PART 1

ECONOMIC POLICIES IN THE FIRST PHASE OF INDIAN ECONOMY

1. Cement: Cement was totally decontrolled, and a number of private

sector units were issued additional licensed capacities.
2. Sugar: The share of free sale of sugar in open market was enlarged.
3. Asset limit: The ceiling of the asset limit of big business houses was
enhanced from Rs. 20 crores to Rs. 100 crores.
4. Broad-banding: The scheme of “broad-banding” of licences was
introduced to bring variety in the production of two wheelers which was
later extended to 25 other categories of industries like, four-wheelers,
chemicals, Petro-chemicals, pharmaceuticals, typewriters-etc.
5. Drug: 94 drugs were completely delicensed, and 27 industries were
placed outside the purview Of MRTP Act.
6. Textile: Introduction of new Textile Policy, 1985 practically abolished the
distinction between mill, power loom and handloom sectors and also
between natural and synthetic fibre for licensing purposes.
7. Electronics: Electronics industry was liberalised from MRTP Act
restrictions. The entry of FERA Companies in the areas was also
liberalised.
8. Foreign Trade: Export-Import Policy, 1985 was announced in order to
pave the way for easier and quicker access to imports, strengthening
export production base and for facilitating technological up-gradation.
9. LTFP: Long Term Fiscal Policy, 1985 was announced for the
implementation of the Seventh Plan in a smooth manner.

ECONOMIC POLICIES IN THE SECOND PHASE OF INDIAN ECONOMY

The main macro-economic objectives of economic reforms (2nd phase) in India
include:
(a) Attaining economic growth at the rate of 3 to 3.5 per cent in 1991-92 and at
4 per cent in 1992-93;
(b) Reducing the annual rate of inflation by 9 per cent in 1991-92 followed by 6
per cent in 1992-93;

(c) Relieving the critical balance of payments situation and rebuilding foreign
exchange reserves to $ 2.2 billion in 1991-92;

(d) Reducing current account deficit in the budget from 2.5 per cent of GDP in
1990-91 to 2.0 per cent by 1992-93.

The following are the major areas of the second phase of economic reforms in
India:
1. Fiscal Policy Reforms:
The Government initiated various fiscal measures in order to reduce the fiscal
deficit from 8.4 per cent of GDP in 1990-91 to 5.0 per cent in 1996-97 and to
3.7 per cent in 2006-2007. In order to achieve this target, the Government
introduced various controls over public expenditure and took initiative to raise
both its tax and non-tax revenue.

The other measures include imposition of fiscal discipline by both Central and
State Governments, reduction of subsidies, developing a more efficient
expenditure system, encouraging state governments to streamline the working
State Enterprise, more particularly State Electricity Boards and State Transport
Corporations and withdrawal of budgetary support to Central public sector
enterprises and to improve their profitability and efficiency.

2. Monetary Policy Reforms:

The Government pursued a restrictive monetary policy for reducing
inflationary pressures and also for improving balance of payment position.

3. Pricing Policy Reforms:

In order to reduce budgetary provision for subsidies and to promote a more
flexible price structure, the Government increased the administered prices of
various commodities and inputs (petroleum products and fertilizers) and gave
greater freedom to public sector enterprises to set price as per market forces.

4. External Policy Reforms:

The government introduced stabilisation and import compression measures in
order to reduce the current account deficit in balance of payments to 2.1 per
cent of GDP in 1991-92 and then to 2 per cent of GDP in 1992-93.

5. Industrial Policy Reforms:

In order to make necessary reforms in its industrial policy, the Government
introduced its new industrial policy on July 24, 1991.

6. Foreign Investment Policy Reforms:

The new industrial policy, 1991 made provision for increased flow of foreign
investment in connection with technology transfer, marketing expertise and
introduction of modern managerial techniques. Accordingly, the new policy
included 34 priority industries in Annexure III to give automatic permission for
foreign direct investment up to 51 per cent foreign equity.

In respect of foreign technology agreements automatic permission will be

provided in high priority industry for royalty payments up to 5 per cent on
domestic sales, 8 per cent on export sales or a maximum payment of Rs. 1
crore. Moreover, in order to promote exports of Indian commodities in
international market, foreign trading companies were also allowed to raise
their foreign equity holdings up to 51 per cent for export activities.

7. Public Sector Policy Reforms:

Considering the huge amount of losses incurred by a good number of public
sector enterprises, the Government has taken various policy measures of
making necessary reforms of the public sector.

