Eonomic reforms in india essay

Eonomic reforms in india essay

Essay on economic reforms in india

The Indian economy, which is going through a transitional period, has now come out of the crisis situation arising in the year 1990-91, which was the result of unusually high inflation rate, uncontrolled fiscal deficit, trade deficit and dire balance of payments situation.

This was the period when the Soviet Union, which was considered the world’s second largest power, was disintegrated and divided into 15 independent countries; The armies of the United States, France, Britain and Saudi Arabia were at war with Iraq to teach a lesson to Iraq, which had dared to occupy a part of Kuwait; In Eastern Europe and the countries created by the disintegration of the former Soviet Union, communism was dying, centralized economies were transforming into market economies, and multinational companies of developed economies stuck in recession and unemployment, had high investment returns in Third World countries.

The situation in India at that time was bad to the extent that due to lack of sufficient foreign exchange to meet the liabilities related to essential imports, the Reserve Bank of India had to pay 47.5m. Tons of gold was forced to get foreign exchange by pledging with the Bank of England. In these difficult circumstances, a large-scale and multi-faceted program of economic reforms and liberalization was carried out in India, the immediate task of economic reforms was to control inflation and save India’s declining credibility in the international community with an increase in economic output.

India responded swiftly to this immediate crisis and at the same time worked with the overarching objective of propelling the economy on the path of rapid and job-generating growth. The goal of all this is to give India its rightful place in the international community.

The policies of economic reforms and liberalization were related to fiscal reforms, financial and banking reforms, industrial reforms, taxation reforms, foreign trade reforms, foreign exchange reforms, capital market reforms, public sector reforms and reforms in the infrastructure sector.

Structural reform policies aimed at increasing efficiency in the use of resources and improving India’s international competitiveness are crucial in providing a lasting solution to the payment crisis.

Restructuring India’s trade and industrial policies, promoting efficiency through greater domestic competition, putting domestic producers in a position to import at reasonable rates of duty, promoting foreign investment and up-gradation of technology and progressively Indian Integration of the economy with the global economy was considered necessary.

To eliminate the weaknesses of the foreign exchange market, prevent black marketing and smuggling of foreign exchange, sell foreign exchange at market rates to foreign exchange earning exporters and enable importers and others to receive foreign exchange from the open market. Full convertibility has been implemented. The import of gold and silver along with capital goods has been facilitated. The new industrial policy paved the way for domestic and foreign private investors to invest more openly in India.

All other industries except 5 industries were exempted from the licensing process Capacity expansion and diversification of large size firms/companies were simplified, the number of industries reserved for the public sector was reduced from 17 to only 3 High priority The maximum limit of foreign equity in the receiving industries was increased from 40 per cent to 51 per cent under normal circumstances and up to 100 per cent in special circumstances, automatic permission was given to enter into foreign technology agreements.

The policy of ending investment in respect of public sector enterprises is an important part of economic liberalization which has given a new lease of life to sick units and provided good incentives to individual entrepreneurs. In order to prevent the recurrence of securities scams like 1992, a statutory body called Securities and Exchange Board of India (SEBI) was formed and it was given wide powers to regulate the primary and secondary capital markets.

Foreign institutional capital investors were allowed to enter the Indian capital market. Indian companies were allowed to acquire capital by issuing Euro issuances in foreign capital markets. The top effective rates of personal income tax, corporation tax, customs duty and central excise, etc. were all widely discounted. These reforms were made on the basis of the recommendations of the Chellaiya Committee.

The banking sector was made more transparent and accountable to the public. His accounting system was improved, more careful arrangements were made for his supervision; More than ₹ 10,000 crore were given from the Union Budget to the loss making banks. The results of economic reforms and liberalization policies were very encouraging.

After reaching a record level of 9.6 percent in 2006-07, the annual growth rate of GDP has come down to 9-3 percent for 2007-08 and 6-7 percent for 2008-09. The rate of economic growth was 86 percent in the year 2009-10 and 93 percent in the year 2010-11, but since then the growth rate has continued to decline. It is estimated to be below 6-2 percent in the year 2011-12, 5-0 percent in the year 2012-13 and even below 4-5 percent in the year 2013-14.

According to the revised figures, the growth rate of the manufacturing sector had reached a record level of 18.4 percent in the year 2007-08, but it decreased to ( ) 0.6 percent in the year 2011-12 and only 0-4 percent in the year 2012-13. In the year 1991-92, the annual growth rate of GDP was less than one percent. Indian industries have modernized and upgraded technology and this has increased their competitiveness.

From 1991 to March 2013, foreign direct investment of $287-372 billion had been made, of which 40-00 percent FDI was from Mauritius. Foreign direct investment has been mainly in priority industries like electricity, communication, road construction etc.

The successes of the foreign sector are particularly noteworthy. As on November 1, 2013, there were $281-294 billion in foreign exchange reserves, in which foreign exchange amounted to $253-609 billion and gold of $21-227 billion and IMF reserves tranches of $2-039 billion and The balance amount was SDR. The current account deficit of the balance of payments was equal to 1-1 percent of GDP in the year 2006-07.

The structure of exports etc. has also improved. Loss-making banks are now slowly moving towards profitability. The capital market has almost completely globalized. The business of Mumbai Stock Exchange, National Stock Exchange, Delhi Stock Exchange etc. has started being done on computer. A revolution has come in India in the field of telecommunications and information technology. C All these achievements are a sign that the Indian economy has now come out of the crisis.

It has taken the form of an economy which shows rapid growth in agricultural and industrial product, rapid revival in domestic investment, sustained growth in foreign direct investment, renewed growth in employment and satisfactory position of foreign exchange. Now we are slowly moving towards the status of worldwide economic order and we have established good credibility at domestic and foreign level.

We have now entered the 21st century with new hope and confidence, while our economic system seems to be getting a new vibrancy. The credit for all this goes to the various economic reforms carried out so far, but the challenges of inclusive growth still remain the same.

Below average growth rate and slowdown in manufacturing and foreign sector in the years 2012-13 and 2013-14, higher than normal inflation rate, skyrocketing food prices, increasing current account deficit and inability to reduce the revenue account deficit There are macro economic issues that need immediate attention, on the other hand, crores of people trapped in the web of poverty, illiteracy, malnutrition, unemployment need to be brought out of this web by policies to improve the quality of life.

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