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In the 1980s, the Indian economy suffered from ______ management, which ultimately contributed to a financial crisis.
In the 1980s, the Indian economy suffered from ______ management, which ultimately contributed to a financial crisis.
inefficient
When the government spends more than it earns, it often ______ to cover the difference, both from domestic and international sources.
When the government spends more than it earns, it often ______ to cover the difference, both from domestic and international sources.
borrows
A key problem was that development policies required the government to overshoot its revenue to tackle issues like unemployment and ______.
A key problem was that development policies required the government to overshoot its revenue to tackle issues like unemployment and ______.
poverty
The government's continued investment in social sectors and defence, which do not yield immediate returns, necessitated a highly ______ use of remaining revenue.
The government's continued investment in social sectors and defence, which do not yield immediate returns, necessitated a highly ______ use of remaining revenue.
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India's foreign exchange reserves dropped so low that they could only finance imports for about ______ weeks.
India's foreign exchange reserves dropped so low that they could only finance imports for about ______ weeks.
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Adding to the crisis, India lacked enough foreign exchange to pay the ______ owed to international lenders.
Adding to the crisis, India lacked enough foreign exchange to pay the ______ owed to international lenders.
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Facing a severe financial crisis, India turned to the World Bank (IBRD) and the ______ for a loan.
Facing a severe financial crisis, India turned to the World Bank (IBRD) and the ______ for a loan.
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To alleviate the crisis, India received a loan of $______ billion from the World Bank and the IMF.
To alleviate the crisis, India received a loan of $______ billion from the World Bank and the IMF.
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[Blank] of the public sector enterprises involves selling off a portion of the equity of Public Sector Enterprises (PSEs) to the public.
[Blank] of the public sector enterprises involves selling off a portion of the equity of Public Sector Enterprises (PSEs) to the public.
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The removal of ______ is intended to enhance the competitive positioning of Indian products within the international markets.
The removal of ______ is intended to enhance the competitive positioning of Indian products within the international markets.
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[Blank] refers to the transfer of ownership or management control from a government-owned enterprise to private entities.
[Blank] refers to the transfer of ownership or management control from a government-owned enterprise to private entities.
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The government identifies Public Sector Enterprises (PSEs) and designates them as maharatnas, navratnas, and miniratnas to enhance efficiency and foster competitiveness within the ______ global environment.
The government identifies Public Sector Enterprises (PSEs) and designates them as maharatnas, navratnas, and miniratnas to enhance efficiency and foster competitiveness within the ______ global environment.
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Granting greater operational, financial, and managerial ______ to profit-making enterprises, known as miniratnas, empowers them to make essential decisions, enhancing their efficiency and profitability.
Granting greater operational, financial, and managerial ______ to profit-making enterprises, known as miniratnas, empowers them to make essential decisions, enhancing their efficiency and profitability.
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According to the government, the primary goal of selling equity in Public Sector Enterprises (PSEs) is to improve financial discipline and facilitate ______.
According to the government, the primary goal of selling equity in Public Sector Enterprises (PSEs) is to improve financial discipline and facilitate ______.
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To improve efficiency and encourage competition, the government categorizes Public Sector Enterprises (PSEs) into maharatnas, navratnas, and ______.
To improve efficiency and encourage competition, the government categorizes Public Sector Enterprises (PSEs) into maharatnas, navratnas, and ______.
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It was anticipated that private capital and managerial skills could be efficiently used to improve the performance of the ______.
It was anticipated that private capital and managerial skills could be efficiently used to improve the performance of the ______.
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[Blank] is the outcome of policies aimed at transforming the world towards greater interdependence and integration.
[Blank] is the outcome of policies aimed at transforming the world towards greater interdependence and integration.
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The process of hiring regular services from external sources, often in other countries, that were previously provided internally is known as ______.
The process of hiring regular services from external sources, often in other countries, that were previously provided internally is known as ______.
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The growth of fast modes of communication, particularly ______, has intensified outsourcing as an economic activity.
The growth of fast modes of communication, particularly ______, has intensified outsourcing as an economic activity.
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Voice-based business processes, also known as ______, are a common type of service that is often outsourced to countries like India.
Voice-based business processes, also known as ______, are a common type of service that is often outsourced to countries like India.
