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ECONOMIC REFORMS SINCE 1991: ECONOMIC REFORMS SINCE 1991 INTRODUCTION: INTRODUCTION Since independence, India followed the

mixed economy. India has been able to achieve growth in savings , diversified industrial sector, ensured food security etc. PowerPoint Presentation: In 1991, India met with economic crisis and govt. was not able to make repayments on its borrowings from abroad and foreign exchange reserves. PowerPoint Presentation: All this led the govt. to introduce a new set of policy measures which changed the direction of our developmental strategies. BACKGROUND: BACKGROUND The origin of financial crisis can be traced from the inefficient management of theIndian economy in 1980s For implementing various policies, the govt. generates funds such as taxation . PowerPoint Presentation: . When expenditure is more than income, the government borrows to finance the deficit from banks and from people within the country and from international institution . PowerPoint Presentation: At times, our foreign exchange, borrowed and international financial institutions, was spent on meeting consumption needs. India faced a crisis in Foreign Exchange ( Forex ) reserves, left with reserves of only about $1 billion (US) PowerPoint Presentation: India approached International bank for reconstruction and development (IBRD) India agreed to the conditions of world bank and announced new economic policy. PowerPoint Presentation: The set of policies were classified into two groups :- Stabilization measures and Structural reform measure . Reasons for reforms: Reasons for reforms License - permit - quota raj led to widespread corruption. The bureaucracy was the principal beneficiary of this system. The Government officials in collusion with the political bosses earned huge money via corruption . Hence, it was increasingly felt to dismantle the system of licensing and controls. PowerPoint Presentation: Quite a large number of public entrepreneurs which played crucial role in setting up heavy and basic industries; S ocial and Economic infrastructural development were king problem of inefficiency and high cost of operation. PowerPoint Presentation: Further, there was a high pressure of the World Trade Organisation (WTO) to expose Indian industry to face world competition. The performance of the Indian Economy was not up to expectations. All these factors made the Govt. to introduce the economic reforms. PowerPoint Presentation: Thus, under pressure, the country took the risk of reforming the socialist economy. P.V. Narasimha Rao was the twelfth Prime Minister of India, led one of the most important administrations in India's modern history overseeing a major economic transformation and several incidents affecting national security. PowerPoint Presentation: At that time Dr. Manmohan Singh (currently, Prime Minister of India) launched India's free market reforms that brought the nearly bankrupt nation back from the edge. The industrial policy announced in 1991 provided following rationale for introducing economic reforms: :

The industrial policy announced in 1991 provided following rationale for introducing economic reforms: T o decontrol the Indian industrial economy from unnecessary bureaucratic controls; To introduce liberalisation with a view to integrate the Indian Economy with the world economy ; PowerPoint Presentation: To remove the restrictions on foreign direct investment; To remove the restrictions of MRTP Act To shed the load of public sector enterprises which have shown a very low rate of return and incurring losses over the years. Objective For NEP : : Objective For NEP : PowerPoint Presentation: 3 Constituents of E conomic Reforms Liberalization Privatization Globalization LIBERALISATION : LIBERALISATION In the context of economic reforms, liberalisation refers to shifting of license dominated regime to de-licensing, deregulation and de-bureaucratisation. India has taken following measures towards liberalising the economy. Removal of Industrial Licensing:-: Removal of Industrial Licensing:- Except 18 industries relating to security and strategic concerns, social reasons, hazardous chemicals and over-riding environmental , all industrial licensing was abolished. Subsequently, this list was reduced to a small group of five industries. PowerPoint Presentation: After Reforms Industrial licensing was Imposed Only For:- Industrial Explosives Hazardous Chemicals Alcohol Electronics Cigar And Other Tabaco Products. PowerPoint Presentation: Central Public Sector Enterprises (CPSEs) were classified into two categories Strategic and Non-Strategic . Strategic CPSEs were identified in the areas of:: Strategic CPSEs were identified in the areas of: Arms & Ammunition and the allied items of defence equipment's, defence air-crafts and warships Atomic Energy PowerPoint Presentation: Railway transport All other public sector enterprises were considered as non-strategic. Liberalization was mainly introduced in:-: Liberalization was mainly introduced in:- Industrial licensing, Export import policy, Fiscal policy, Financial sector, Foreign exchange market etc. In order to put an end to various restrictions and open up various sectors of economy. PowerPoint Presentation: REFORMS IN THE FIELD OF :INDUSTRIAL SECTOR:: INDUSTRIAL SECTOR: Before Reforms Regulatory mechanism were enforced in various ways:-: Before Reforms Regulatory mechanism were enforced in various ways:- Permission from govt. to start and close a firm. Private sector was not allowed in many industries . Some goods could be produced only in small scale industries . Controls on price fixation. FINANCIAL SECTOR: FINANCIAL SECTOR PowerPoint Presentation: Before Reforms It used to includes commercial banks, stock exchange etc. This sector in India was controlled by the reserve bank of India (RBI). RBI used to decide the amount of money that the banks can keep with themselves,

