economicreforms-101101094318-phpapp01.pptx

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The term economic reform broadly indicates

necessary structural adjustments to external

events. It include the function of country’s spending to the level parallel to its income

and thereby reducing fiscal deficits.

This requires gradual reduction in import and

increase in export. These adjustments also

requires market change in order to make

economy flexible.



The present process of economic reforms was

born out of the crisis in the economy, which

climaxed in 1991. The crisis compelled thegovernment to adopt a new path-breaking

economic policy under which a series of

economic reform measures were initiated

with the objective to deal with the crisis andto take the economy on a high-growth path.



Increase in Fiscal Deficit

Increase in adverse balance of Payment

Gulf Crisis

Fall in foreign Exchange Reserve

Rise in Prices

Poor Performance of Public Sector



The top and immediate priority of the

government was to stabilize the economy,

bring the growth of the economy to its

normal track and to win back confidence of

masses in the country and the international

financial community.

The crisis management measures focussed

largely on fiscal correction, industrial

decontrol and balance of payments.



ECONOMICREFORMS

LIBERALISATION

PRIVATISATION

GLOBALISATION



It means to free the economy from direct orphysical controls imposed by thegovernment. Prior 1991, government hadimposed several types of controls on Indian

economy e.g. industrial licensing system,price control or financial control on goods,import license, foreign exchange control,restriction on investment by big business

houses, etc. These controls leads to fall ineconomy growth. Economic reforms werebased on the assumption that marketforces could guide the economy in a moreeffective manner than government control.



Abolition of industrial licensing and

Registration : According to new industrial

policy , with the exception of 6 sectors,

industrial licensing has been removed.Concession from MRTP Act

Freedom from Expansion and Production to

Industries

Increase in the Investment Limit of the SmallIndustries: It has been raised to Rs 1crore &

Investment limit has been raised to Rs 25

lakh.



Freedom to import capital goods

Freedom to import technology

Action plan for information Technology and

software development.



Privatisation means allowing the private

sector to set up more and more of industries

that were previously reserved for public

sector.It can take in three in forms:

a. Change in ownership: Degree of

privatisation judged by the extent of

ownership transferred from public toprivate sector. This can have four forms:

i) Total Nationalisation

ii) Joint Venture



iii) Liquidation

IV) Workers Co-operative

b. Organizational Measures: It includes variety

of measures to limit state control.i) A holding Company Structure

ii) Leasing

c. Operational Measures: Autonomy to the

operators of the enterprise.



To increase efficiency & competitive power

of the enterprises To strengthen industrial management.

To earn more & more Foreign currency.

To make optimum use of resources

To achieve rapid industrial development of

the country.



Reduction in economic burden

Increase in efficiency

Reduction in sense of irresponsibility

Scientific Management

Reduction in Political Interference

Encouragement of new Inventions



Lack of social welfare

Class struggle Increase in inequality

Increase in unemployment

Exploitation of weaker section



Contraction of Public sector

Disinvestment

Sale of shares of public enterprises

Increase in private sectorConversion of loans into shares is not

necessary

Sick industries

Memorandum of understanding



Public sector in India includes all activities or

institutions funded out of the government’s

budget whether at centre or states. Public

sector includes the following:

Govt. Dept. & Govt. Companies

Irrigation & power projects

Railways, post & telegraphs

Banking, insurance, financial and otherservices



Conflict between the financial and social

objectives

Problem of losses or low rate of return oninvestment

Lack of professionalism in management

Time & cost overruns in new projectsUnderutilization of capacity

Operational inefficiency



PSU Refocussing

Memorandum-of-Understanding (MOU)

System of PSE Financial & operational autonomy

Restructuring of sick units

Privatisation through disinvestment Protection of PSU workers’ Interest



The disinvestment programme towards

greater privatization of the economy was

launched in the year 1991-1992 with the

announcement of the new industrial policy in

August 1991 and is an ongoing process even

today. It involves sale of minority stake in a

few PSU, strategic sales, initial public

offering and rights offer. Between August

1991 and March 2003, in all 48 companies

underwent the disinvestment process.



Valuation of public sector unit

Method of disinvestment

The extent of disinvestment

Issues concerning labour



It is defined as a process associated with

increasing openness, growing economic

independence and Deeping economic

integration in the world economy.

Reduction of trade barriers

Free flow of capital

Free flow of technology

Free movement of technology



Stage I: Domestic company exports to foreigncountries through the dealers or distributors of homecountry

Stage II: The domestic company exports to foreigncountries directly on its own.

Stage III: The domestic company becomes aninternational company by establishing production andmarketing operations in various key foreign countries.

Stage IV: The company replicates a foreign company

in the foreign country by having all the facilitiesincluding R&D, full fledged human resources, etc.

Stage V: The company becomes a true foreigncompany by serving the needs of foreign customersjust like the host country’s company serves.



Globalisation of markets

Globalisation of ProductionGlobalisation of Technology

Globalisation of Investment



Reduction of import duties

Encouragement of foreigninvestment

Reducing custom duty

Devaluation of currencyPartial convertibility

economicreforms-101101094318-phpapp01.pptx

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