Economic Reforms of 1991

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 same thing 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
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 to reduce 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 regulation to 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.
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 a change in the economy.
WHY ECONOMIC REFORM

Poverty and inequality Environmental concern Caste Problems in the agricultural sector Inadequate infrastructure Failing education Inefficient public sector Inflation Corruption High fiscal deficit
Economic reforms
DIVIDED AS PER MACRO AND MICRO Macroeconomic Reforms. Fiscal policy Monetary policy Exchange rate management
Micro Economic Reforms Industrial Policy Infrastructure Financial Sector Agriculture
Economic Reforms Pre-colonial period (up to 1773)

Indus valley civilization Maritime trading kingdoms and rulers issued coins, barter was prevalent centralised administration under the Mughals Maratha Empire British East India Company
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
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 unionState ownership Central administrative planning. Import substitutionSubsidization of vital industries Increased taxation to fund above Central planningEconomic planning
Economic interventionEconomic planning is a form of Economic intervention Regulation e.g. Development approvals, reduction in economic inequality Large Public sectorBefore 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 industryE.g. Iron & steel, heavy chemicals Green revolution
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 social sectors, 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.
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.
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.
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 of

income, etc.
Trade and Investment policy reforms
import licensing, april 2001 agriculture products, export duty, competitive position in I. market, etc
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.
GLOBALISATION
Outsourcing World Trade Organisation
80-91 92-01 02-07
GDP 5.6% 6.4% 8.0%
FDI FER $100 bn $6 bn

$150 bn $ 125 bn
CURRENT CHALLENGES IN ECONOMY.

POVERTY LL of education, discrimination, inequality, HUMAN CAPITAL FORMATION IN INDIA RURAL DEVELOPMENT EMPLOYMENT INFRASTRUCTURE ENVIRONMENT AND SUSTAINABLE DEVELOPMENT
Why does economic reform fails

Agriculture remain untouched by reforms.
Industrial growth remain below expectation

Corruption
Inadequate infrastructure
Population
Suggested Economic Reform

Agriculture Urbanisation and Urban Development Human Resource Development Primary and Secondary Education Vocational Training Higher Education Health Public Sector Management

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What is economic reforms

WHY ECONOMIC REFORM

Micro Economic Reforms Industrial Policy Infrastructure Financial Sector Agriculture

Economic Reforms Pre-colonial period (up to 1773)

Economic Reforms Colonial period (17731947)

Economic Reforms Pre-liberalisation period (19471991)

NEED OF NEW ECONOMIC POLICY

INDIA APPROACHES TO IBRD AND IMF.

Financial sector reforms. RBI role from regulator to facilitator,

Foreign exchange reforms. Lower tax rate, disclosure of

Trade and Investment policy reforms

80-91 92-01 02-07

GDP 5.6% 6.4% 8.0%

FDI FER $100 bn $6 bn

CURRENT CHALLENGES IN ECONOMY.

Why does economic reform fails

Industrial growth remain below expectation

Suggested Economic Reform

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