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30 Years of Economic Reforms - Coggle Diagram
30 Years of Economic Reforms
Pre-liberalization Economic Policy
Protectionism
License Raj
Background
Balance of Payment Crisis
Long pending economic reforms
New Economic Policy 1991
Steps undertaken
Privatization
Reserved sector for public eg. mining , atomic energy
Disinvestment in PSUs
Globalization
Lift of import restrictions for capital goods
Rupee made partially convertible
Long term trade policy
Limit for foreign capital investment to 100% from 40%
Reduction in tariffs
Liberalization
Raising of investment limits to 1 Cr for SSIs
freedom to import capital goods like machinery and raw materials
Freedom for banks to determine interest rates
Abolition of restrictive trade practices under MRTP
Industrial licensing and registration were removed
Objectives
Making economy more market and service-oriented
Expanding role of private and foreign investment
Success of the reforms
Stagnant sectors got liberalized
RBI and Govt relations have been redefined
India became Startup capital of the world
Private companies became big employers
Tariff got reduced facilitating import and multilateral trade.
Fiscal Deficit reduced to 4% from then 8%
State became facilitator & neutral regulator
Foreign investment increased 316.9%
India’s GDP grew from $266 billion in 1991 to $2.3 trillion in 2018
Shortcomings of the reforms
Import dependence for almost everything
Share of manufacturing in the GDP has largely remained stagnant
Self sufficiency got compromised
Inequality has sustained
It failed to provide secure jobs to the masses
State became redundant agency
Challenges in 2021
Fall in aggregate demand
Liberalization 2.0 needed
Collapse in production
Pandemic-induced lockdown has brought big slowdown
Permission raj persists
Conclusion
Need for reforms in political economy
Human development needs focus
State-led industrialization holds importance