economic reforms of 1991

7/29/2019 economic reforms of 1991

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What is economic reforms

View about economic reform as by

Political speak for something that never happens.

-AJAY RAGHAV

Well since the definition of "insanity" is doing the samething over and over and expecting different results, I

would say this would be, 'Insane.

-VIKESH KHANNA

Politicians keep pretending to answer the questions on

how they would 'change' thingsbut then keep on doing

the same old thing. Total Insanity.

-NIKHIL BHARARA


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Economic reform" usually refers to deregulation, or at times to

reduction in the size of government, to remove distortions

caused by regulations or the presence of government, rather

than new or increased regulations or government programs toreduce distortions caused by market failure. As such, these

reform policies are in the tradition of laissez faire, emphasizing

the distortions caused by government, rather than in

ordoliberalism, which emphasizes the need for state regulationto maximize efficiency.

The term microeconomic reform (or often just economic

reform) refers to policies directed to achieve improvements in

economic efficiency, either by eliminating or reducing

distortions in individual sectors of the economy or by reforming

policies such as tax policy and competition policy with an

emphasis on economic efficiency, rather than other goals such

as equity or employment growth.


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In simpler terms

The word re-form means a change for the

better as a result of correcting abuses .

and this

in the sense of economic reform is to bring achange in the economy.


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WHY ECONOMIC REFORM

Poverty and inequality

Environmental concernCaste

Problems in the agricultural sector

Inadequate infrastructure

Failing educationInefficient public sector

Inflation

Corruption

High fiscal deficit


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Economic reformsDIVIDED AS PER MACRO AND MICRO

Macroeconomic Reforms.

Fiscal policy

Monetary policy

Exchange rate management

Micro Economic Reforms

Industrial Policy

Infrastructure

Financial SectorAgriculture


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Economic Reforms

Pre-colonial period (up to 1773)

Indus valley civilizationMaritime trading

kingdoms and rulers issued coins, barter was prevalent

centralised administration under the Mughals

Maratha Empire

British East India Company


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Economic Reforms

Colonial period (17731947)

Company rule in India

removal of international restrictions by the Charter of 1813

single currency with fixed exchange rates

railways and telegraphs

growing population, a largely illiterate and unskilled labour force, and

extremely inadequate infrastructure


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Economic Reforms

Pre-liberalisation period (19471991)

Economic policy after independence was highly influenced by

the policy of protectionism, which was very much clear with

the reforms that were taken during that period.

Economy of soviet union-

State ownership

Central administrative planning.

Import substitution-

Subsidization of vital industries Increased taxation to fund above

Central planning-

Economic planning


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Economic intervention-

Economic planning is a form of Economic intervention

Regulation- e.g. Development approvals, reduction in economic

inequality

Large Public sector-

Before 1991 there were 17 industries which were under

public sector

Licensing (licence raj)-

Before 1991 there were 18 industries for which license

was compulsory

Heavy industry-E.g. Iron & steel, heavy chemicals

Green revolution


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NEED OF NEW ECONOMIC POLICY

Economic crisis related to external debt.

Payment for foreign exchange reserve.

Increasing prices of essential goods.

Not capable of raising from internal sources like tax

Areas not providing immediate returns like socialsectors, defence, etc.

Incomes of PSUs were also not so high.

F.E invested in meeting consumption needs. Neither reduces the imports nor boost up the exports.


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Cont

Late 1980s it became unsustainable.

Imports & prices of essential goods gone up.

Funds were not more than 2 weeks

Not sufficient to pay even for the interest.


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INDIA APPROACHES TO IBRD AND IMF.

Received $7 billion as loan.

They expected India to liberalise and become

open economy.

THEN announced policy of LPG.

Stabilisation measures and structural

measures.

First two are policy strategies and third is the

outcome.


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LIBERALISATION

Deregulation of Industrial sector:Permission, allowing

private sector, small scale industries, pro

Financial sector reforms. RBI role from regulator to facilitator,

50% increase in F.I, allowing FIIs to invest in India.

Foreign exchange reforms. Lower tax rate, disclosure ofincome, etc.

Trade and Investment policy reforms import licensing,april 2001 agriculture products, export duty, competitive position inI. market, etc


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PRIVATISATION

Disinvestment

Withdrawal of Public sector from ownership

Sale of public sector companies.

Facilitate modernisation.

Inflow of FDI.

Special status like navaratnas and mini ratnas.

IOC, BPCL, HPCL, ONGC, SAIL, IPCL, BHEL, NTPC,VSNL, GAIL, MTNL.


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GLOBALISATION

Outsourcing

World Trade Organisation

GDP FDI FER

80-91 5.6% $100 bn $6 bn

92-01 6.4%02-07 8.0% $150 bn $ 125 bn


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CURRENT CHALLENGES IN ECONOMY.

POVERTY LL of education, discrimination, inequality,

HUMAN CAPITAL FORMATION IN INDIA

RURAL DEVELOPMENT EMPLOYMENT

INFRASTRUCTURE

ENVIRONMENT AND SUSTAINABLEDEVELOPMENT


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Why does economic reform fails

Agriculture remain untouched by reforms.

Industrial growth remain below expectation

Corruption

Inadequate infrastructure

Population


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Suggested Economic Reform

Agriculture

Urbanisation and Urban Development

Human Resource DevelopmentPrimary and Secondary Education

Vocational Training

Higher Education

Health

Public Sector Management


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economic reforms of 1991

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