Economic Reforms in India

Prepared by :- Mansi Karandikar Abhishek Agrawal

Contents
Why economic reforms?? Factors ob!ecti"es - #eforms Foreign $n"estment % Policy #eforms Foreign &rade '(change Policy #eforms $nd)strial reforms P)blic sector reforms Financial Fiscal reforms *ocial reforms Agric)lt)ral reform Po"erty +ealth 'd)cation concl)sion

Why 'conomy reforms??

,, -ackgro)nd of 'conomic reforms,, First introd)ced )nder #a!i" .andhi regime 'nd of /00/- )nprecedented crisis #eser"e of foreign e(change- 1 weeks $mport 2o 2ew 3oans a"ailable -4P- critical Faith of $nternational comm)nity shaken

Factors % 'conomic #eforms

5A6$nternational Factors 1 $nternational scenario 7 $nternational press)re

condition

5-6 8omestic Factors / $ncrease in fiscal deficit 1 8eficit in c)rrent acco)nt increase in foreign debt 7 -4P crises 9 Monitoring inflationary press)re : ;nsatisfactory performance of p)blic sector

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4b!ecti"es of 'conomic reforms

5/6$ncrease in the rate of 'conomic growth 516$ncrease in competiti"eness of ind)strial sector 576#ed)ction in Po"erty and $ne=)ality 596$ncrease in 'fficiency of p)blic sector 5:6Control o"er Fiscal deficit 5<6Promoting F8$ 5>68ecline in 8eficit of -4Ps

$nd)strial Policy
4b!ecti"es of $nd)strial Policy-/00/

/ *elf #eliance 1 *o)nd policy Framework 7 8e"elopment of *mall sector 9 Foreign $n"estment &echnology collaboration : Abolishment of Monopoly < #ightf)l #ole to P)blic sector > Protection of $nterest of 3abo)rers

Feat)res of $nd)strial Policy/00/

$nd)strial licensing Foreign $n"estment Foreign &echnology Policy regarding p)blic sector M#&P limit

Foreign $n"estment % Policy #eforms

2eed foreign capital in $ndia

/?'(ploitation of nat)ral reso)rces 1?&echnological .ap 7?-4P s)pport 9?;ndertaking the $nitial #isk

#eforms in Foreign $n"estment

F8$ Appro"al
A)tomatic appro"al by #-$ Case to case appro"al by .o"ernment

Foreign &echnology Agreement Foreign $n"estment Promotion -oard 5F$P-6 Foreign $n"estment $mplementation A)thority 5F$$A6 'nhancement of Foreign '=)ity in '(isting Companies $n"estment in /@@A '4;s B 'PCs Foreign $n"estment in &rading companies 4pening of 3iasonB-ranch office Foreign $n"estment in *** ;se of Foreign -rand 2ame #epatriation of Foreign Capital &a(ation

#eforms in Foreign &rade '(change Policy #eforms

Cash Compensatory *cheme 5CC*6 s)spended #eplenishment 3icensing *cheme 5 #ep6 All e(porters entitled to ha"e )niform 5#ep6 of 7@A of 5F4-6 All s)pplementary licenses stand abolished e(cept in case of

*** prod)cers of life sa"ing dr)gs All additional licenses granted to '(port ho)se stand abolished ;nlisted 4.3 stand abolished allowed to import thr) #ep ro)te Ad"ance licensing for imports for e(ports remain open All $mport licensing for capital goods raw materials ha"e been remo"ed grad)ally Financial $nstit)tions ha"e also been allowed to trade '(im scrips &he r)pee was e(pected to f)lly con"ertible on &rade acco)nt in 7 to : years

Fiscal reforms
*implification of ta( policy was anno)nced c)stom d)ty red)ced from //@A in /00/ to

/1?:A in 1@@< '(cise is now le"ied as DA& Corporate ta( was bro)ght down to 7@A $ntrod)ction of F#-M $2 1@@9 state le"el sales ta(es to the DA&

Financial *ector #eforms

8ereg)lation of interest rate 8ereg)lation of credit -anking sector Co-operati"e banks 8e"elopment finance instit)tions 2on- banking financial instit)tions $ns)rance sector Money market Capital market

8ereg)lation of interest rates

-egan in *eptember /00/ Withdrawal of minim)m lending rate in 4ctober

/009 hence gi"ing f)ll freedom to banks to determine lending rates for loans abo"e #s 1 lakh? Foc)s is on soft interest rate regimeE increasing operational efficiency and technological )pgradation?

8ereg)lation of credit
-egan in mid /0F@s intensified in /00@s &o e(pand the pool of lendable reso)rcesE

rationaliGation of priority sector re=)irements and rela(ation of balance sheet restrictions to impro"e the credit deli"ery system?

