Economic Policy Reforms

Questions and Answers

To promote growth of a more efficient and competitive industrial economy (correct)

To increase the role of the public sector in the economy

To restrict foreign investments in the country

To impose licensing restrictions on all industries

Licensing restrictions were removed for all industries except 18 (correct)

Licensing restrictions were removed for all industries

Licensing restrictions were imposed on all industries

Licensing restrictions were tightened for all industries

There was a reduction in reserve requirements and liberalization of bank branch licensing policy (correct)

There was a reduction in competition in the banking sector

There was a restriction on private participation and foreign competition

There was an increase in controls on banks by the Reserve Bank of India

Licensing for imports was removed and quantitative restrictions were dismantled Signup and view all the answers

To facilitate mobilization of adequate resources and their efficient allocation Signup and view all the answers

The number of industries reserved for the public sector was reduced Signup and view all the answers

Foreign investments were liberalized Signup and view all the answers

To establish norms for classification of assets, disclosure of income and provisions for bad debt Signup and view all the answers

The number of industries reserved for the small scale sector was reduced Signup and view all the answers

The rupee was devalued Signup and view all the answers

Study Notes

The economic reforms in India aimed to shift from central direction to market orientation.
The reforms were classified into two types:
- Stabilization measures: short-term measures to address inflation and adverse balance of payment.
- Structural reform measures: long-term measures to bring in productivity and competitiveness by removing structural rigidities in different sectors of the economy.

Fiscal discipline was vital to address the crisis caused by excess domestic demand, surge in imports, and widening current account deficit (CAD).
Measures to augment revenues and curtail government expenditure included:
- Introduction of a stable and transparent tax structure.
- Ensuring better tax compliance.
- Curtailing government expenditure.
- Reduction and abolition of unnecessary subsidies.
- Disinvestment of part of government's equity holdings in select public sector undertakings.
- Encouraging private sector participation.
The government entered into an agreement with the Reserve Bank in 1994 to bring down fiscal deficit to nil by 1997-98.

The reforms granted statutory recognition to the Securities and Exchange Board of India (SEBI) to facilitate mobilization of adequate resources and their efficient allocation.

The 'New Industrial Policy' announced in 1991 aimed to substantially deregulate industry to promote growth of a more efficient and competitive industrial economy.
Measures included:
- Removing licensing restrictions for all industries except 18 on strategic considerations.
- Reducing the number of industries reserved for the public sector and the small scale sector.
- Restructuring policies related to merger, amalgamation, and takeover under the MRTP act.
- Devaluation of rupee.
- Liberalization of foreign investments.
- Disinvestment of government holdings of equity share capital of public sector enterprises.

The reforms included:
- Liberalization of external trade.
- Removal of licensing for imports.
- Dismantling of quantitative restrictions on imports and exports.
- Phased reduction and simplification of tariffs.