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Economic Reform In India

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After the set back of early nineties when the Government of India had to pledge the gold to acquire foreign currency to meet the severe problem of balance of payment temporarily, the Government planned to liberalize the Indian economy and open its door to the foreigners to speed up the development process as a long-term solution for the ailing economy and is attempting to transform itself into one of the fastest growing emerging economies of the world. The policy framework relating to industry, trade and investment has undergone significant changes since July 1991. These aim at effecting structural changes to achieve greater efficiency in domestic production and bring about integration of the Indian economy with the rest of the world. The underlying …show more content…

The path of reforms was phased, difficult, and not without risk and challenge. Nevertheless, RBI pursued the reform process relentlessly. The seed of the reforms in India were sown by the Narasimham Committee appointed by the RBI under the chairmanship of M. Narasimham, the former Governor of RBI, to examine all aspects relating to the structure, organization, functions and procedures of the financial system and suggest remedial measures. The Committee submitted its reports in November 1991 and thus, began a new chapter in Indian …show more content…

It aimed at providing a diversified, efficient and competitive financial system with ultimate objective of improving the allocative efficiency of available resources, increasing the return on investments in promoting an accelerated growth of the economy. The specific goals of the reforms were development of transparent and efficient capital and money markets, promotion of competition through free entry/exit in financial sector, improvement in access of financial savings, improvement of financial health of banks by recapitalizing and restructuring etc. of weaker banks, improvement in the level of managerial competence and quality of human resources, building up financial institutions and infrastructure relating to supervision, audit, technology and legal framework, and correction and improvement of the macro-economic setting in which the bank operates, involving rationalization of interest rates, redesigning of directed credit programmes and reduction in levels of resource pre-emptions.
The financial sector reforms touched a number of areas such as introduction of capital adequacy norms, prudential norms relating to income recognition, classification and provisioning of assets, transparent accounting policy, setting up of a strong supervisory and surveillance mechanism

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