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The digitization and real-time transmission of text, voice, and visual data across continents are enabled by modern ______ links.
The digitization and real-time transmission of text, voice, and visual data across continents are enabled by modern ______ links.
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ONGC Videsh, a subsidiary of the Indian public sector enterprise, is involved in ______ and production projects in 16 countries.
ONGC Videsh, a subsidiary of the Indian public sector enterprise, is involved in ______ and production projects in 16 countries.
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[Blank], established in 1907, is among the top ten global steel companies, operating in 26 countries and selling products in 50 countries.
[Blank], established in 1907, is among the top ten global steel companies, operating in 26 countries and selling products in 50 countries.
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Companies like Dr Reddy's Laboratories, initially a small supplier to Indian firms, now have manufacturing plants and ______ centres across the world.
Companies like Dr Reddy's Laboratories, initially a small supplier to Indian firms, now have manufacturing plants and ______ centres across the world.
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Foreign investment includes Foreign Direct Investment (FDI) and Foreign ______ Investment (FII).
Foreign investment includes Foreign Direct Investment (FDI) and Foreign ______ Investment (FII).
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India's foreign exchange reserves increased from approximately US $6 billion in 1990-91 to about US $413 billion in ______.
India's foreign exchange reserves increased from approximately US $6 billion in 1990-91 to about US $413 billion in ______.
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Since 1991, India has emerged as a successful exporter of auto parts, pharmaceutical goods, engineering goods, IT software, and ______.
Since 1991, India has emerged as a successful exporter of auto parts, pharmaceutical goods, engineering goods, IT software, and ______.
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The increase in foreign investment indicates a significant change from approximately US $100 million in 1990-91 to US $30 ______ in 2017-18.
The increase in foreign investment indicates a significant change from approximately US $100 million in 1990-91 to US $30 ______ in 2017-18.
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The reduction in subsidy on materials like seeds and fertilizers led to an increase in Mahadeva's cost of ______.
The reduction in subsidy on materials like seeds and fertilizers led to an increase in Mahadeva's cost of ______.
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The flooding of local markets with cheap imported edible oils resulted from the removal of restrictions on ______.
The flooding of local markets with cheap imported edible oils resulted from the removal of restrictions on ______.
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The reforms have faced criticism for not adequately addressing fundamental economic challenges, particularly in areas like employment and ______ development.
The reforms have faced criticism for not adequately addressing fundamental economic challenges, particularly in areas like employment and ______ development.
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Mahadeva, a farmer in Andhra Pradesh, faced challenges due to crop disease and reduced research and extension work, exacerbated by lower government ______.
Mahadeva, a farmer in Andhra Pradesh, faced challenges due to crop disease and reduced research and extension work, exacerbated by lower government ______.
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Even though India eliminated all quota restrictions on textile and clothing exports, the ______ has not removed quota restrictions on textile imports from India and China.
Even though India eliminated all quota restrictions on textile and clothing exports, the ______ has not removed quota restrictions on textile imports from India and China.
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Each year, the government sets a ______ for disinvestment of Public Sector Enterprises (PSEs).
Each year, the government sets a ______ for disinvestment of Public Sector Enterprises (PSEs).
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Critics claim that the assets of PSEs have been ______ during disinvestment, resulting in financial losses for the government.
Critics claim that the assets of PSEs have been ______ during disinvestment, resulting in financial losses for the government.
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Instead of reinvesting in PSE development, the funds from disinvestment are often used to compensate for shortages in government ______.
Instead of reinvesting in PSE development, the funds from disinvestment are often used to compensate for shortages in government ______.
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Economic reforms have placed limitations on the expansion of public expenditure, especially in the ______ sectors.
Economic reforms have placed limitations on the expansion of public expenditure, especially in the ______ sectors.
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Tax reductions implemented during the reform period, aimed at increasing revenue, have not led to a corresponding rise in government tax ______.
Tax reductions implemented during the reform period, aimed at increasing revenue, have not led to a corresponding rise in government tax ______.
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Reform policies that involve tariff reduction have limited the potential for increasing revenue through custom ______.
Reform policies that involve tariff reduction have limited the potential for increasing revenue through custom ______.