8. Trade Policy Reform:

In the context of globalisation of the economy and also to promote
international integration of our country, phasing out of excessive and
indiscriminate protection given to domestic industry become necessary. This
would develop a vibrant export sector and create a regime of price-based
system.

The main objective is to eliminate progressively the system of licenses and

quantitative restrictions, particularly for capital goods and raw materials so
that these items can be placed easily on open general license . The new policy
made provision for reduction of the scope of public sector monopoly sharply
for most export items and also a good number of import items.

In this context, the Government has introduced Export-Import Policy, 1992-97

and 1997-2002 for the coming five years and on 13th April 1998 the
Government has further modified this new Exim Policy (1997-2002) and also
announced its annual Exim Policy, 2000-01 and also in 2001-2002; Again, on
31st March 2002, the Government announced its new Exim Policy, 2002-07 so
as to achieve 1 per cent share in global exports by 2007.
9. Social Policy Reforms:
To meet the objective of poverty alleviation as a part of our adjustment
process, the government has allocated a higher amount of outlays on
elementary education, rural drinking water supply, assistance to small and
marginal farmers, programmes for the welfare of scheduled caste and
scheduled tribe and other weaker sections of the society, programme for
women and children and also on infrastructure and employment generation
projects.

As a part of this programme, the 1995-96 Budget has introduced a National

Social Assistance Scheme in the form of housing assistance, old age pension,
maternity benefit, group insurance for schemes etc. for those living below the
poverty line.

PART 2

RECENT ECONOMIC REFORMS THAT HAPPENED AND ITS IMPACT ON INDIAN

ECONOMY
DEMONITISATION AND GST : Currency in circulation was 12.1% of India’s
nominal GDP in 2015-16, the year before demonetisation. It plummeted to
8.7% in 2016-17 as the banking system was struggling to put cash back into the
system after demonetisation. Since then, this ratio has climbed steadily, and it
reached 12% in 2019-20. demonetisation was not the only policy change which
has affected tax collections in India. It was followed by the roll-out of Goods
and Services Tax in July 2017. In September 2019, the government announced
a significant reduction in Corporation Tax rates, which led to a sharp fall in
direct tax collections. Even as economic observers were waiting for the long-
term effects of corporation tax cuts, the economy was hit by the pandemic,
which led to a sharp fall in GDP and hence tax collections across the board.
With these caveats in place, a look at the central government’s gross tax
collection vis-a-vis its budgeted targets — they are the best measure of
whether the government’s own expectations about tax collection have been
fulfilled — does not show much of an improvement after demonetisation.

PART 3

MACRO-ECONOMIC FACTORS OF INDIAN ECONOMY

 Inflation : Inflation is a progressive increase in the average cost of goods and
services in the economy over time.

Economic Growth Rate : The economic growth rate is the percent change in
the cost of the output of goods and services in a country across a specific
period of time, relative to a previous period.

Price Level : A price level is the variation of existing prices for economically
produced goods and services. In broader terms, the level of prices refers to the
costs of a good, service, or security.

Gross Domestic Product : The gross domestic product is a quantitative

measure of the market value of all finished goods and services produced over a
given time period.

National Income : National income is the aggregate amount of money

generated within a nation.

Unemployment Level : The level or rate of unemployment is the unemployed

share of the labour force in a given country, calculated and stated as a
percentage.

PART 4
COMPARATIVE ANALYSIS REPORT FOR GDP
FY 2020-21 FY 2019-20 FY 2018-19
QTR Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
GROWTH 1.64 0.46 -7.44 -24.43 3.0 3.28 4.61 5.39 5.84 6.33 6.49 7.56
RATE % 1

REPORT
FORCAST CHANGES EXPECTED IN GDP 2023
FY 2021-22
QTR Q4 Q3 Q2 Q1
GROWTH RATE % 1 1.5 1.6 1.4

COMPARATIVE ANALYSIS OF PREVIOUS YEARS

When we compare the GDP growth rate of each year, we can understand that
there was a good rate in the financial year 2018-19 and towards the beginning
phase of next annual year 2019-20. But with the onset of COVID-19, the GDP
took a huge hit and even became negative. But good government policies have
been able to revive the Indian economy and has been able to become positive
in the last quarter.
FORCAST EXPECTED IN GDP IN FY 2023 :
The economic situation is still not so stable and is still in revival mode and
hence the low projected GDP rate. This could be a little more than predicted as
life of common people have come back on track, companies and industry are
back to their normal production rate supported by favourable government
policies.