Economic Reforms in India
September 6th, 2008
U.T.R.S.P. asked:
“India is shining” and “India is rising” are the slogans by various political parties in India to highlight the achievements of the economic reforms initiated in India in 1991.The economic reforms initiated in 1991 are also known as the new economic policy-1991.These reforms were initiated by then prime minister late sri P.V.Narasimha rao under the finance minister ship of the present prime minister,sri.Dr.Manmohan Singh.These reforms were initiated with the hope of transformimg India into a developed nation from a developing nation.The economic growth and economic development of a nation depend on the economic policies of the government,the availability of natural resources,the quality and the quantity of the population,the availability of efficient technology and the availability of credit and proficient and efficient management.In other words these are also known as the factors of production,viz Land,Labour,Capital and Organisation.Economic growth is defined as the increase in the per capita availability of goods and services,and the economic development means the overlall development of a nation including the improvements in infrastructural facilities such as the economical and social infrastructural facilities.
At present there are:1.Cars from different foreign countries plying on the Indian roads,2.Different new retail stores like reliance,spencers,etc.,3.Several private airlines operators like jet,King fisher,Airdeccan,Paramount,Sahara etc 4.Many TV channels like BBC,Zee,Etv,Gemini,Teja,Maa Tv,Sony TV, Animal planet,National geographic,Sahara,etc but before 1991 there was only one channel in India named “Doordarshan”, 5.Many kinds of cell phone instruments like Nokia,Samsung,Philips,Reliance,and so on.,6.Collaborations and acquisitions of various compamies by private people both from India and abroad.7.New courier companies like Professional couriers,First flight,Door to door cargo(DTDC),etc.8.New land line phone instruments,etc.9.Foreign banks working from India,eg:HSBC(Hongkong Shanghai Banking Corporation and 10.Foreign goods available in plenty like Rolex watches etc. These are only some changes which we can observe in the Indian society after the implementation of new economic policy-91.
After Independence,India opted for a mixed economic system in which both private and public sector play a role in producing goods and services to satisfy the human wants.India also adopted the planning system from erstwhile USSR.But these policies did not help much the ‘welfare state’(India), in achieving some of the planned targets.Thus by 1991,India faced the following economic problems,1.Very high inflation, 2.Very high balance of payment problem,3.Very high unemployment problem,etc.4.Some public sector units were running under losses,due to over staffing,lack of proper budgets,due to mis management,5.Meagre Forex resources,etc.Adding fuel to the problems, the Gulf war(1990-91) was responsible for severe increase in the prices of most of the essential commodities,as the international oil prices soared to a new high.The gulf war also contributed to the severe balance of payments crisis as India still depends on imported oil.The imported oil meets 70% of Indian oil requirements.The restrictive policies of the government and red tapism also contributed to very high corruption in Indian socity.These economic problems are responsible for the initiation of new economi policy-1991,popularly known as the new economic reforms.
Economic reforms include three major aspects viz,Liberalisation,Privatisation,and Globalisation.Globalisation means ‘having minimum possible restrictions in economic relations with other nations’,this includes the free movement of capital(investments,both FDI,foreign direct investments and FII,foreign institutional investments),Ideas,Goods,Technology,People/labour,etc.Earlier there were restricted policies in India but now it’s a liberalised era,under the restricted policy entrepreneurs had to wait for many months or even years to start their ventures and to produce goods and services.The liberalised policy allows the entrepreneurs to start their ventures without waiting for the Government’s approval i.e.de-licensed.Under this policy the private people are allowed to produce goods and services in the areas which were earlier reserved for the Government,for eg:there are now new private LPG cylinder dealers like Spic Jothi,Elf gas,etc.Before 1991,the LPG was supplied by the government only, through Indane,bharath,etc.Similarly at present there are some private petrol bunk dealers like Reliance.Under this liberalised policy,the govt allows the private sector to get foreign technology to improve their company’s efficiency.The liberalised policy of the govt is also responsible for the proliferation of private schools and colleges(Corporate colleges);Restaurants;business establishments,private hospitals(Corporate hospitals like Apollo,CDR,etc).Privatisation includes the selling of loss making public sector units to private companies/people and allowing private sector participation in the areas which were earlir excusively under the control of government,for eg:there are many private sector banks now in India,ICICI bank is the largest private sector bank.Other private sector banks are Kotak mahindra bank,HDFC bank,IDBI,etc.The government also sold out certain percentage of shares of the loss making PSU’s (public sector units) to the public.
