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Economic Reforms Essay

962 Words4 Pages

The process of economic reforms was started by the government of in 1991 for taking the country out of economic difficulty and speeding up the development of the country. The centre of economic reforms has been the liberalization, privatization and globalization.
The Indian government has introduced many economic reforms in India since 1991.During 1990-1991, India had to face various economic problems. There was a massive deficiency which was increasing day by day. Since1978-88 till 1990-91 it was increasing in such a rapid scale that by the end of 1990-91 the amount of deficit balance becomes 10,644 crores. At the same time foreign exchange stock was also decreasing. In 1990-91 India had taken huge loan from IMF this lead also increase in …show more content…

To liberalize the industrial policy of the government and to invite foreign by privitsation of industries and abolishing the license system
2. Automatic approval for foreign direct investment (FDI) was introduced for many industrial sectors, by FDI India aimed at decreasing the inflation rate.
3. To decrease the value of money in terms of dollar.
4. To reform the banking system and tax structure of economy.
5. To encourage the private sector to take part in large investment.
6. To make the export-import policy more liberal.
The main objective of new fiscal policy was to establish economic structural adjustments at first stage and then to establish market economy by removing controls and restrictions on it.
The two phases were:-
1. The stabilization phase where all government expenditures were reduced and banks are restricted on giving credit.
2. The second phase was the structural adjustment phase where the production of exportable goods and the alternative of import goods are increased and at the same time reducing government interventions.
LIBERALIZATION, PRIVATISATION& GLOBALIZATION
1. LIBERALIZATION:-
Liberalization aims at removing the license raj system so that there is less government interventions so that business can be run more …show more content…

The role of financial sector in shaping fortunes for Indian economy has been more critical. Financial sector contribution comes across even more strong if we look at number of employment and tax revenue it generates. Especially employment generated by banking sector and insurance sector every year runs in millions. India Commercial banking system in 1991 had many of the problems typical of unreformed banking system in many developing countries. There was extensive financial repression, reflected in detailed controls on interest rates. The system was also dominated by public sector banks, which accounted for 90 per cent of total banking sector assets. The system suffered from inadequate prudential’s regulations, and non transparent accounting practices. Supervision but the reserve bank of India (RBI) was also weak. The banks were nationalized because of the perception that it was necessary to impose social control over banking to give it a developmental thrust, with a special emphasis on extending banks in rural

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