EVOLUTION OF INDIA IN THE WORLD ECONOMY

Presented by Rudroj BhattacharjeeDebopriya Kar Ganggin Thang KukiBidyut Bikash DasRajesh Deka

Introduction Five-Year Plans (FYPs) are centralized and integrated national economic

programs. Joseph Stalin implemented the first FYP in the Soviet Union in the late

1920s. Most communist states and several capitalist countries subsequently have

adopted them. China and India also started to followed. India launched its First FYP in 1951, immediately after independence First five plan plays an important role in economic development of the

country. It built a particular system of mixed economy, with a great role for the

public sector as well as a growing private sector.

First five year plan (1951-56)

The first Indian prime minister Jawaharlal Nehru presented the first five year plan to the parliament of india on 8 Dec 1951.With a OBJECTIVE: Improved the living standard of the people in india.The total planned budget of Rs.2069 crore was allocated to seven broad areas:I. Irrigation And Energy (27.2%). II. Agriculture And Community Development (17.4%).III. Transport And Communications (24%).IV. Industry (8.4%),.V. Social Services (16.64%),.VI. Land Rehabilitation (4.1%).VII. Other Sectors And Services (2.5%).

The target growth rate was 2.9% annual GDP growthAnd the achieved growth rate was 3.6%

During the first five year plan, the net domestic product went up by 15%. In India, the contribution of agricultural sector to GDP was 59% in 1950-1951

and it declined to nearly 35% in 1990. The share of industrial sector rose from 13% in 1951-51 to 24.6 % in 1990-

1991. On the other hand , the share of service sector rose from 28% in 1950-51 to

40.5 % in 1990-1991which was higher than that of agriculture or industry. Many irrigations projects were initiated during this period including the

bhakra dam and hirakud dam. At the end of the first five year plan in 1956, five IITS were started as major

technical institutions. UGC was set up to take care of funding and take measures to strengthen the

higher education in the country.

Second five year plan (1956-61) The second five year plan focused on industry, especially heavy industry. Target growth rate was 4.5 % every year and actual growth rate was

4.27%. The total amount allocated under the second five year plan in india was

rs.4,800 crores. This amount were allocated among various sectors:

Monopolies and Restrictive Trade Practice(MRTP) Act,1969MRTP Act, 1969 was enacted with the basic aim of comprehensive control over direction, pattern and quantum of investment to ensure that wealth is not concentrated in the hands of the few.WHY IT WAS ENACTEDTo stop the concentration of wealth in the hands of few industries.EMERGENCE OF MRTPIn order to stop the big firms from monopolising the market and to ensure the welfare of the consumer by removing barriers to competition in the Indian economy. MRTP Act was introduced.

PRIMARY AREA OF FOCUS Regulate the concentration of economic power to the common detriment, Control monopolies and monopolistic trade practices, Prohibit restrictive trade practices, and Regulate unfair trade practices.HOW THESE ARE CONTROLLEDArticle 39[(b) and (c)] of the Constitution lay down that the State shall direct its policy towards ensuring: Ownership and control of material resources of the community are

distributed as to best serve the common good. Operation of the economic system does not result in the concentration of

wealth and means of production to the common detriment.

SHORTCOMINGS OF MRTP Anti-Welfaristic Results.

The heightened governmental control, where new undertakings and ventures were severely restrained by complex procedures, created conditions wherein the firms, existing and new, found it difficult to survive and thus, could not give back any benefits to the consumer. Stringent Provisions.

The Act, over the years became very active in taking on firms head-on to make them stand in line with the provisions of the Act. The provisions, though aimed at benefitting the consumers and the industrial growth, often played out tough- and the stringent provisions did not benefit anyone.

e.g: Predator Pricing Policy. Ambiguity in Law.Complaints relating to anti-competition practices could be tried under the definition of restrictive trade practice, the absence of specific identifiable anti-competition practices gave room to different interpretations by different Courts of Law which resulted in the true meaning getting lost. International Norms.

The MRTP Act lack the resources to handle the incoming international investments or to meet the trade requirements of the WTO.

Economic reforms in india : liberalisation, privatisation and globalisation (lpg)

Pre- liberalisation period :• Since independence India had only been able to maintain a

growth rate of 3-3.5 % with capital growth even less , at around 1.3% and the natural outcome of this was extensive bureaucracy, unnecessary regulations and trade barriers to open up our markets to foreign investments, all contributed to our economy stagnating at dismal growth rates.

• By 1985, India had started having balance of payments. By 1990, it was in a serious economic crisis. Government was closed to default. It’s central bank had refused new credit.

Economic policy of 1991

The process of economic reforms was started by the Government of India in 1991 for taking the country out of the economic difficulty and speeding up the development of the country. The centre of economic reforms has been Liberalisation , Privatisation and Globalisation.