PowerPoint Presentation: The major aim of liberalisation was to reduce the role of RBI from regulator to facilitator of financial sector. Thereby It led to establishment of private sector banks . PowerPoint Presentation: Certain aspects have been retained with the RBI to safeguard the interest of account holders and the nation. TAX REFORMS: TAX REFORMS These were concerned with the reforms in Governments taxation and public expenditures policies known as fiscal policies. There are two types of taxes: There are two types of taxes Direct - Consist of taxes on incomes of individuals as well as profits of business enterprises. Indirect - Taxes levied on commodities to facilitate common national market for goods and commodities FORIEGN EXCHANGE : FORIEGN EXCHANGE In 1991,as an immediate to resolve the balance of payment crisis, the rupee was devalued against foreign currencies. It led to increase in the inflow of foreign exchange. Now , more often markets determined exchange rates based on the demand and supply of foreign exchange. TRADE & INVESTMENT: TRADE & INVESTMENT Its aim was to promote the efficiency of local industries and the adoption of modern tech. India was following a regime of quantitative restrictions by imposing high tariffs. It aimed at :-: It aimed at :- Dismantling of quantitative restrictions on imports and exports . Reduction of tariff rates. Removal of licensing procedures for imports . : Import licensing was abolished in case of hazardous goods. Export duties have been removed to increase the competitive positions of goods. PRIVATISATION: PRIVATISATION It implies shedding of the ownership of a govt. owned enterprise . Govt. Companies can be converted into private companies in two ways : By withdrawal of govt. from ownership and management of public sector companies. By outright sale of public sector companies .. PowerPoint Presentation: Privatization of PSU can be done by selling off part of the equity of PSUS to the public is known as disinvestments. Its main aim was to improve financial discipline and facilitate modernization. PowerPoint Presentation: Out of the various forms of privatisation, the most acceptable is the joint venture in which the share of the private sector is kept at either 49 per cent or 74 percent . But simply a change of ownership is not sufficient to increase productivity and profitability ., PowerPoint Presentation: For this purpose, other measures like linking wages to productivity, changing promotion policy based on the efficiency of the workers is needed so that a competitive environment is created in which efficiency pricing becomes a norm . The following steps have been taken towards privatisation of the Indian economy :- : The following steps have been taken towards privatisation of the Indian economy :- Permitting the entry of the private corporate sector in such core sectors as steel, telecommunications , ports, airlines and power; No fresh budgetary support for Public Sector Enterprises Which will lead to:- : Which will lead to:- Dilution of Govt. equity for most of the PSE which decide to go in new projects and expansion; N o new Central Public Sector undertakings (Ps Us) will be set up in the country. I ssue of equity to the public by the identified PSUs . Outright sale of identified PSUs