Thus the new economic policy ultimately improves the quality of life of the people of India,for eg:at present many people of India are favouring air transport and the air ports are looking like crowded railway platforms,this is due to the competetion from other modes of transport and lesser fares of air transport,thus the passengers can save their time as they reach the destination fast.The new economic policy is also responsible for increase in the employment avenues for the people,for eg:any human resource with a +2 qualification and good english language skills is invited by a BPO/KPO companies with a minimum pay of 15,000 per mensum.The liberalisation of trade policies and availability of credit at lower interest rates also improve the incomes of the people of India.There are many players in the market now to produce goods and services to meet the increased demands from the consumers which will lead to consumer satisfaction and increse in the qualityof life of a consumer and consumer surplus.The Economic reforms thus lead to economic growth and economic development.
The major achiements of economic reforms are1.Improvement in the balance of payments situation,( balance of payments is the difference between exports and imports) 2.Increase in the incomes of the people,3.Reduction of poverty ratio to around 25% from about 40% in 1991,4.Increase in the employment levels both in urban and rural india,5.Improvements in the infrastucture such as education,health,transportation,communication, 6.Increase in the power production due to involvement of private people in the power production,etc 7.Increase in the availability of banking/credit facilities due to the participation of private and foreign banking entrepreneurs.8.Increase in the per capita income and GDP growth rates,at present the GDP growth rate is 8.5%.GDP is defined as the total money value of goods and services produced in an economy in an year.9.There is also an improvemant in the Forex( foreign exchange resources) resources.
There were criticisms too against the new economic policy-91.According to the critics the economic reforms divided the Indian society into haves and have nots and digitslised and non- digitalised etc, but by taking effective steps to improve the lot of the rural masses (India lives in villages,and at present nearly 65% of the Indian population lives in villages) the gap can be filled.These steps incude,the increase in the availability of cheap credit,improving the marketing facilities,Irrigation faacilities, Uninturrupted Power supply for agriculture,employment facilities during the lean agricultural season by encouraging the setting up of rural industries by providing some incentives along with the existing concessions,improving the rural infrastructural facilities like roads etc.
The economic reforms also contributed to the increase in savings rate and thus the investment growth rate.The supply of goods and services has been increasing and the consumer has to choose from the various choices available in the market.
“India is shining” and “India is rising” are the slogans by various political parties in India to highlight the achievements of the economic reforms initiated in India in 1991.The economic reforms initiated in 1991 are also known as the new economic policy-1991.These reforms were initiated by then prime minister late sri P.V.Narasimha rao under the finance minister ship of the present prime minister,sri.Dr.Manmohan Singh.These reforms were initiated with the hope of transformimg India into a developed nation from a developing nation.The economic growth and economic development of a nation depend on the economic policies of the government,the availability of natural resources,the quality and the quantity of the population,the availability of efficient technology and the availability of credit and proficient and efficient management.In other words these are also known as the factors of production,viz Land,Labour,Capital and Organisation.Economic growth is defined as the increase in the per capita availability of goods and services,and the economic development means the overlall development of a nation including the improvements in infrastructural facilities such as the economical and social infrastructural facilities.
At present there are:1.Cars from different foreign countries plying on the Indian roads,2.Different new retail stores like reliance,spencers,etc.,3.Several private airlines operators like jet,King fisher,Airdeccan,Paramount,Sahara etc 4.Many TV channels like BBC,Zee,Etv,Gemini,Teja,Maa Tv,Sony TV, Animal planet,National geographic,Sahara,etc but before 1991 there was only one channel in India named “Doordarshan”, 5.Many kinds of cell phone instruments like Nokia,Samsung,Philips,Reliance,and so on.,6.Collaborations and acquisitions of various compamies by private people both from India and abroad.7.New courier companies like Professional couriers,First flight,Door to door cargo(DTDC),etc.8.New land line phone instruments,etc.9.Foreign banks working from India,eg:HSBC(Hongkong Shanghai Banking Corporation and 10.Foreign goods available in plenty like Rolex watches etc. These are only some changes which we can observe in the Indian society after the implementation of new economic policy-91.
