India Economic Reform of

1991

LPG MODEL
 WHY?
 While the crisis hit India in 1990-91, it
had been building for half a decade prior
to the crisis year.
 India's industry became uncompetitive
using outdated technology, producing
the same old models and was unable to
sell its products overseas.
 The year 1990-91 ended with a fiscal
deficit of 8.4% of GDP.

2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 2

 COMPETITION GRAPHIC

Convenient

CHINA
UNITED STATES OF AMERICA

Affordable Expensive

UNITED KINGDOM
INDIA

GERMANY OTHERS
Inconvenient

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 PROBLEM

Market gap Financials Customers

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 SOLUTION

Close the gap Target audience Cost savings Easy to use

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 UNIQUE

AUTHENTIC
LPG MARKET
ORIENTED

NEW
TRANSITION
TO TAX AND
BUSINESS

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2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 7
2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 8
Company
overview
 Transition to a market oriented economy

“By June 1991, the balance of payments

crisis had become overwhelming Ly a
crisis of confidence in the Government's
ability to manage the balance of payments“

For the first time, foreign investment up to

51 per cent equity was automatically
allowed in a wide range of industries.
Industrial licensing was virtually abolished
and Monopolies and Restrictive Trade
Practices (MRTP) clearances dispensed
with.

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 Import duty reduction

Reforms of the early nineties focused on trade and industry.

Expert committee based process helped in charting an agenda

forreforms.

Some reforms were introduced in the scale and financial sector

Till the mid-nineties, the government used to borrow directly from

the RBI through the issue of ad-hoc treasury bills.

Automatic monetization of debt was discontinued: The Centre was

soon barred from direct borrowing from the RBI through ad hoc
treasury bills to instill greater fiscal discipline, an idea that was
mooted by Manmohan Singh in 1994, but implemented in 1997 by
P. Chidambaram, who was then finance minister in the United
Front
government.

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Banking sector was left out

When people set up factories

and invest, they need money.

Steady ow of finance
requires a competitive
banking system.

Restrictions on banking:
dominance of public sector
banks continued even after
1991.

Existing banks had a

preference for their
traditional customers further
helping the incumbents to
borrow more.

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Factor market reforms

The first generation of reforms

focused on product markets.
Reforms in the land, labor and
capital markets were left
untouched.

One such norm is the Industrial

Disputes Act (IDA) that
prevented companies with more
than 100 employees from ring
people without
government permission.

States have taken some steps to

rationalize the existing labor
law restrictions.

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 Consolidation of labor laws into 4 codes

The government has consolidated 44 labor laws

under 4 categories of Codes namely, Wage
Code, Social Security Code, Occupational
Safety, Health & Working Conditions Code
and the Industrial Relations Code .

The rules for these four Labor Codes are yet to

be framed and notified, thanks to the lack of
unanimity among the states.

A consultative and collaborative framework

with states needs to be set up

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 Land acquisition problems

In India, land acquisition by the private sector has been made

complex by the land acquisition act enacted in 2013.

Requires a mandatory social impact assessment, a series of

permissions, compensation up to 4 times the market value of the
land.

Lack of a robust mechanism for price determination.

Any attempt to amend the `Right to Fair Compensation and

Transparency in Land Acquisition, Rehabilitation and Resettlement
Bill' has met with opposition and is labelled as anti-farmers.

As a result, acquisition of land for industrial purposes is has become

tedious and slow. This discourages new projects in the private sector.

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 GDP GROWTH

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 INDIA TRADE BALANCE

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 FOREIGN DIRECT INVESTMENT (FDI)

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 Market overview

$3 $12,833 $5.5
Trillion Billion Trillion

India is the 8th largest market in terms of India’s wealth grew up from 2019 despite India’s financial wealth likely to grew up by
market cap. of COVID aimed and taking the global 10% pa by 2025 to $5.5T.
wealth share of 3.1%

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 Summary
Reforms need to be expedited for sustained higher growth

 Substantial fiscal consolidation

 Privatization of state owned entities
 Reduction in import duties to foster competition

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 Thank you

ARUSHI SINGH
(A42304619025)
&
DIVANSHU SACHDEVA
(A42304619021)

B.COM (HONS.) 5TH SMESTER

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