GLOBALISATION: GLOBALISATION GLOBALISATION IS THE OUTCOME OF THE POLICIES OF LIBERALISATION PRIVATISATION . IT MEANS AN INTEGRATION OF THE ECONOMY OF THE COUNTRY WITH THE WORLD ECONOMY PowerPoint Presentation: Globalisation means the economic integration of the country with the rest of the world . In other words, it is a process of integrating the various economies of the world without creating any hindrances in the flow of goods and Services, technology, capital and labour This involves four components:- : This involves four components:- Reduction of trade barriers in the form of custom duties or quantitative restrictions or quotas so as to permit free flow of goods and services among different economies; Creation of an environment in which free flow of capital (or investment) can take place between nation-states; PowerPoint Presentation: Creation of an environment for free flow of technology; Creation of an environment in which free flow of labour or human resource can take place among different countries of the world PowerPoint Presentation: PRE 1991 POLICY POST 1991 POLICY PUBLIC SECTOR MONOPOLY EXPECT FEW, ALL WERE OPEN FOR PRIVATE SECTOR MRTP restriction No such restriction Foreign investment in few industries Foreign investment in large No. of industries Restrictive policy towards foreign industries Very liberal policy towards foreign industries Reservation of large no of product for ssi Reservation was being pruned

PowerPoint Presentation: INTRODUCTION Since independence, India followed the mixed economy. India has been able to achieve growth in savings , diversified industrial sector , ensured food security etc . In 1991, India met with economic crisis and govt. was not able to make repayments on its borrow ings from abroad and foreign exchange reserves. All this led the govt. to introduce a new set of policy measures which changed the direction of our developmental strategies. PowerPoint Presentation: BACKGROUND The origin of financial crisis can be traced from the inefficient management of the Indian economy in 1980s For implementing various policies, the govt. generates funds such as taxation. When expenditure is more than income, the government borrows to finance the deficit from banks and from people within the country and from international institution. At times, our foreign exchange, borrowed and international financial institutions, was spent on meeting consumption needs . India approached International bank for reconstruction and development (IBRD) India agreed to the conditions of world bank and announced new economic policy. The set of policies were classified into two groups namely stabilization measures and the structural reform measure. PowerPoint Presentation: LIBERALISATION It was introduced in Industrial licensing, Export import policy, Fiscal policy, Financial sector, Foreign exchange market etc. to put an end to various restrictions and open up various sectors of economy. PowerPoint Presentation: Industrial sector REFORMS IN THE FIELD OF :- Financial sector Tax reforms Foreign exchange Trade and Investment PowerPoint Presentation: Regulatory mechanism were enforced in various ways:- Permission from govt. to start and close a firm. Private sector was not allowed in many industries. Some goods could be produced only in small scale industries. Controls on price fixation. Industrial licensing was abolished for products like alcohol,electronics etc. The only industries which are now reserved for public sector are railway, defence etc. INDUSTRIAL SECTOR:PowerPoint Presentation: It includes commercial banks, stock exchange etc. This sector in India is controlled by the reserve bank of India (RBI). RBI decides the amount of money that the banks can keep with themselves. Its major aim was to reduce the role of RBI from regulator to facilitator of financial sector. It led to establishment of private sector banks.