-anking sector
#ed)ction in *3# and C##E transparent

g)idelines for entry and e(it of p"t? *ector banksE p)blic sector bks ha"e been allowed direct access to capital marketE reg)lated interest ha"e been simplified? &o increase financial "iability of banksE increase a)tonomyE greater entry to pri"ate sector bankingE liberaliGing capital marketsE operational fle(ibility and competition and impro"ing financial health of banks?

Co-operati"e banks
2o significant impro"ement has been obser"ed

in either in stability or efficiency parameters #eform process started m)ch later than the commercial banking sector *tate co-operati"e and district co-operati"e banks inc)rring losses t)rned aro)nd and made some profits?

8e"elopment financial instit)tions

Policy initiati"es relate to a)dit connected

lendingE loans against g)arantees e(tended by banks With a "iew to ha"e an integrated "iew of the operations of financial instit)tions and commercial banks and to pro"ide more comprehensi"e basis for the cond)ct of monetary and credit policies

2on banking financial instit)tions

Pr)dential reg)lations as prescribed for

commercial banks were e(tended to 2-FCs? Penalties for non s)bmission of periodic ret)rns to #-$ as well as cancellation of certficate of registeration of 2-FCs?

2on banking financial instit)tions

Pr)dential reg)lations as prescribed for

commercial banks were e(tended to 2-FCs? Penalties for non s)bmission of periodic ret)rns to #-$ as well as cancellation of certficate of registeration of 2-FCs?

$ns)rance sector
4pening )p of ins)rance b)siness to pri"ate

participation $#8A actE /000 &o deepen ins)rance penetration by enlarging cons)mer choices thro)gh prod)ct inno"ation? F8$ )p to 1<A allowed

Money market reforms

Ceiling of /@A on call money rates imposed by

$-A withdrawn in /0F0 &he 8F+$ was set )p to participate in call money market both as borrower and lender 2ew financial instr)ments s)ch as inter bank participation certificatesE certificate of depositE commercial papers and repos F)ll fledged li=)idity ad!)stment facility was introd)ced on !)ne :E 1@@@ CC$3 was set )p in 1@@1

Capital market
Co?swere gi"en freedom to price their iss)es

)nder capital iss)es control act /09> 'lectronic trading system A8#s and .8#s and 'C-s F$$s in capital market

P)blic sector reforms

4b!ecti"es of p)blic sector

/?'ns)re rapid economic growth ind)strialiGation of the co)ntry 1?'arn ret)rn on in"estment 7?promote redistrib)tion of income and wealth 9?to create employment opport)nities :?balanced regional de"elopment <?de"? 4f small scale and ancillary ind)stries >?sa"e and earn foreign e(change for economy

Policy initiati"es5p)blic sector6

#estr)ct)ring $ncrease in a)tonomy and performance

acco)ntability Changes in management in specific enterprise &echnological )p gradation 8isin"estment and pri"atiGation

Policy initiati"es5p)blic sector6

#estr)ct)ring $ncrease in a)tonomy and performance

acco)ntability Changes in management in specific enterprise &echnological )p gradation 8isin"estment and pri"atiGation

*ocial sector

Agriculture

Partial decontrol of fertiliGer prices #emo"al of bottlenecks in agric)lt)ral marketing #ela(ation of restrictions )nder the essential

commodities actE /0:: $ntrod)ction of forward trading in important commercial crops #eplacement of the re"amped p)blic distrib)tion system with targeted p)blic distrib)tion system 'stablishment of r)ral infrastr)ct)re de"elopment f)nd #eplacement of =)antitati"e control tariff

Po"erty
2ational food for work programme #)ral employment generation programme Hai prakash roGgar g)arantee yo!ana Hawahar gram samridhi yo!na *warna !ayanti gram swaro!gar yo!ana 2ational social assistance programme 'mployment ass)rance scheme Pradhan mantri gramodaya yo!ana

;nemployment
2ational r)ral employment programme #)ral landless employment g)arantee programme *cheme of training r)ral yo)th for self-employment Hawahar ro!gar yo!na A faster and geographically di"ersified growth of

agric)lt)re 8e"elopment of infrastr)ct)re and marketing Arrangements for agro-based acti"ities .reater attention to the needs of the small mfg sector as a ma!or so)rce of ind)strial growth #e"amping of training systems to introd)ce greater fle(ibility to labo)r market trends

concl)sion
Ascended a higher growth path so far $ndians ha"e fo)nd a new le"el of self-

confidence as respect for india has increased? Miles to go b)tIsecond generation of reforms m)st foc)s on a similar empowerment of p)blic sector ? We are in the midst of economic reforms and need to mo"e to the ne(t le"el of s)stained growth?

#eferences
2ew $ndian 'conomy

#eforms-K?3? .)ptaE

+ar"inder Ka)r $ndian Financial *ector- 2iti -hasin $ndiaJs 'conomic #eforms % Di!ay HoshiE $?M?8? 3ittle $mpact of #eform process on $ndian 'conomy8r? -abita Agrawal $ndian 'conomy- 8att *)ndaram #eser"e bank of $ndia -)lletine-1@@<