ASSIGNMENT # 1- STRATEGIC FINANCIAL MANAGEMENT SUBMITTED BY: YASH SAXENA ROLL NO.

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Ques 1. If Manmohan Singh was not the Finance Minister in 1991, what would be the economic conditions today and repercussions now? Ans. Mr. Manmohan Singh rose to political prominence as India's finance minister in 1991, taking over as the country was plunging into bankruptcy. That served as the launch for an ambitious and unprecedented economic reform programme. Mr Singh slashed red tape, simplified the tax system and removed stifling controls and regulations to try to create an environment conducive to business. The economy revived, industry picked up, inflation was checked and growth rates remained consistently high in the 1990s. In 1991, India's Prime Minister at the time, P.V. Narasimha Rao, chose Singh to be his Finance Minister. At this time, India's fiscal deficit was close to 8.5 per cent of the gross domestic product, the balance of payments deficit was huge and the current account deficit was close to 3.5 percent of India's GDP. India's foreign reserves barely amounted to US$1 billion, enough to pay for a few weeks of imports, in comparison to US$283 billion today. Evidently, India was facing an economic crisis. At this point, the government of India sought relief from the supranational International Monetary Fund, which, while assisting India financially, imposed several conditions regarding India's economic policy. In effect, IMF-dictated policy meant that the ubiquitous License Raj had to be dismantled, and India's attempt at a state-controlled economy had to end. Accordingly, Singh, who had thus far been one of the most influential architects of India's socialist economy, slowly opened the Indian economy to foreign investment and business competition. Rao and Singh thus implemented policies to open up the economy and change India's socialist economy to a more capitalistic one, in the process dismantling the License Raj, a system that inhibited the prosperity of private businesses. They removed many obstacles standing in the way of Foreign Direct Investment (FDI), and initiated the process of the privatization of public sector companies. However, in spite of these reforms, Rao's government was voted out in 1996 due to non-performance of government in other areas. In praise of Singh's work that pushed India towards a market economy, long-time Cabinet minister P. Chidambaram has referred to Singh as the Deng Xiaoping of India.

instead promising to punish the individuals directly accused in the report. Singh's government introduced the value added tax. He liberalized the Indian economy. allowing it to speed up development dramatically. Chidambaram. as well as public sector companies. Following the advice of International Monetary Fund in 1991. replacing sales tax. In 2005. along with the former Finance Minister. India achieved its highest GDP growth rate of 9% and became the second fastest growing major economy in the world.8 billion securities scandal. source of slow economic growth and corruption in the Indian economy for decades. Singh is now a strong supporter of globalization. Singh has also been working on reforming the banking and financial sectors.In 1993. During his term as Prime Minister. Singh's government has continued the Golden Quadrilateral and the highway modernization program that was initiated by Vajpayee's government. Singh offered his resignation from the post of Finance Minister after a parliamentary investigation report criticized his ministry for not being able to anticipate a US$1. have presided over a period where the Indian economy has grown with an 8–9% economic growth rate. In 2007. enjoying widespread success in these matters. In 2007 and early 2008. seeing India's immense labor capacity as a path to delivering Indian goods in a worldwide market and eventually relieving large-scale poverty. P. Singh. freed India from the License Raj. The Finance ministry has been working towards relieving farmers of their debt and has been working towards pro-industry policies. . Singh continued to encourage growth in the Indian market. Prime Minister Rao refused Singh's resignation. Singh as Finance Minister. the global problem of inflation impacted India.

5% of the total Indian trade as per WTO. Indian economy stands today as one of the influential and attractive economy. Since the last two decades Indian economy is on a rise and has proved its mettle to the Indian. Services . Liberalization has brought in many private players and multinational organizations into manufacturing foray. The agricultural sector which was the back bone of Indian economy postindependence took a back seat in 21st century and contributed only 17. Discuss the current economic scenario in India. With large base of English speaking educated people. India’s per capital income (PPP) is not too attractive and stands at USD 4542.5% to the GDP. India currently accounts for 1. With the beginning of the new millennium. Ans. The Information Technology and IT outsourcing services has been the biggest contributor to India’s growth. India was considered as an emerging super power. India is characterized by small and medium manufacturing units with few major players. Mostly. Agriculture Indian Economy: Though agricultural activities employ 52% of the total work force yet it contributes only 17. India is an Asian nation with seventh largest land base and second largest in term of population. 14% of the total workforce is engaged in manufacturing activities. The liberalization move by the Indian Government in 1990s has given a boost to the Indian economy and put her into a fast track economic growth route.5 trillion making it the fourth largest economy.5% to the GDP and employ 34% of the work force. Indian GDP based on purchasing power parity (PPP) stood at USD 3.5% to the total GDP. agriculture is carried out using traditional methods and farmers are . In 2009.5% of the GDP while the industrial sector contributes 20% to the GDP. India has become a preferred destination for business services.Ques 2.Service Providers & Services Sector contribution in Indian Economy: India is one of the leading service providers and services sector contributed 62. Indian Sector Analysis: Indian Economy VS Industry: Industrial activities accounts for 20% of the economy. India growth rate has been an average of 7% since 1997 and has maintained a growth rate above 5% even in times of global recession. 2007 publications. India’s service industry accounts for 62. The economy of India is the largest economy in the Indian by nominal GDP and the fourth largest by purchasing power parity (PPP). India is one of the fastest growing economies and is often considered as one of the major super powers.

Both imports and exports have taken a leap by 20% on an average. Indian Economy VS Agriculture: Agriculture sector in India lacks innovation and investment. The total area under farming is also reduced due to growing industrialization and urbanization.dependent on heavily on monsoons. There is a large regional income disparity in India where six low income states are home to more than one third of population. Industrial reforms have made the scenario more attractive and with growing economy it looks promising in terms of return. According to Indian Bank. Banking and Finance . India has a robust banking economy which was proved by the fact that it remained largely unaffected by the global recessions. Japan.Indian Economy: India has one the largest network of bank branches and most of the people in India enjoy banking facilities. It still uses the traditional methods of farming giving less produce per hectare of cultivated land as compared to global standards. Effect of Poverty on Indian Economy: 24% of the Indian population lives below the poverty line (USD 1. Russia and EU are the major trading partners to India. Global Trade Relations: Since liberalization India’s contribution to total global trade has increased to 5%. The US. Green revolution and white revolution has given a boost to this sector but it is yet embrace technology on a large scale. External Trade and Investments: Balance of Payments: India’s balance of payment has been in RED since independent and though growing exports in post-liberalization era is expected to bring it down. China. Foreign Direct Investments (FDI): India is the preferred destination for FDI since liberalization. . the current rising oil bill is making it look difficult. Concerns: Though India is considered as a major economic power but it faces many challenges. India has to strike a balance between industrial growth and agricultural growth.25 per day). UK. India is classified as low income economy.

. Liberalization has reduced the red tape and bureaucracy but still it never lost it ground. Most of the government spending fail to reach the general public and government initiative are marked by large scale corruption.Effect Corruption on Indian Economy: Corruption has been a wide spread problem in India.

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