Indian Economy 1991

 27. What were the main components of the economic reforms made in the Indian economy in 1991?  What objectives did it try to achieve?  Examine how successful they were in meeting those objectives.


 Approach:


 • Introduce the economic reforms of 1991 outlining the conditions necessary for them.

 • Describe its main components

 • Describe the objectives these reforms sought to achieve.

 • Conclude by evaluating the success of these reforms in achieving the specified objectives.

 Answer:

 In the 1990s, India had to borrow from the International Monetary Fund (IMF) due to a balance of payments crisis.  Significant reform initiatives were adopted by the Government of India in 1991 to comply with some IMF conditions.

Ingredient :

 The reform strategy had three main

 components:

 Liberalization: It aims to end the 'License Raj' and reduce unnecessary state controls by giving more freedom to entrepreneurs.  For this, several important initiatives were launched, such as de-reservation of industries reserved for the public sector only, abolition of industrial licences, freedom of production according to demand etc.

 Privatization: It increased private control in public enterprises through disinvestment and industrial units and began to reduce the share of the government.

 Globalization : It was the result of the above two measures as it liberalized the external sectors through partial convertibility of the rupee, liberalized imports and opening the economy to foreign capital.

 Objective:

 • Its primary objective was to open the Indian economy to global transactions (trade) and make it market oriented.

 • Along with this, it aims to boost the slow and single digit growth rate of the Indian economy and build strong foreign reserves.

 • This strategy focuses on achieving economic stability and removing all unnecessary market restrictions and state controls.

 • It also allows unrestricted international flow of goods, services, capital, human resources and technology.

 • He reduced the number of reserved sectors to 3 and encouraged the private sector to boost the economy.

Evaluation:

 • Reforms related to the expansion of the services sector were supported by liberalized investment and trade regimes.  This increased the choices available to the consumer and significantly reduced poverty.

 • Since 1991, the share of services in GDP has increased by 20 percent, representing a decisive change in the nature of India's economic output.  Excluding agriculture, the average growth rate has been consistently high since 1991.

 • Increased entrepreneurship led to increased infrastructural development.  While India is one of the most attractive destinations for FDI, the country has established itself as a very fast growing country.  Foreign exchange reserves (which were at their lowest level in 1991) have increased steadily.

 • However, India's performance in the two largest employment generating sectors – manufacturing and agriculture has not been satisfactory.  is  Therefore, now is the right time for India to redefine the economic agenda and initiate the next generation of reforms or 'Reforms 2.0'.


 The 1991 reforms are not the only event.  In fact, administrative and governance reforms should be initiated along with economic reforms to achieve the goals of inclusive and sustainable development.  Overall, these reforms have inspired India to pursue its own unique path of development, for which progress is still being made.


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