FIRST GENERATION

ECONOMIC REFORMS
 FIRST GENERATION REFORMS

• WHY REFORMS

• WHAT IS REFORM
• 1. ECONOMIC RFFORM REFERS TO THE PROCESS IN WHICH A GOVERNMENT PRESCRIBES DECLINING ROLE FOR
STATE AND EXPANDING ROLE FOR PRIVATE SECTOR IN AN ECONOMY

• 2. CREATING THE ENVIRONMENT FOR THE GROWTH OF INDUSTRIES IN THE ECONOMY BY LIBERALISING THE
POLICIES WHICH ARE PUTTING HURDLES IN THE GROWTH

• WHY IN 1991
• INFLATIONARY PRESSURE
• SHORTAGE OF FINANCE FOR INDUSTRY
• DECLINE IN THE SHARE IN WORLD TRADE
• HIGHER FISCAL DEFICIT
• GULF WAR
 ECONOMIC REFORMS

• POLICIES RESPONSIBLE FOR SUCH PROBLEMS

• SYSTEM OF LICENSING
• RESTRICTION ON IMPORTS TARIFF
• RESTRICTION ON FOREIGN INVESTMENT
• DUAL SYSTEM OF FOREIGN EXCHANGE RATES
• WHY URGENCY IN 1991 – MAJOR CRISIS

STEEP DECLINE IN FOREIGN EXCHANGE RESERVES ($0.6 BILLION)

IN MAY 1991 INDIA AIRLIFTED 67 TONS OF GOLD
PLEDGED 47 TONS TO BANK OF ENGLAND AND 20 TONS TO UNION BANK OF
SWITZERLAND AND RAISED $600 MILLION LOAN
APPROCHED WORLD BANK AND IMF AND RECEIVED $7BILLION AS LOAN TO
MANAGE THE CRISIS
 ECONOMIC REFORMS

• CONDITIONS OF IMF FOR DISBURSING THE LOAN

• DEVALUATION OF RUPEE BY 22% , CONSEQUENTLY RUPEE FELL FROM RS22/$ TO 27/$ USD
• DRASTIC REDUCTION IN IMPORT TARIFF (FROM 130% TO 30%)
• EXCISE DUTIES BE INCREASED BY 20% TO NEUTRALISE THE REVENUE SHORT FALL
• ALL GOVERNMENT EXPENDITURES TO BE CUT DOWN BY 10% ANNUALLY

• ANNOUNCEMENT OF NEW ECONOMIC POLICY LPG

• LIBERALISATION
• PRIVATISATION
• GLOBALISATION
 ECONOMIC REFORMS

• LBERALISATION
END TO RESTRICTION AND OPENING UP OF VARIOUS SECTORS OF THE
ECONOMY
REFORMS IN INDUSTRIAL SECTOR :
1. ABOLITION OF INDUSTRIAL LICENSING
INDUSTRIES RESERVED FOR PUBLIC SECTORS
DEFENCE EQUIPMENT, ATOMIC ENERGY GENERATION AND RAILWAY
TRANSPORT
2. PROMOTION OF PRIVATE SECTOR
ABOLITION OF MRTP LIMITS, SIMPLIFICATIONS OF ENVIRONMENT LAWS

3. REMOVAL OF ADMISTRATIVE PRICE MECHANISM

PETROLEAM PRICE HAVE BEEN LEFT TO MARKET
 ECONOMIC REFORMS

• REFORMS IN FINANCIAL SECTOR

1. ROLE OF RBI CONTROLER TO FACILITATOR

2. ESTABLISHMENT OF PRIVATE BANKS

ICICI, AXIS (UTI) , HDFC , Yes Bank, IDFC , Bandhan Bank

3.RAISING OF LIMITS OF FOREIGN INVESTMENT UP (74% -100%) OF PAID-UP CAPITAL

4. FREEDOM IN OPENING OF NEW BRANCH BY BANKS

5. FOREIGN INSTITUTIONAL INVESTORS (FIIs) Merchant Banks, Mutual Funds and

Pension funds
6.LIBERALISATION OF INTEREST RATES

7. ESTABLISHMENT OF SEBI –REGULATORY MECHANISM

 ECONOMIC REFORMS

• EXTERNAL SECTOR REFORMS

•
1. ABOLITION OF QUANTITATIVE RESTRICTIONS

2. SWITICHING TO MARKET DETERMINED RATES OF EXCHANGE

FROM REGULATED ONE

3. FULL CURRENT ACCOUNT CONVERTIBILITY

4. REPLACING DRACONIAN FERA WITH LIBERAL FEMA

 ECONOMIC REFORMS

• TRADE AND INVESTMENT POLICY REFORMS

1. TO PROMOTE THE EFFICIENCY OF LOCAL INDUSTRY AND ADOPTION OF
MODERN TECHNOLOGY

2. RELEXATION IN QUANTITATIVE RESTRICTION ON IMPORTS AND EXPORTS. IN

APRIL 2001 REMOVAL OF RESTRICTIONS

3. REDUCTION IN TARRIF RATES

4. REMOVAL OF LICENSING PROCEDURE FOR IMPORTS

5. RELAXATION IN EXPORT DUTIES TO ENCOURAGE COMPETITIVE POSITION FOR

INDIAN GOODS IN INTERNATIONAL MARKET
 ECONOMIC REFORMS

• SECOND GEN REFORMS –9TH AND 10TH FIVE YEARS PLANS (1997-2007)
• Agricultural and rural development to generate employment and eradicate
poverty.
• Accelerating growth rate with stable prices.
• Ensuring food security for all.
• Ensuring basic service like drinking water, healthcare, education etc.
• Controlling population growth rate.
• Ensuring environmental sustainability.
• Women empowerment, especially those from disadvantaged groups.
• Promoting and developing participatory institutions like Panchayat and self-
help groups.
• Creating self-reliance.
 ECONOMIC REFORMS

• 10TH FIVE YEAR PLAN (2002 -2007)

• Reduction in poverty ratio by 5 percentage points.
• Providing quality employment to the labor force.
• All children in school by 2003, all children to complete 5 years of schooling by
2007.
• Reduction in literacy and wage gender gaps by 50%.
• Reduction in decadal population growth.
• Increase in literacy rate to 75%.
• Reduction in Infant Mortality Rate.
• Reduction of Maternal Mortality Ratio.
• Increase in forest and tree cover.
• Access to potable drinking water in all villages.
• Cleaning of major polluted rivers.
 ECONOMIC REFORMS

• SOCIAL SECTOR REFORMS

• HEALTH AND NUTRITION :
• POVERTY,
• EDUCATION SARV SIKSHA ABHIYAN
• GENDER INEQUALITY
• HEALTH