ECONOMIC REFORMS SINCE 1991

‘Economic reforms’ usually refers to deregulation, or at times to reduction in the size of govt., to remove distortions caused by regulations or the presence of govt. rather than new or increased, regulations or govt. programs to reduce distortions caused by market failure.

Need of economic reforms in India

• Increase in fiscal deficit.
• Increase in adverse balance of payment
• Fall in foreign exchange reserve
• Rise in prices
• Poor performance of public sector.

Role of Manmohan Singh

• In 1991, when Mr. Singh become the finance minister, India was on the brink of bankruptcy. By 1994, when he presented his historic budget, the economy was well on its way to recovery.
• Mr. Singh, unshackled the country from the bureaucratic controls and license- permit raj, and took the economy to a high growth path of 6 – 7 % during his five year stint at north block.

Cont……..

• Nearly 1Crore new jobs were created, an environment of liberalization was set in motion and the foundation of an information technology and telecom revolution was laid.

Main features of economic reforms

Liberalisation

• Simply speaking liberalization means to free to economy from the controls by the govt. before 1991, govt. had put many types of controls on Indian economy.
• These were as follows –
• (a) industrial licensing system
• (b) foreign exchange control

​

​

Cont……

• (c) price control on goods
• (d) import license

​

Steps taken for liberalization

• (1) independent determination of interest rate
• (2) increase in the investment limit of the small scale industries
• (3) freedom tom import capital goods
• (4) freedom to import technical know-how

Cont….

• (5) freedom for expansion and production to industries.
• (6) freedom from monopolies act.
• (7) removal of industrial licensing.

​

Privatization

• simply speaking, privatization means permitting the private sector to set up industries which were previously reserved for the public, under this policy many PSU’s were sold private sector.
• The main reason for privatization was in currency of PSU’s are running in losses due of political interference.

Cont…..

• The managers cannot work independently. production capacity remained under-utilize. To increase competition and efficiency need of privatization was felt.

Steps taken from privatization

• (1) sale of shares
• (2) disinvestment in PSU’s
• (3) minimization of public sector
• Number of industries reserved for public sector was : reduced from 17 to 4
• (A) railway
• (B) atomic minerals
• (C) atomic energy
• (D) defense equipment.

​

Globalization

• Globalization means the establishment of relations of the economy with world economy in regard to foreign investment trade, production and financial matters.

Steps taken for globalization

• (1) reduction of tariffs
• (2) long team trade policy
• (3) partial convertibility
• (4) increase in equity limits of foreign investment.

Types of economic reforms

• (1) structural reforms initiatives
• (2) fiscal reforms
• (3) infrastructure reforms

Capital and money market reforms

• (1) increase in national product
• (2) foreign investment
• (3) agricultural production
• (4) foreign currency reserves
• (5) fiscal deficit
• (6) imports
• (7) control of inflation.

Negative effect of reforms

• National sovereignty at stake leads to commercial and political colonialism
• Kills the domestic business
• Farmer’s suicide
• Social inequality
• Fail to obey the labour laws
• Decline demand for domestic products
• Transfers of natural resources

​

​

World trade organization

• The world trade organization is a large international organization to regulate trade that was established in 1995
• As of 14 July 2016, there were 164 member countries.
• In the WTO agreements are made on trade between countries.

Objectives of WTO

• To improve the standard of living of people in the member countries.
• To ensure full employment and broad increase in effective demand.
• To enlarge production and trade of goods.
• To increase the trade of services.

Cont………

• To ensure optimum utilization of world resources.
• To protect the environment.
• To accept the concept of sustainable development.

​

**Thank you**

​

​