Certain aspects have been retained with the RBI to safeguard the interest of account holders and the nation . FINANCIAL SECTOR PowerPoint Presentation: These were concerned with the reforms in Governments taxation and public expenditures policies known as fiscal policies. There are two types of taxes:- Direct -consist of taxes on incomes of individuals as well as profits of business enterprises. Indirect -taxes levied on commodities to facilitate common national market for goods and commodities. TAX REFORMS PowerPoint Presentation: In 1991,as an immediate to resolve the balance of payment crisis, the rupee was devalued against foreign currencies. It led to increase in the inflow of foreign exchange . Now,more often markets determined exchange rates based on the demand and supply of foreign exchange. FORIEGN EXCHANGE PowerPoint Presentation: Its aim was to promote the efficiency of local industries and the adoption of modern tech. India was following a regime of quantitative restrictions by imposing high tariffs. It aimed at :- Dismantling of quantitative restrictions on imports and exports. Reduction of tariff rates . Removal of licensing procedures for imports. Import licensing was abolished in case of hazardous goods. Export duties have been removed to increase the competitive positions of goods. TRADE & INVESTMENT PowerPoint Presentation: PRIVATISATION It implies shedding of the ownership of a govt. owned enterprise. Govt. companies can be converted into private companies in two ways :- By withdrawal of govt. from ownership and management of public sector companies. By outright sale of public sector companies. Privatization of PSU by selling off part of the equity of PSUS to the public is known as disinvestments. Its main aim was to improve financial discipline and facilitate modernization. PowerPoint Presentation: GLOBALISATION GLOBALISATION IS THE OUTCOME OF THE POLICIES OF LIBERALISATION AND PRIVATISATION. IT MEANS AN INTEGRATION OF THE ECONOMY OF THE COUNTRY WITH THE WORLD ECONOMY PowerPoint Presentation: OUTSOURCING In outsourcing, a company hires regular service from external sources, mostly from other countries like legal advice, advertisement etc. It has intensified because of the growth of fast modes of communication, particularly the growth of IT The low wage rates and availability of skilled manpower in india have made it a destination for global outsourcing in the post reform period PowerPoint Presentation: WORLD TRADE ORGANISATION It was founded in 1995 and was expected to establish a rule-based trading regime in which nations cannot place arbitrary restrictions on trade. It covers trade in goods as well as services to facilitate international trade through removal of tarrif as well as non tarrif barriers and providing greater market access to all member countrie India has kept its commitments towards liberalisation of trade, made in WTO, by removing quantitative restrictions on imports and reducing tarrif rates. PowerPoint Presentation: INDIAN ECONOMY DURING REFORMS FOREIGN DIRECT INVESTMENT:- In economics, growth of an economy is measured by the gross domestic product (GDP). GDP has increased from 5.6%during 1980-1991 to 6.4% during 1992-2001. The opening up of the economy has led to the increase in foreign direct investment and foreign exchange reserves. Foreign direct investment has increased from about 100million US$ to 150 billion US$. India is seen as a successful exporter of auto parts, IT software and textiles in reform period. PowerPoint Presentation: GROWTH AND EMPLOYMENT Though GDP rate has increased but growth has not generated sufficient employment opportunities in the country. PowerPoint Presentation: REFORMS IN AGRICULTURE:- Public investment in agriculture sector especially in infrastructure , which includes irrigation, power , roads, etc has been reduced in the reform period. Removal of subsidy has led to increase in the cost of production , which has affected small & marginal farmers. This sector has been experiencing a no. of policy changes such as reduction in import duties on agricultural products, removal of minimum support price, etc. There has been a shift from production for domestic market towards production for

domestic market towards production for the export market focusing on cash crops in lieu of production of food grains. PowerPoint Presentation: REFORMS IN INDUSTRY Decreased demand of industrial goods due to cheap imports, inadequate investment, etc led to decrease in the industrial growth. Cheaper imports have replaced the demand for domestic goods . The infrastructure facilities , including power supply etc, has remained inadequate due to lack of investment. Moreover, a developing country like India still does not have access to developed countries market because of high non-tariff barriers. PowerPoint Presentation: The PSEs made a significant contribution to industrial production , 100 per cent in lignite, over 80 per cent in coal, crude oil and zinc, almost 50 per cent in aluminium and over 30 per cent in finished steel. In terms of profitability, the PSEs showed diverse patterns . In 2000-01, 122 enterprises made a profit with the top 10 among them - giants such as the Oil and Natural Gas Corporation (ONGC), the National Thermal Power Corporation (NTPC), the Indian Oil Corporation (IOC) and the Videsh Sanchar Nigam Limited (VSNL) - accounting for close to 70 per cent of the total net profit of Rs.19,604 crores. DISINVESTMENT PowerPoint Presentation: REFORMS AND FISCAL POLICIES :- The tax reductions have not resulted in increase in tax revenue for the goverenment. Tarrif reduction have curtailed the scope for raising revenue through custom duties. PowerPoint Presentation: Every aspect has a prose and a pon.Similarly, globalization is an opportunity in terms of greater access to global market,higher technology etc.Whereas on the other side it has widened economic disparities among nations and people. It has increased income and quality and consumptions of only high income groups like real estate,IT,rather than vital sector like agriculture. CONCLUSION