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    Economic Liberalisation

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    rahul81s
    The document outlines India's economic reforms since 1947. It began with a planned approach to development but saw the need for changes in the 1980s. Major reforms began in 1991 when India faced a balance of payments crisis under license raj. This led to liberalization, making the economy outward-looking and competitive. Reforms included abolishing licensing, opening to foreign investment and technology, and reducing public sector control. First generation reforms focused on stabilization while second generation introduced more structural reforms. Reforms have benefited services but agriculture and industry still face challenges around infrastructure, laws and credit access. Ongoing reforms aim to reduce non-performing assets and impose tighter fiscal discipline.

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    Economic Liberalisation

    Uploaded by

    rahul81s
    30 views12 pages
    The document outlines India's economic reforms since 1947. It began with a planned approach to development but saw the need for changes in the 1980s. Major reforms began in 1991 when India faced a balance of payments crisis under license raj. This led to liberalization, making the economy outward-looking and competitive. Reforms included abolishing licensing, opening to foreign investment and technology, and reducing public sector control. First generation reforms focused on stabilization while second generation introduced more structural reforms. Reforms have benefited services but agriculture and industry still face challenges around infrastructure, laws and credit access. Ongoing reforms aim to reduce non-performing assets and impose tighter fiscal discipline.

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    The document outlines India's economic reforms since 1947. It began with a planned approach to development but saw the need for changes in the 1980s. Major reforms began in 1991 when India faced a balance of payments crisis under license raj. This led to liberalization, making the economy outward-looking and competitive. Reforms included abolishing licensing, opening to foreign investment and technology, and reducing public sector control. First generation reforms focused on stabilization while second generation introduced more structural reforms. Reforms have benefited services but agriculture and industry still face challenges around infrastructure, laws and credit access. Ongoing reforms aim to reduce non-performing assets and impose tighter fiscal discipline.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    30 views12 pages

    Economic Liberalisation

    Uploaded by

    rahul81s
    The document outlines India's economic reforms since 1947. It began with a planned approach to development but saw the need for changes in the 1980s. Major reforms began in 1991 when India faced a balance of payments crisis under license raj. This led to liberalization, making the economy outward-looking and competitive. Reforms included abolishing licensing, opening to foreign investment and technology, and reducing public sector control. First generation reforms focused on stabilization while second generation introduced more structural reforms. Reforms have benefited services but agriculture and industry still face challenges around infrastructure, laws and credit access. Ongoing reforms aim to reduce non-performing assets and impose tighter fiscal discipline.

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    of 12

    1 1

    THE ROAD TO ECONOMIC


    THE ROAD TO ECONOMIC
    REFORMS
    REFORMS
    2 2
    The Initial Years 1947
    The Initial Years 1947
    -
    -
    1991
    1991

    Industrial Policy Drafts


    Industrial Policy Drafts
    -
    -
    1948, 1956
    1948, 1956

    Planning approach to Economic


    Planning approach to Economic
    Development
    Development

    Mahalanobis Model
    Mahalanobis Model

    Commanding height of the


    Commanding height of the
    P.S.U.s
    P.S.U.s

    Green Revolution
    Green Revolution

    Signals of a paradigm shift in the Mid


    Signals of a paradigm shift in the Mid
    -
    -
    80s
    80s
    3 3
    1991
    1991

    The Watershed Year


    The Watershed Year
    BOP crisis BOP crisis
    - - License License Raj Raj, fixed demand, complacency , fixed demand, complacency
    - - Lack of export competitiveness Lack of export competitiveness
    - - Export earning< import expenditure Export earning< import expenditure
    - - Steady import demand Steady import demand
    - - Gulf War and Fall of USSR, situation accentuated Gulf War and Fall of USSR, situation accentuated
    - - Verge of sovereign default Verge of sovereign default
    Liberalisation begins Liberalisation begins
    - - Making economy outward looking Making economy outward looking
    - - Increasing element of competition Increasing element of competition
    - - Transfer of resources to productive areas Transfer of resources to productive areas
    4 4
    New Industrial Policy
    New Industrial Policy
    -
    -
    1991
    1991

