Chapter 9 ECONOMIC POLICY OF INDIA SINCE 1991
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The economic policy of India since 1991 refers to a significant shift in the country's approach to economic management and development. Prior to 1991, India followed a mixed economy model with heavy government intervention and regulation in various sectors.
However, faced with
a severe balance of payments crisis, India embarked on a series of economic
reforms aimed at liberalizing its economy and integrating it more fully into
the global marketplace. Here are some key elements of India's economic policy since
1991:
1. Liberalization: The Indian
government began dismantling the License Raj, which was a complex system of
licenses, permits, and regulations that restricted the private sector. This
involved reducing industrial licensing requirements and allowing greater
freedom for businesses to operate.
2. Privatization: There was a
push towards privatizing state-owned enterprises to improve efficiency and
reduce the burden on the government. This included disinvestment of shares in
public sector companies and opening up certain sectors to private investment.
3. Globalization: India adopted a more open
approach to trade and investment, reducing tariffs and import quotas to
encourage foreign trade and attract foreign investment. This included
participating in international trade agreements and liberalizing foreign direct
investment (FDI) rules.
4. Deregulation: The government eased
regulations in various sectors to promote competition and innovation. This
included reforms in the financial sector, telecommunications, and
infrastructure development.
5. Fiscal Reforms: Efforts were made to
rationalize taxation, streamline public expenditure, and reduce fiscal
deficits. This involved reforms in tax administration, introduction of
value-added tax (VAT), and fiscal discipline measures.
6. Financial Sector Reforms: There were significant
reforms in the banking and financial sector, including the establishment of new
private banks, liberalization of interest rates, and strengthening of
regulatory institutions like the Reserve Bank of India (RBI).
7. Infrastructure Development: There was an emphasis on
developing infrastructure to support economic growth, including investments in
transportation, energy, and telecommunications.
Overall, these reforms aimed to unleash the potential of India's economy by fostering competition, attracting investment, and integrating it into the global economy. While they have led to significant economic growth and development in certain sectors, there have also been challenges and criticisms, including concerns about inequality, environmental degradation, and the pace of reforms.