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Questions and Answers
What was one of the key objectives of the 'New Industrial Policy' announced in 1991?
What was one of the key objectives of the 'New Industrial Policy' announced in 1991?
What was the outcome of the 'License Raj' after the announcement of the 'New Industrial Policy'?
What was the outcome of the 'License Raj' after the announcement of the 'New Industrial Policy'?
What was the impact of the monetary and financial sector reforms on the banking sector?
What was the impact of the monetary and financial sector reforms on the banking sector?
What was the outcome of the trade policy reforms?
What was the outcome of the trade policy reforms?
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What was the role of SEBI in the capital markets reforms?
What was the role of SEBI in the capital markets reforms?
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What was the impact of the reforms on the public sector?
What was the impact of the reforms on the public sector?
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What was the outcome of the reforms on foreign investments?
What was the outcome of the reforms on foreign investments?
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What was the objective of the prudential norms of accounting?
What was the objective of the prudential norms of accounting?
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What was the impact of the reforms on the small scale sector?
What was the impact of the reforms on the small scale sector?
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What was the impact of the reforms on the rupee?
What was the impact of the reforms on the rupee?
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Study Notes
Economic Reforms in India
- 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 Reforms
- 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.
Monetary and Financial Sector Reforms
- The reforms aimed to make the financial system more efficient and transparent.
- Measures included:
- Interest rate liberalization.
- Reduction in controls on banks by the Reserve Bank of India.
- Facilitating greater competition in the banking sector through private participation and foreign competition.
- Reduction in reserve requirements.
- Liberalization of bank branch licensing policy.
- Establishing prudential norms of accounting.
Capital Markets Reforms
- The reforms granted statutory recognition to the Securities and Exchange Board of India (SEBI) to facilitate mobilization of adequate resources and their efficient allocation.
Industrial Policy Reforms
- 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.
Trade Policy Reforms
- 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.
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Description
This quiz tests your knowledge on economic policy reforms, including stabilization measures and structural reform measures aimed at addressing inflation and improving productivity.