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In an effort to attract foreign investment, governments offer tax ______ to foreign investors, which further reduces the potential for tax revenue collection.
In an effort to attract foreign investment, governments offer tax ______ to foreign investors, which further reduces the potential for tax revenue collection.
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The decline in public investment, coupled with ineffective reforms, has particularly hampered the progress of the ______ sector.
The decline in public investment, coupled with ineffective reforms, has particularly hampered the progress of the ______ sector.
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The slowdown in the industrial sector's expansion can be attributed to the influx of more affordable ______ and decreased investment.
The slowdown in the industrial sector's expansion can be attributed to the influx of more affordable ______ and decreased investment.
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The Reserve Bank of India (RBI) transitioned from a ______ to a facilitator of the financial sector, adapting to evolving economic needs.
The Reserve Bank of India (RBI) transitioned from a ______ to a facilitator of the financial sector, adapting to evolving economic needs.
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[Blank] of the rupee can impact trade balances; it is a deliberate downward adjustment to the value of a country's currency relative to another currency.
[Blank] of the rupee can impact trade balances; it is a deliberate downward adjustment to the value of a country's currency relative to another currency.
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While tariffs are taxes on imports, ______ barriers include quotas, embargoes, and other restrictions that limit the quantity of goods that can be imported.
While tariffs are taxes on imports, ______ barriers include quotas, embargoes, and other restrictions that limit the quantity of goods that can be imported.
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[Blank] restrictions are quantity limits on the amount of goods that can be imported into a country.
[Blank] restrictions are quantity limits on the amount of goods that can be imported into a country.
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[Blank] is a practice where companies assign specific tasks to third parties who are often located overseas to leverage cost advantages. Developed countries sometimes oppose it due to concerns over job displacement.
[Blank] is a practice where companies assign specific tasks to third parties who are often located overseas to leverage cost advantages. Developed countries sometimes oppose it due to concerns over job displacement.
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The high growth of the ______ sector is largely attributed to factors such as technological advancements, increasing disposable incomes, and policy support.
The high growth of the ______ sector is largely attributed to factors such as technological advancements, increasing disposable incomes, and policy support.
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Flashcards
Inefficient Management
Inefficient Management
Poor handling of the Indian economy during the 1980s.
Government Borrowing
Government Borrowing
When government loans money to cover expenses.
Revenue Deficit
Revenue Deficit
When government expenditure exceeds its income.
Foreign Exchange Reserves
Foreign Exchange Reserves
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High Imports Growth
High Imports Growth
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International Monetary Fund (IMF)
International Monetary Fund (IMF)
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World Bank
World Bank
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Consumption Spending
Consumption Spending
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Export Duties
Export Duties
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Privatisation
Privatisation
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Disinvestment
Disinvestment
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Navratnas
Navratnas
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Miniratnas
Miniratnas
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Maharatanas
Maharatanas
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Nationalised Bank
Nationalised Bank
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Globalisation
Globalisation
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Outsourcing
Outsourcing
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BPO
BPO
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Information Technology (IT)
Information Technology (IT)
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ONGC Videsh
ONGC Videsh
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Tata Steel
Tata Steel
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HCL Technologies
HCL Technologies
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Dr Reddy's Laboratories
Dr Reddy's Laboratories
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Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI)
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Foreign Institutional Investment (FII)
Foreign Institutional Investment (FII)
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Economic Reforms
Economic Reforms
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Groundnut in Andhra Pradesh
Groundnut in Andhra Pradesh
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Impact of Subsidies
Impact of Subsidies
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Problems from Imports
Problems from Imports
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Crop Diseases
Crop Diseases
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PSEs
PSEs
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Quota Restrictions
Quota Restrictions
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Tax Incentives
Tax Incentives
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Welfare Expenditures
Welfare Expenditures
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Power Sector Reforms
Power Sector Reforms
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Decline in Public Investment
Decline in Public Investment
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Industrial Sector Growth Slowdown
Industrial Sector Growth Slowdown
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WTO Membership Importance
WTO Membership Importance
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RBI's Role Change
RBI's Role Change
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Devaluation of Rupee
Devaluation of Rupee
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Tariffs
Tariffs
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Navaratna Policy
Navaratna Policy
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Study Notes
Unit II: Economic Reforms Since 1991
- India achieved a strong industrial base and self-sufficiency in food grain production after 40 years of planned development.
