.


  1. Aronowitz, Richard. How class works. London: OpenMute Publishers, 2003
  2. Geoff, Payne. “The Death of Class.” Libertarian Studies Journal, 3.1 (1999): 180
  3. Kurian, Mathew. India: State and Society. New Delhi: McMillan, 2000

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1. StudyCorgi. "India’s Economy: The 1991 Reforms and Caste System." November 1, 2021.


StudyCorgi. "India’s Economy: The 1991 Reforms and Caste System." November 1, 2021.


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StudyCorgi. (2021) 'India’s Economy: The 1991 Reforms and Caste System'. 1 November.

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