Will India go back to 1991 situation?

Suggest some measure to rescue the economy from its

current state of economic turmoil (To increase the rupee value)
India's present situation of rapid fall in rupee value is caused by
Persistent inflation of past few years
High current account deficit of about $85billion (4.5% of GDP)
1991 situation
Western economies were stronger and looking forward to deepen the process of economic
globalisation
Big bang reforms like LPG worked for India
2013 situation

Major OECD economies are looking much more inward to stabilize their economy
Negative impact of global financial crisis began to affect the emerging nations like India.
After 2010,excess liquidity flowing from west caused the
High international oil prices and commodity
India's mismanage of supply of key resources such as Land, Coal, Iron ore, Critical
food items

All these problems had created India to face the

High inflation
Low growth
Bulging CAD
Key difference between 1991 & 2013 are

Availabilty of global financial inflows to India during 1991 and 2013

US federal reserve withdrawl of liquidity

India needs to understand:

Cheap financial capital inflowing from the west is double edged weapon if not used
judiciously to enhance productivity of domestic economy it leads to external debt trap.

As said before, present situation of the India's economy is different from 1991 situation. So India
will never go back to 1991 situation because Indias fundamentals of economy are stronger.

Measures to revive Indian economy (To increase the rupee value)

1. To contain CAD:

By discouraging imports and supporting exports.

Large amount of CAD is caused by import of coal ($15 billion) - It can be reduced by
increasing domestic coal production because India is having largest coal reserves in Asia.

2. Reducing subsidies:

Reduction in the government consumption / subsidies and a loosening of monetary policy

to increase government saving

3. Import oil from Iran:

Increase oil imports from Iran as we can pay in rupees.

4. Dollar Swap facility to oil companies:

RBI has to give direct access to large dollar buying oil companies -to bypass the spot
market

5. Correcting non-oil trade deficit:

India's biggest trading partner China accounts for half of the non-oil trade deficit.

This can be offset by capital inflows from China into India's infrastructure, such as metro
or road projects.

6. Encouraging Capital Inflows

RBI has removed administrative restrictions on investment schemes offered by banks to

non-resident Indians, and removed ceiling on interest rates on deposit accounts held by
NRIs.

RBI increased the current overseas borrowing limit for banks from 50% to 100%, and
allowed it to be converted into rupees and hedged with the RBI at concessional rate.

RBI also allowed banks to swap fresh NRI dollar deposits with a minimum duration of 3
years with the RBI.

7. Strong push to exports:

Widening the focus market and focus product scheme.

India's iron ore export can be restored to more than $10 billion annually.

8. Selling of gold bonds

Sell a gold bond with a five year maturity, which can act as a gold
substitute just like Kisan Vikas Patras

9. International Cooperation

Government increased its currency swap limit with Japan from

USD15 billion to USD50 billion.

10. National manufacturing policy

To increase the sectoral share of manufacturing in GOP to at least 25% by

2022

To increase the rate of job creation so as to create 100

million additional jobs by 2022;

Industrial townships called National Investment and

Manufacturing Zones (NIMZs)

Effective and rapid implementation of NMP is necessary at this stage to enhance the economic
situation.
by SUTHAN S.P

REFERENCES:

The Hindu editorial

Prsindia.org