- However, a significant portion of the population relies on agriculture for their livelihood.
- A 1991 balance of payments crisis triggered economic reforms in India.
- This unit analyzes the reform process and its influence on India.
Liberalisation, Privatisation and Globalisation: An Appraisal
- Students will learn about the background of 1991 reforms in India.
- Students will understand the mechanisms behind the introduction of reform policies.
- Students will understand the process of globalization and its impact on India
- The influence of the reform process on various sectors will also be explored.
Introduction
- Economic development isn't solely measured by GDP.
- India's mixed economy model (combining capitalist and socialist systems) has been the subject of debate regarding its effectiveness.
- Critics argue that the rules and laws regulating the economy hindered growth and development. Others support the policy's role in achieving growth in savings and developing a diversified industrial sector, securing food security through agricultural expansion.
- India faced an economic crisis in 1991, partly due to an inability to repay its debt and low foreign exchange reserves.
- Rising costs of essential goods also contributed to the crisis.
Background
- The inefficient management of India's economy during the 1980s is a significant factor leading to the financial crisis.
- Government expenditures often exceeded income, leading to borrowing from banks and international institutions.
- Imports, particularly petroleum, put a strain on foreign exchange reserves.
- The government needed to meet increasing challenges, including unemployment and poverty in order to justify the expenditure without additional revenue.
Liberalisation
- The policies removed restrictions on economic activities and opened the economy to various sectors.
- The 1980’s policies included industrial licensing restrictions, export-import regulations, fiscal policies and foreign investment policies.
- The reforms introduced in 1991 were comprehensive.
- Industries like alcohol, cigarettes, and hazardous chemicals were removed from the reserved sector for the public.
- Some sectors, particularly those for atomic energy and railway transport, remained under public sector control.
Privatisation
- Privatisation involves transferring ownership and management of government-owned enterprises to private entities.
- This can occur through disinvestment, selling a portion of company equity, or a complete withdrawal of government presence.
- The purpose of privatisation is, according to the government, improving financial discipline and encouraging modernizations.
- Government enterprises, such as Navratnas and Maharatnas, are given more freedom to manage their operations.
Globalization
- Globalisation is the integration of a country's economy with the world economy. This includes economic, social, and geographical interactions.
- The increased interdependence and integration of economies among countries were the outcome of policies aimed at global integration.
- Outsourcing has increased due to the growth of communication technology, particularly the growth of Information Technology (IT).
- The rise of outsourcing involves businesses handing over certain services like call centers, record keeping, etc., to other countries.
Tax Reforms
- Tax reforms encompass adjustments to the government's taxation and public spending policies, typically referred to as fiscal policies.
- Direct taxes such as those levied on individuals and business enterprises, and indirect taxes on goods have been adjusted since 1991.
- Tax rates on individual incomes have been reduced.
- Corporate tax rates have also been reduced.
Trade and Investment Policy Reforms
- These reforms aimed to enhance international competitiveness of India's industrial production, encourage foreign investment, improve business efficiency, and increase domestic production.
- Quantitative restrictions were removed to facilitate a common national market.
- The liberalization of the trade and investment policy was aimed at attracting foreign investment and technology transfers.
Reforms in Agriculture and Industries
- Agricultural growth rates did not increase significantly after 1991.
- The reforms negatively impacted the agricultural sector, especially smaller farmers, due to export-oriented policies prioritizing cash crops over food grains, and reduced subsidies.
- Industrial growth has also slowed down due to a decreased demand for industrial products and the accessibility of cheaper imports from other countries.
Disinvestment
- The government aimed to achieve disinvestment of public sector companies to generate revenue.
- The target was to increase funds raised through disinvestment each year.
- Critics question whether the proceeds from disinvestment effectively supported the development of PSUs rather than offsetting revenue shortfalls.
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Description
This quiz explores the factors leading to India's 1991 economic crisis, including fiscal mismanagement, government spending, and low foreign exchange reserves. It covers India's reliance on loans from the World Bank and IMF to address the crisis and the reforms that followed.
