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Definition Indian trade before liberalization Measures taken for liberalization Key players in the battle field Changing environment after 1991 Challenges ahead Limitations Suggestions Conclusion

DEFINITION
Liberalization means to free economy from direct or physical controls imposed by the government.

1980s suggests that the root cause of the crisis was the large and growing fiscal imbalance. Large fiscal deficits emerged as a result of mounting government expenditures, particularly during the second half of the 80s. These fiscal deficits led to high levels of borrowing by the government from the Reserve Bank of India (RBI), IMF, World Bank. Over the 1980s, government expenditure in India grew at a phenomenal rate, faster than what government earns as a revenues.

The subsidies grew at a rate faster than government expenditures.

Expenditure on subsidies rose from Rs.19.1 billion in 1980-81 to Rs. 107.2 billion in 1990-91.
The Indian economy was indeed in deep trouble. Lack of foreign reserves . Gold reserve was empty. Before 1991, India was a closed economy.

Abolition of Industrial Licensing and Registration Concession from Monopolies Act Freedom for Expansion and Production to Industries Increase in Investment Limit of the Small Industries Freedom to Import Capital Goods Freedom to Import Technology Free Determination of Interest Rates

Dr. Man Mohan Singh Dr. Arvind Virman C. Rangarajan Montek Singh Ahluwalia Shankar Acharya Y. Venugopal Reddy

Opening up of the Indian Economy

Before 1991 there was closed economy and import of certain goods was restricted. After 1991 competition increased tremendously after the liberalisation. Competitors from all over the world enter the Indian market

Competition from Low Wage Countries

Low range products are floating into the market Low price, low quality

1.

Governance o Need for elimination of large number of Rules & Regulations in the books Sharply reducing the number of implementing agencies Moving towards single window clearance.
Infrastructure: A Challenge and an opportunity Investments required up to 2012 US$ 334 billion Power Generation - US$ 143 billion Power Transmission & Distribution US$ 116 billion Roads US$ 40 billion Ports US$ 20 billion Railways US$ 15 billion

2.

BRIC Study of Goldman Sachs (2003) predicts that: INDIA WILL EXCEED Frances GDP in 2020 Germanys in 2025 Japans in 2035 TO BECOME THE 3RD LARGEST ECONOMY IN THE WORLD BY 2050

GDP growth at constant prices

9 8 7 6 5 4 3 2 1 0

8.2 6.1

in per cent

Average for 1993-2003

2003-04

10th Plan Projection (2002-07)

Indian Foreign Exchange Reserves: a steady rise after liberalization

Foreign exchange reserves (US$ billion) 150 100

118.3 75.4 54.1 17.0

1995-96 2001-02 2002-03 2003-04

50

2.2
0 1990-91

Foreign Investments after liberalization

Total Foreign Investment (US$ million) US$ million

18000 16000 14000 12000 10000 8000 6000 4000 2000 0

15,872

5,138 103
1990-91 1994-95

5,385

6,789

8,152 5,639

1997-98

2000-01

2001-02

2002-03

2003-04

Import duty Reductions after liberalization

Reduction in Peak Customs Duties on Manufactured items
160 140

in per cent

120 100 80 60 40 20 0

150 110

50
1991 Mar-92 Mar-95

42
Mar-97

38.5
Mar-00

30
Mar-02

25
Mar-03

20
w.e.f March 2004

Rising share of Indias external trade after liberalization

Total Exports in 2003-04 - US$ 61.8 Bn; Imports US$ 75.2 Bn. Assume target for exports for 2009 - US$150 Bn

Share of external trade in GDP

35 30 25 20 15 10 5 0

in per cent

18.1

23.1

25.5

26.9

30.3

28.9

31.6

32

1991-92 1994-95 1997-98

19992000

2000-01 2001-02 2002-03 2003-04

Less importance to agriculture Induced by IMF and World Bank More dependence on Foreign Debt Promotion of consumerism Missing of social motive Problem of employment Dependence on foreign technology

Policy formulation that supports overall planning objectives Monitoring the performance of market Adhere to contract conditions, especially quality of service Abide with relevant laws Contribute to social well-being Respect contract clauses on safety, social order, environmental protection Seek reasonable profit

Thus in the end it can be concluded that removal of or reduction in the trade practices that was free flow of goods & services from one nation to another can lead to mass production, increases GDP, Import and Export. More steps should be initiated to enhance the performance of economy in real time manner.