Professional Documents
Culture Documents
Indian Trade Liberalisation
Indian Trade Liberalisation
PRESENTED BY GROUP 7
1980s, suggests that the root cause of the crisis was the large and growing fiscal imbalance. Large fiscal deficits emerged as a result of mounting government expenditures, particularly during the second half of the 80s. These fiscal deficits led to high levels of borrowing by the government from the Reserve Bank of India (RBI),IMF,World Bank.
Over the 1980s, government expenditure in India grew at a phenomenal rate, faster than what government earns as a revenues. The subsidies grew at a rate faster than government expenditures.
Expenditure on subsidies rose from Rs.19.1 billion in 1980-81 to Rs. 107.2 billion in 1990-91. Although, a large part of the problem concerning external imbalances in India could be attributed to extraneous developments, such as two oil-shocks during the last decade.
The Indian economy was indeed in deep trouble. Lack of foreign reserves . Gold reserve was empty. Before 1991, India was a closed economy. The government was close to default and its foreign exchange reserves had reduced to the point that India could barely finance three weeks worth of imports. The Government of India headed by Chandra Shekhar decided to usher in several reforms that are collectively termed as liberalisation in the Indian media with Man Mohan Singh whom he appointed as a special economical advisor.
License Raj was the regulations that were required to set up business in India between 1947-1990. where all aspects of the economy are controlled by the state and licenses were given to a select few. The License Raj is considered to have been dismantled in 1990. Ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors India still ranks in the bottom quartile of developing nations in terms of the ease of doing business compared to China.
The reforms brought changes in three broad areas, collectively known as liberalization, privatization and globalization. Liberalization did away with regulatory hurdles and minimized licensing requirements. Privatization reduced the role of the state and public sector in business. Globalization made it easier for the MNCs to operate in India. This policy was later continued by Prime minister P. V. Narasimha Rao, and he was fully supported by his finance minister Manmohan Singh and other officials such as C. Rangarajan, Montek Singh Ahluwalia, Shankar Acharya and Y. Venugopal Reddy.
CH ALLE NG ES ahead
1. Governance Need for elimination of large number of Rules & Regulations in the books Sharply reducing the number of implementing agencies Moving towards single window clearance (traders to submit regulatory
documents at a single location and/or single entity. Such documents are typically customs declarations, applications for import/export permits, and other supporting documents such as certificates of origin and trading invoices).
2.
Infrastructure: A Challenge and an opportunity Investments required upto 2012 US$ 334 billion Power Generation - US$ 143 billion Power Transmission & Distribution US$ 116 billion Roads US$ 40 billion Ports US$ 20 billion Railways US$ 15 billion
BRIC Study of Goldman Sachs (2003) predicts that: INDIA WILL EXCEED Frances GDP in 2020 Germanys in 2025 Japans in 2035 TO BECOME THE 3RD LARGEST ECONOMY IN THE WORLD BY 2050
8.2 6.1
in per cent
2003-04
50
2.2
0 1990-91
17.0
1995-96 2001-02 2002-03 2003-04
15,872
5,138 103
1990-91 1994-95
5,385
6,789
8,152 5,639
1997-98
2000-01
2001-02
2002-03
2003-04
150 110 50
in per cent
42
38.5
30
25
20
18.1
23.1
25.5
26.9
30.3
28.9
31.6
32
in per cent
19992000
India is looking for investment in infrastructure, packaging and marketing. India - One of the largest food producers of the world The Indian scientific and research talent had boomed up after liberalization because of various MNC are investing big money in R&D.
AUTO & AUTO COMPONENTS AFTER LIBERALISATION 2nd largest small car market in the world. Largest motorcycle manufacturer in the world. 2nd largest scooter and tractor manufacturer in the world. Many international auto majors are manufacturing in India Daimler Chrysler, General Motors, Toyota, Ford, Honda, Hyundai, Volkswagen, Suzuki etc Most of them are also outsourcing their components from India as a hub.
1,263,764 671,928
14.33 368
1991-92
17.82
23.82
Exports (in '000 tonnes) 36.19 6000 33.67 29.7 5200 5000 4506 4000
3000 2000 1000 0
1994-95
1998-99
2000-01
2002-03
2003-04 (Provisional)
RESE ARCH & D EVEL OPME NT f acili ties afte r l ib eraliza tio n
More than 100 global companies outsource R&D facilities from India GE John F Welch Technology Centre Companys largest research outfit outside the US GE Medical Systems India as sole sourcing base for its portable ultrasound scanner Monsanto First non-US research facility Eli Lilly largest research facility in Asia and 3rd largest in the world Texas Instruments Digital Signal Processor developed in India controls 50% of the world market AVL, Austria India as base to do R&D for the company.
Se veral Wor ld l eader s h ave investe d Busin ess P rocesses & In dustr y i n In dia a ft er l ib eraliza tio n General British American Electric Airways Express Citibank McKinsey Accenture Microsoft Dell Sun Microsystems Pfizer Cummins Intel Oracle CISCO Dupont Honeywell Hewlett Packard IBM Texas Instruments General Motors Monsanto
Thank You
BOP
The balance of payments, (or BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits). Balance of payments is one of the major indicators of a country's status in international trade, with net capital outflow.
FISCAL DEFICIT
A budget deficit occurs when an entity (often a government) spends more money than it takes in. The opposite is a budget surplus. An accumulated deficit over several years (or centuries) is referred to as the government debt. Often, a certain part of spending is dedicated to paying of debt with certain maturity, which can be refinanced by issuing new government bonds. That is, a fiscal deficit leads to an increase in an entity's debt to others. A deficit is a flow. And a debt is a stock. Debt is essentially an accumulated flow of deficits. Since debt is the total amount one owes, a deficit can also be defined as the amount by which a debt grows or a savings decreases. For instance, prior to the Second Gulf War, many Americans confused debt and deficit, believing that the United States government still had a massive deficit; in fact, the government had a sizable surplus. The deficit was gone, but the debt was still being paid down. Because the United States government counts money it collects through its Social Security program as income, many people had also become accustomed to the notion that the deficit was far larger than it actually was, yet, even removing Social Security funds, there was a surplus. (Although the Social Security program currently collects income, the money is considered "owed" to the people who pay into the program.)