Indian Economic Liberalisation
Table of Contents
Pre-Liberalisation age 2 Reason for Liberalisation 2
Liberalisation 3
Reforms taken during Liberalisation 3 Financial Sector Reforms 3 Industrial Sector Reforms 5 Trade Sector Reforms 6 Fiscal Sector Reforms 7
Challenges Ahead 8
Current India 14
Pre-Liberalisation age: A struggle
Indian was under social democratic policies from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, public ownership, persasive corruption and slow growth. Indian economic policy after independence was influenced by colonial experinece, which was seen by Indian leaders as exploitative, and by those leaders’ exposure to democratic socialism as well as the progress achieved by the economy of the Soviet Union. Domestic ploicy tended towards protectionism, with a strong emphasis on import substitution, industrialisation, economic interventionis, a large public sector, business regulation, and central planning, while trade and foreign investment policies were relatively liberal. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalised in the mid-1950s. Economy transformaed from primarlity agriculture, forestry, fishing, and textile manufacturing in 1947 to major heavy industry, transportation, and telecommunications industry by late 1970s. In 1980s, the root cause of the crisis was the large and growing fiscal imbalance. The subsidies grew at a rate faster than government expenditures and it rose from Rs. 19.1 billion in 1980-81 to Rs. 107.2 billion in 1990-91. Before 1991, India was a closed economy.
Reason for Liberalisation
• Balance of Payment (BOP) crisis in 1991 which pushed the country to near bankruptcy.
• The Rupee devalued and economic reorms were forced upon India.
• Indian Central bank had refused new credit and foreign exchange reserves had reduced to the point tht India could barely finance
Pre-Liberalisation age 2 Reason for Liberalisation 2
Liberalisation 3
Reforms taken during Liberalisation 3 Financial Sector Reforms 3 Industrial Sector Reforms 5 Trade Sector Reforms 6 Fiscal Sector Reforms 7
Challenges Ahead 8
Current India 14
Pre-Liberalisation age: A struggle
Indian was under social democratic policies from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, public ownership, persasive corruption and slow growth. Indian economic policy after independence was influenced by colonial experinece, which was seen by Indian leaders as exploitative, and by those leaders’ exposure to democratic socialism as well as the progress achieved by the economy of the Soviet Union. Domestic ploicy tended towards protectionism, with a strong emphasis on import substitution, industrialisation, economic interventionis, a large public sector, business regulation, and central planning, while trade and foreign investment policies were relatively liberal. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalised in the mid-1950s. Economy transformaed from primarlity agriculture, forestry, fishing, and textile manufacturing in 1947 to major heavy industry, transportation, and telecommunications industry by late 1970s. In 1980s, the root cause of the crisis was the large and growing fiscal imbalance. The subsidies grew at a rate faster than government expenditures and it rose from Rs. 19.1 billion in 1980-81 to Rs. 107.2 billion in 1990-91. Before 1991, India was a closed economy.
Reason for Liberalisation
• Balance of Payment (BOP) crisis in 1991 which pushed the country to near bankruptcy.
• The Rupee devalued and economic reorms were forced upon India.
• Indian Central bank had refused new credit and foreign exchange reserves had reduced to the point tht India could barely finance