After Independence,India opted for a mixed economic system in which both private and public sector play a role in producing goods and services to satisfy the human wants.India also adopted the planning system from erstwhile USSR.But these policies did not help much the ‘welfare state’(India), in achieving some of the planned targets.Thus by 1991,India faced the following economic problems,1.Very high inflation, 2.Very high balance of payment problem,3.Very high unemployment problem,etc.4.Some public sector units were running under losses,due to over staffing,lack of proper budgets,due to mis management,5.Meagre Forex resources,etc.Adding fuel to the problems, the Gulf war(1990-91) was responsible for severe increase in the prices of most of the essential commodities,as the international oil prices soared to a new high.The gulf war also contributed to the severe balance of payments crisis as India still depends on imported oil.The imported oil meets 70% of Indian oil requirements.The restrictive policies of the government and red tapism also contributed to very high corruption in Indian socity.These economic problems are responsible for the initiation of new economi policy-1991,popularly known as the new economic reforms.
Economic reforms include three major aspects viz,Liberalisation,Privatisation,and Globalisation.Globalisation means ‘having minimum possible restrictions in economic relations with other nations’,this includes the free movement of capital(investments,both FDI,foreign direct investments and FII,foreign institutional investments),Ideas,Goods,Technology,People/labour,etc.Earlier there were restricted policies in India but now it’s a liberalised era,under the restricted policy entrepreneurs had to wait for many months or even years to start their ventures and to produce goods and services.The liberalised policy allows the entrepreneurs to start their ventures without waiting for the Government’s approval i.e.de-licensed.Under this policy the private people are allowed to produce goods and services in the areas which were earlier reserved for the Government,for eg:there are now new private LPG cylinder dealers like Spic Jothi,Elf gas,etc.Before 1991,the LPG was supplied by the government only, through Indane,bharath,etc.Similarly at present there are some private petrol bunk dealers like Reliance.Under this liberalised policy,the govt allows the private sector to get foreign technology to improve their company’s efficiency.The liberalised policy of the govt is also responsible for the proliferation of private schools and colleges(Corporate colleges);Restaurants;business establishments,private hospitals(Corporate hospitals like Apollo,CDR,etc).Privatisation includes the selling of loss making public sector units to private companies/people and allowing private sector participation in the areas which were earlir excusively under the control of government,for eg:there are many private sector banks now in India,ICICI bank is the largest private sector bank.Other private sector banks are Kotak mahindra bank,HDFC bank,IDBI,etc.The government also sold out certain percentage of shares of the loss making PSU’s (public sector units) to the public.
Thus the new economic policy ultimately improves the quality of life of the people of India,for eg:at present many people of India are favouring air transport and the air ports are looking like crowded railway platforms,this is due to the competetion from other modes of transport and lesser fares of air transport,thus the passengers can save their time as they reach the destination fast.The new economic policy is also responsible for increase in the employment avenues for the people,for eg:any human resource with a +2 qualification and good english language skills is invited by a BPO/KPO companies with a minimum pay of 15,000 per mensum.The liberalisation of trade policies and availability of credit at lower interest rates also improve the incomes of the people of India.There are many players in the market now to produce goods and services to meet the increased demands from the consumers which will lead to consumer satisfaction and increse in the qualityof life of a consumer and consumer surplus.The Economic reforms thus lead to economic growth and economic development.
The major achiements of economic reforms are1.Improvement in the balance of payments situation,( balance of payments is the difference between exports and imports) 2.Increase in the incomes of the people,3.Reduction of poverty ratio to around 25% from about 40% in 1991,4.Increase in the employment levels both in urban and rural india,5.Improvements in the infrastucture such as education,health,transportation,communication, 6.Increase in the power production due to involvement of private people in the power production,etc 7.Increase in the availability of banking/credit facilities due to the participation of private and foreign banking entrepreneurs.8.Increase in the per capita income and GDP growth rates,at present the GDP growth rate is 8.5%.GDP is defined as the total money value of goods and services produced in an economy in an year.9.There is also an improvemant in the Forex( foreign exchange resources) resources.
There were criticisms too against the new economic policy-91.According to the critics the economic reforms divided the Indian society into haves and have nots and digitslised and non- digitalised etc, but by taking effective steps to improve the lot of the rural masses (India lives in villages,and at present nearly 65% of the Indian population lives in villages) the gap can be filled.These steps incude,the increase in the availability of cheap credit,improving the marketing facilities,Irrigation faacilities, Uninturrupted Power supply for agriculture,employment facilities during the lean agricultural season by encouraging the setting up of rural industries by providing some incentives along with the existing concessions,improving the rural infrastructural facilities like roads etc.
The economic reforms also contributed to the increase in savings rate and thus the investment growth rate.The supply of goods and services has been increasing and the consumer has to choose from the various choices available in the market.