m Closed Economy

m Inconvertible Rupee
m High Tariffs
m Import Licensing

m Central Planning System

m Labyrinthine Bureaucracy
m Import Substitution
m Socialism and Colonial Exploitation
m —
s and — s ± Progress in banking and
large commercial houses
m Nexus between banks and businesses was
lacking
m Dec —  Government introduced bill for social
control over banks
m Feb —  National Credit Council (NCC)
Established for Prioritizing Credit
m July —  - — commercial banks nationalized
m — s - Financial System Widening
m — s growth and development
m —  Questions on allocative efficiency
m — — Narasimham Comittee Report ± Financial
Sector reform measures
u Œacro Economical Stebilisation
u Structural adjustment
u Price controls

u Œoving to post Liberalisation«

p
p 
 
p
pp
m — s, suggests that the root cause of the crisis was the large
and growing fiscal imbalance. ‡
m Large fiscal deficits emerged as a result of mounting government
expenditures, particularly during the second half of the s. ‡
m These fiscal deficits led to high levels of borrowing by the
government from the Reserve Bank of p  (RBI),IŒF,World
Bank.
m vver the — s, government expenditure in p  grew at a
phenomenal rate, faster than what government earns as a
revenues. ‡
m The subsidies grew at a rate faster than government
expenditures.
m Expenditure on subsidies rose from Rs.— .— billion in — -— to
Rs. —.2 billion in — - —.
m Although, a large part of the problem concerning external
imbalances in p  could be attributed to extraneous
developments, such as two oil-shocks during the last decade.
m in the bottom quartile of developing nations in terms of
the ease of doing business compared to China.
m The Indian economy was indeed in deep trouble.
u Lack of foreign reserves .
u Gold reserve was empty.
m Before — —, p  was a closed economy. ‡
m The government was close to default and its foreign
exchange reserves had reduced to the point
that p  could barely finance three weeks worth of
imports.
m The Government of p  headed by Chandra
Shekhar decided to usher in several reforms that are
collectively termed as liberalisation in the Indian media
with Œan Œohan Singh whom he appointed as a
special economical advisor.
m  
u vpening up of Indian Economy
u Competition increased tremendously
u Competitors from all over World
m 6
  
  
u Œajor shift in momentum of export growth
u Emphasis on bringing in large inflows of foreign capital
m —  opening up of economy for import
penetration
m Import tariff was continuously lowered
m Significant change in Œanufacturing goods
m Got Œembership in WTv — 
m Severe competition in Export market
m Rupee devaluation in — — followed by removal of
export subsidies [tea, coffee]

m Restrictions removed from April 2

u Agricultural Seeds
u Wheat
u Wheat products
u Butter
u Rice
m Indian negotiations had declared zero rates and
tariff binding
m After — 
u The Government of India was forced to negotiate the
bound tariff level for as many as —
agricultural items
u World trade price of various crops crashed
m r p  is one of the fastest growing economies in
the world.
m r AT Kearneys FDI Confidence Index Report ±
p  has been upgraded to th most attractive
destination worldwide in 2 (from —
th in 22)
r
m In Services sector, p  was ranked as the 4th
most attractive destination (up from —4th place in
22)
m BRIC Study of Goldman Sachs (2) predicts
that: p
p WILL EXCEED
u Frances GDP in 22
u Germanys in 22

u Japans in 2

u  
     
    

m @ 6p6
 p
 
p
pp

m p  is world's 4th largest pharmaceuticals producer with  share of

global production. r
m  New Œolecules discovered by Indian companies - —2 more in the final
stages.
m vver — Indian formulations have received United States FDA
approval

m p6 
p
pp

m Œore than  companies involved in traditional biotech products

m Biopharma products ± 
new ŒNC companies set up in past
years.
r
m R&D and commercialization of products on agricultural biotechnology is
the latest trend. r
m vpportunities for fresh investment in Indian biotech sector in next
-
years - US$ —.
± 2 billion
m  p ! 
@6p 
p
pp

m p  is looking for investment in infrastructure, packaging and

marketing.
m p  - vne of the largest food producers of the world
m The Indian scientific and research talent had boomed
up liberalization because of various ŒNC are investing big money
in R&D.

m  !  6@   

p
pp "

m 2nd largest small car market in the world.

m Largest motorcycle manufacturer in the world.
m 2nd largest scooter and tractor manufacturer in the world.
m Œany international auto majors are manufacturing in p  ± Daimler
Chrysler, General Œotors, Toyota, Ford, Honda, Hyundai, Volkswagen,
Suzuki etc r
m Œost of them are also outsourcing their components from p  as a
hub.