ABHINAV TYAGI

Roll number-001
Liberalization refers to laws or rules being
liberalized, or relaxed, by a government.
Economic liberalization is generally defined as the
loosening of government regulations in a country
to allow for private sector companies to operate
business transactions with fewer restrictions. In
relation to developing countries, this term refers to
opening of their economic borders to
multinationals and foreign investment.
• A Balance of Payments (BOP) crisis in 1991 which
pushed the country to near bankruptcy

• The Rupee devalued and economic reforms were forced

upon India

• India central bank had refused new credit and foreign

exchange reserves had reduced to the point that India
could barely finance three weeks’ worth of imports

• No FDI & FII Investments

Liberalization : A beginning
 Financial
Sector

Fiscal
Reforms
Industrial
Sector
taken during Sector
Liberalization

Trade
Sector
 Financial Sector Reform
Financial Sector Reforms refers to the deregulation of
domestic financial markets and the liberalization of the
capital account

Financial Sector Reforms are:-

– Reform in Banking Sector
– Reform in Stock Market
– Reform in Insurance
 Industrial Sector Reform
Industrial Sector was among the first sectors to be liberalized
in India in a series of measures
Industrial licensing has been abolished except in a small
number of sectors where it has been retained on strategic
considerations

Industrial Sector Reforms are:-

• Abolition of industrial licensing
• Restriction were removed on expansion
• Reduction in the reservation of public sector
 18.00%

16.00%

14.00%

12.00%
Year to year growth

10.00%

Government Companies
8.00%

Non-Government
6.00% Companies

4.00%

2.00%

0.00%

-2.00%
1993-94 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
Year
 Trade Sector Reform
Trade policy allowing domestic providers (of goods and/or
services) to compete more freely in world markets and
foreign providers to compete more freely in domestic
markets

Trade Sector Reform :-

• Elimination of Import Licensing
• Rationalization of Tariff Structure
• Adoption of Flexible Exchange rate
 (US$ Billion)

0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
1991 27.9
18.5
1992 21.1
18.3
1993 24.3
18.9
1994 26.7
22.7
1995 35.9
26.9
1996 43.7
32.3
1997 48.9
34.1
1998 51.2
35.7
1999 47.5

Merchandise Exports
34.3
2000 55.4
37.5
2001 57.9
45.5
2002 56.3
44.7
2003 64.5
53.8
2004 80.0
Merchandise Imports 66.3
2005 118.9
85.2
2006 157.1
105.2
2007 190.7
128.9
2008 257.6
166.2
2009 308.5
189.0
2010 300.6
182.2
2011 380.9
250.5
 India's fiscal sector reforms help to raise the rate of
savings and investment in India. This further helps to
enhance the productivity of public expenditures

 India has established itself as one of the fastest growing

economies in the world. India is also advancing towards
the economical growth and improvement in literacy.
 SENSEX DURING
LIBRALZIATION
Trends in Capital Market - SENSEX ans BSE 100

21,000.0

18,000.0

15,000.0

12,000.0

9,000.0

6,000.0

3,000.0

0.0
1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011
SENSEX BSE 100
• Annual growth in GDP

• A rate of growth that will double average income in a

decade

• Rapid Growth in all sectors

• Exports of information technology enabled services

particularly strong
 (Rs. 000' Crore)

1000.0
2000.0
3000.0
4000.0
5000.0
6000.0

0.0
1991 5.3%
1992 1.4%
1993 5.4%
1994 5.7%
1995 6.4%
1996 7.3%
1997 8.0%
1998 4.3%
1999 6.7%

GDP
2000 6.4%
2001 4.4%
2002 5.8%
2003 3.8%
2004 8.5%
2005 7.5%
GDP Growth Rate 2006 9.5%
2007 9.6%
2008 9.3%
2009 6.8%
2010 8.0%
2011 8.5%
2.0%
4.0%

0.0%
6.0%
8.0%
10.0%
12.0%

Y-O-Y Growth (%)

 (Rs.)

-
5,000
20,000
25,000
30,000

10,000
15,000
35,000
40,000
45,000
1991
1992 -0.5%
1993 3.4%
1994 3.8%
1995 3.8%
1996 5.1%
1997 5.9%

Per Capita Income

1998 2.4%
1999 4.7%
2000 4.5%
2001 2.5%
2002 4.1%
2003 2.1%
2004 6.8%
2005 7.1%
2006 7.8%
2007 8.0%
2008 7.8%
2009 5.3%
Growth in Per Capita Income

2010 6.5%
2011 7.1%
0.0%
2.0%
3.0%
6.0%
7.0%

1.0%
4.0%
5.0%
8.0%
9.0%

-1.0%

Y-O-Y Growth (%)

• Political Reforms for Good Governance
• Re-engineering the Role of the government
• Administrative and Legal Reforms
• Strategic Management of the Economy with a focus on
knowledge based HRD Activities
• Fiscal Prudence
• Agricultural Sector Reforms
• Industrial Restructuring
• Labour Sector Reforms
• Foreign Trade and Outward Investment Policies
• Financial Sector Reforms
Among the Top-15 Countries in terms
of GDP at constant prices
Robust Economic Platform
Surging Exports
• Attractive Investment Destination
• Vibrant Capital Market
• Pacing Ahead to Emerge as a
Major Economy in the World
Major M&A Deals Undertaken Abroad by India Inc.

USD 12.1
billion
Tata Steel buys Corus Plc

USD 6 billion
Hindalco acquired Novelis Inc.
 Vodafone buys Hutch USD 11 billion

Renault, Nissan and Mahindra & Mahindra

has initiated a Greenfield automobile
plant project in Chennai. USD 0.905
billion
 Arguments in the favor of
Liberalization
 Increase in rate of economic growth

 Increase in competitiveness of industrial sector

 Reduction in poverty and inequality

 Fall in fiscal deficit

 Control on prices

 Decline in deficit of BOP

 Increase in Efficiency
 Arguments in the Against of
Liberalization
• Pressure by IMF and World Bank

• More depending on Foreign Debt

• Dependence on Foreign technology

• Undue importance to Privatization

• Problem of Unemployment