The main characteristics of the new Economic policy were:• Delicensing.• Entry to private sector.• Disinvestment.• Liberalisation of foreign policy.• Liberalisation in technical area.• Setting up of Foreign Investment Promotion Board (FIPB)

Liberalisation and its impact Liberalisation meant to unshackle the economy from the bureaucratic cobweb to make it more competitive by relaxing many restrictions and controls. It helped to do away with having a license for most of the

industries. Removing restrictions from movement of goods and services Freedom to fix prices of goods and services. Reduction in rate of taxes. Simplifying import-export procedure Simplifying the process of attracting foreign capital and

technology.

Privatisation and its impactPrivatisation means such an economic process through which some public sector undertaking is brought either partially or completely under private ownership. Reduced the role of public sector and increasing role of private

sector Reduced fiscal burden of the government. Reducing the size of government machinery Speeding up economic development Increase in government treasury Increasing competition by opening industries reserved for the

public sector to the private sector.

Globalisation and its impactGlobalisation means integrating the economy with rest of the world. Import liberalisation. Foreign Exchange Regulation Act (FERA) was

replaced by Foreign Exchange Management act (FEMA).

Abolition of Export duty. Reduction of Import duty. Rationalisation of Tarrif structure.

Impact of LPG There was a significant difference in the Indian economy after economic reforms in 1991. Following are the changes observed: The per capita income(with constant

growth) increased from Rs, 11,535 in 1990s to Rs 41,129 in 2000s .

Household savings increased by 1156543 (in crores) . Rupee found a realistic level against Dollar.

Since 1991 India’s GDP has quadrupled, its Forex reserves have surged from $5.8 billion to $ 279 billion, and exports from $18 billion to $178 billion.

Paycheques got big and expenses got big as well affecting significantly the economy and the lives and lifestyle of the people as well.

WTO (World Trade organization)

Formed on 1st Jan ,1995. It took over GATT(general agreement on tariffs and trade).

Benefits for India Increases in foreign trade Increase in agriculture exports Increase in inflow of foreign investment Improvement in services Benefits for clothing and textile industry Restricts dumping Promotion to research on patents

Fera (Foreign Exchange Regulation Act), 1973

It was a legislation passed by the Indian Parliament in 1973 and came into force with effect

from January 1, 1974.

Deals with laws which relate to foreign exchange in India.

Objectives Prevent the outflow of Indian currency

To regulate dealings in foreign exchange and securities.

To regulate transactions, indirectly affecting foreign exchange.

To regulate the import and export of currency.

To conserve precious foreign exchange.

The proper utilization of foreign exchange so as to promote the economic

development of the country. To regulate employment of foreign nationals

To regulate foreign companies

Fera to fema The main objective of FERA framed against the background

of severe foreign exchange problem and controlled economic regime , was conservation and proper utilisation of the foreign exchange resources of the country.

FERA created flourishing black market in foreign exchange. It brought into the economic lexicon the word “HAWALA”.

FERA was not suitable for liberalization policy. Though certain amendments were made in 1993 but they were not sufficient.

After 1993, many important changes took place. Foreign exchange reserve also increased. The provisions of FERA were not favorable for these changes.

Fema ( Foreign Exchange Management Act), 1999

The FEMA was an act passed in the winter session of Parliament in 1999 which replaced FERA.

Features of Fema FEMA gives the central government the power to impose the restrictions. The transactions should be made only through an authorized person. Deals in foreign exchange under the current account by an authorized

person can be restricted by the central Government. Deals in foreign exchange under the current account by an authorized

person can be restricted by the Central Government, based on public interest.

The RBI is empowered by this Act to subject the capital account transactions to a number of restrictions

The new law is more transparent in its application. it has laid down the areas where special permission of the reserve bank/Government of India is required.

US Financial Crisis and IndiaEffects Decrease in growth rate. Outflow of FII and inflow of FDI. Exchange rate depreciation. Increase in trade deficit. Decrease on Employment.

Measures taken Diversifying Exports Enhancing Public Spending Generating Employment Provisioning Credit to Productive Sectors

BRICS AND SAARCBRICS Not an Organization or a World Institution. Announcement that there is need for a new "Global

Reserve Currency". Signing of Memorandum of Cooperation. The eThekwini Declaration.

saarc• Promote trade between the member countries.• The agreement on South Asian Free Trade Area (SAFTA).• Help member countries during crisis and natural disasters.• India accounts for nearly 80% of SAARC's economy.

India’s current economic scenario

India is set to emerge as the world’s fastest-growing major economy by 2015.

Increase in investment and production. Huge inflow of FDI and FII. Reduced inflationary trend. Continuous trade deficit.

Sector 1950-51 1990-91 2006-2007 2013-141.Agricuture

59.0 34.9 20.5 17.9

2.Industry 13.0 24.6 24.7 24.23.Service 28.0 40.5 54.8 57.9

THANK YOUSourceswww.pib.nic.inwww.dipp.nic.inwww.fpi.nsdl.co.inwww.tradingeconomics.com