    Abolition of industrial licensing


    Abolition of industrial licensing

    Role of Public sector diluted


    Role of Public sector diluted

    Free entry to foreign investment and


    Free entry to foreign investment and
    technology
    technology

    Abolition of phased manufacturing


    Abolition of phased manufacturing
    program
    program

    Removal of mandatory convertibility clause


    Removal of mandatory convertibility clause

    Industrial location policy liberalised


    Industrial location policy liberalised

    MRTP limit goes


    MRTP limit goes
    5 5
    OTHER REFORMS OF THE
    OTHER REFORMS OF THE
    Ist
    Ist
    GEN..
    GEN..
    1. 1.
    Attempts to contain fiscal deficit and inflation
    Attempts to contain fiscal deficit and inflation
    2. 2.
    Lower rates of income tax
    Lower rates of income tax
    3. 3.
    Corporation tax lowered to 40%
    Corporation tax lowered to 40%
    4. 4.
    Reduction in customs duty
    Reduction in customs duty
    5. 5.
    Excise on ad
    Excise on ad
    -
    -
    valorum basis, slabs reduced
    valorum basis, slabs reduced
    6. 6.
    Operational freedom to banks and
    Operational freedom to banks and
    computerization
    computerization
    7. 7.
    CRR and SLR reduced
    CRR and SLR reduced
    8. 8.
    Exchange rate on free float basis
    Exchange rate on free float basis
    9. 9.
    SEBI created, wired stock markets
    SEBI created, wired stock markets
    6 6
    THE
    THE
    IInd
    IInd
    GEN. REFORMS..
    GEN. REFORMS..
    1. 1.
    Reforms in telecom sector
    Reforms in telecom sector
    2. 2.
    FERA replaced by FEMA
    FERA replaced by FEMA
    3. 3.
    Thrust on increasing FDI and FII inflows
    Thrust on increasing FDI and FII inflows
    4. 4.
    Banking sector reforms
    Banking sector reforms
    --
    --
    reduce
    reduce
    NPAs
    NPAs
    , C.A.
    , C.A.
    Ratio, Pvt. Banks, Mergers etc.
    Ratio, Pvt. Banks, Mergers etc.
    5. 5.
    Infrastructure creation ( privatization , BOOT)
    Infrastructure creation ( privatization , BOOT)
    6. 6.
    MRTP act goes
    MRTP act goes
    7. 7.
    Disinvestment of govt. share in
    Disinvestment of govt. share in
    PSUs
    PSUs
    8. 8.
    Insurance sector reforms
    Insurance sector reforms

    Pvt. Players, cheap


    Pvt. Players, cheap
    insurance
    insurance
    7 7
    Ist
    Ist
    Gen Reforms vs.
    Gen Reforms vs.
    IInd
    IInd
    Gen Reforms
    Gen Reforms
    Ist Gen Reforms IInd Gen Reforms
    1992-97 1997-2002
    Mainly Stabilisation
    policies
    Mainly Structural
    Reforms
    Prerequisite to IInd
    Gen reforms
    Logical Extension of
    the ongoing process
    Limited to a few
    institutional reforms
    Brought reforms to
    new frontiers
    Stiff political
    resistance
    Widespread popular
    support
    Touched banking &
    taxation reforms
    Carried these
    forward
    8 8
    Assessing The Impact of Reforms
    Assessing The Impact of Reforms

    .
    .

    Agriculture
    Agriculture

    Overemphasis on industry and services


    Overemphasis on industry and services

    Consequent drop in public investment


    Consequent drop in public investment

    40% in GDP in 1980, 33% in 1990, 23% in


    40% in GDP in 1980, 33% in 1990, 23% in
    2005
    2005

    56% of country
    56% of country

    s workforce
    s workforce
    9 9

    Industry
    Industry

    Performance hampered by physical


    Performance hampered by physical
    infrastructure
    infrastructure

    No progress made to correct antiquated


    No progress made to correct antiquated
    labour laws
    labour laws

    Protectionism not yet gone


    Protectionism not yet gone

    Shortage of credit to SMEs


    Shortage of credit to SMEs

    Very high entry and exit barriers


    Very high entry and exit barriers
    Assessing The Impact of Reforms ..
    Assessing The Impact of Reforms ..
    10 10

    Services
    Services
    Robust growth performance Robust growth performance
    Liberalisation of financial sector provided impetus Liberalisation of financial sector provided impetus
    Substantial fillip from IT, ITES Substantial fillip from IT, ITES
    40% of GDP in 1990, 50% in 2005 40% of GDP in 1990, 50% in 2005
    Assessing The Impact of Reforms
    Assessing The Impact of Reforms
    ...
    ...
    11 11
    A.
    A.
    Securitisation Act
    Securitisation Act
    to reduce NPAs
    to reduce NPAs

    7% of gross advances
    7% of gross advances

    Volume
    Volume
    -
    -
    Rs. 1,00,000 crore
    Rs. 1,00,000 crore

    Lenders have right to seize and sell


    Lenders have right to seize and sell
    collateral assets to recover dues without
    collateral assets to recover dues without
    legal process
    legal process

    Impact
    Impact
    -
    -
    Lower credit rates
    Lower credit rates
    The
    The
    IIIrd
    IIIrd
    Gen. Reform
    Gen. Reform

    12 12
    B. FRBM Act, 2004
    B. FRBM Act, 2004

    Tighter fiscal discipline


    Tighter fiscal discipline

    Curb on government expenditure


    Curb on government expenditure

    At present, fiscal deficit


    At present, fiscal deficit
    -
    -
    1,30,000 Crores,
    1,30,000 Crores,
    4.3% of GDP
    4.3% of GDP

    Revenue deficit to be eliminated by 2009


    Revenue deficit to be eliminated by 2009

    Fiscal deficit to be contained below 3%


    Fiscal deficit to be contained below 3%

    Impact
    Impact

    beneficial for both public


    beneficial for both public
    and businesses
    and businesses
    The
    The
    IIIrd
    IIIrd
    Gen. Reforms
    Gen. Reforms

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