POLICY AND ECONOMIC

REFORMS IN INDIA
 THE CRISIS EXPLAINED

• Macro economic indicators

a) The trade deficit increased from Rs. 12,400 crore in 1989-90 to Rs. 16,900 crore in 1990-91.
b) The current account deficit increased from Rs. 11,350 crore in 1989-90 to Rs. 17,350 crore
in 1990-91.
c) The average rate of inflation was 7.5 percent in 1989-90, which went up to 10 percent in the
year 1990-91
 POLITICAL
INDICATORS
• Break-up of the Soviet Bloc- trade decreased
• Iraq-Kuwait War- oil prices rose
• Political Uncertainty and Instability
• Loss of Investors’ Confidence
• Increase in Non-oil Imports- deficit increased
 ECONOMIC
INDICATORS
• Fiscal Imbalances (Fiscal Deficit 12.1% of GDP)
• Low Forex Reserves
• Inflation rate at almost 13.9%
• The economic growth from 1950s to 1991 was stagnant at around 3.5%
LPG • The need for Globalization began with the PM- P V Narisimha
Rao and the FM Manmohan Singh initiated economic
liberalization.

• The focus on equity over growth was to change- with

government control decreasing

• Openness to the world as trade partners was initiated

 THE WORLD BANK AND LPG

• To resolve the revenue crisis, India took a loan of USD 7 billion from the World Bank and IMF
• The loan was given with some conditions attached
a) Remove restrictions on the Private Sector
b) Reduce the role of government in many areas
c) Remove trade restrictions
• India agreed to the conditions and New Economic Policy began
THE PATH OF LIBERALIZATION
 NEW INDUSTRIAL POLICY 1991

• Objectives Assisting
Accelerating the overall rate SME sectors
of industrialization

Preventing Monopolies
and concentration of Increasing R&D in
industrial power Industrial
Development

Linkages with other

Generating Employment sectors of the
economy
 MOVIE- LPG

• https://www.youtube.com/watch?v=WYaIXWd9a2U