INDIA & WORLD

ECONOMY

India’s Economic Reforms

An Overview
GROUP 1

Ankit Raj 1109

Keshav Patel 1129
Mahak 1132
Minalee Raghwanshi 1134

2028
Shreshth Gupta 1156
Sridharan 1161
Swapnil Jaiswal 1165
Vaibhav Arora 1168
Economics Reforms: An Overview

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When India attained freedom from the rule of the British, the situation of
independent India was economically exploited and politically divided.

During the period 1900–01 and 1946–47, the growth of per capita income
was around 0.1 percent.

India’s policymakers had choose the development strategy.

India’s policymakers were in dilemma between communist and capitalist

model.

They adopted a mixed economic model with flavour of socialism.

2028
Economics Reforms: An Overview
Key industries with strategic importance were kept under government
control.

First, the government under Jawahar Lal Nehru ensured that equal
importance was given to agriculture sector.

Cottage industries and community development programmes were

given a push.

Government impose restrictions on imports, as the limited foreign

exchange reserve.
 Licence-Permit-Quota-Raj
This dominant governance in India popularly known as the Licence-
Permit-Quota-Raj .

Non availability of forex, restrictions on imports created many problems.

In 1966, the first devaluation of Indian rupee.

Before, the economy could stabilize there was another a recession in

late 1960's.
Licence-Permit-Quota-Raj
 Licence-Permit-Quota-Raj
INITIATIVE TAKEN BY GOVERMENT TO REMOVE THIS SYSTEM:

Rajiv Gandhi's government started liberalizing the restrictions on Import.

Export incentives were introduced or expanded, especially after 1985.

Income tax was also reduced.

 Major AREAS OF Reforms 1991

External Sector

The main objective of the external sector reforms

initiated in the 1990s was to reverse the import
substitution model and dismantle the inward-looking
insular trade and exchange rate policy of India and
integrate India with the rest of the world.

The salient feature of the reforms in this sector was:

A sharp decline in import duties

Dismantling of quantitative controls on imports
Monetary Sector

Independent securities market function

Activation of open market operations

Concept of ‘repo’ and ‘reverse repo’

came
Abolishment of the system of issuing ad
hoc treasury bills (TBs)
Ending of automatic monetization of the
fiscal deficit
Financial Sector

The Narasimham Committee made pertinent

contribution to India’s financial system in general and
the banking system in particular

The recommendations by the Committee brought

about deregulation of interest rates, increased a
healthy competition by allowing private and foreign
banks into domestic banking business.
Liberalization
01 Meaning
Policies less constraining of economic activity
Reduction of tariff or removal of non-tariff barriers

02 Objectives
To boost competition between domestic businesses
To promote foreign trade and regulate imports and exports
To improve the technology and foreign capital
To develop a global market of a country
To reduce the debt burden of a country
Impacts of Liberalization
01 Positive Impacts
Free flow of capital
Stock Market Performance
Political Risks Reduced
Diversification for Investors
Impact on Agriculture

02 Negative Impacts
Destabilization of the economy
Technological Impact
Mergers and Acquisitions
Impact of FDI in Banking sector
Privatization
01 Meaning
Transfer of ownership of property or business from a
government to a privately owned entity

02 Objectives
To increase the inflow of foreign direct investment to India.
It improves the financial strength of the company.
To improve the efficiency of Public Sector Undertaking by giving
them power to make decision.
Finally, promotes government dynamism by reducing
government interference.
Impacts of Privatization
01 Positive Impacts
Improved efficiency
Lack of political interference
Short term view
Increased competition
Government will raise revenue from the sale

02 Negative Impacts
Natural monopoly
Public interest
Government loses out on potential dividends
Fragmentation of industries
Ways of Privatisation
01 Transfer of Ownership
02 Disinvestment

Examples
Lagan Jute Machinery Company Limited (LJMC)
Videsh Sanchar Nigam Limited (VSNL)
Hindustan Zinc Limited (HZL)
Hotel Corporation Limited of India (HCL)
Bharat Aluminium Company limited (BALCO)
Globalization
01 Meaning
expansion of economic activities across political boundaries of
nation states

02 Objectives
Permitting free flow of goods
Flow of capital between the countries
Free flow in technology
Free movement of labour between the countries
FIRST FIVE YEAR PLAN
1951 - 1956

The origin of five year plan brought from USSR

Main focus was primarily based on the

agricultural development of the economy.
FIRST FIVE YEAR PLAN
1951 - 1956

Target Growth

Actual Growth

0% 1% 2% 3% 4%
SECOND FIVE YEAR PLAN
1956 - 1961

Based on great Indian Statistician P.C. Mahalanobis

model.
Main objective was to improve the industrial bases in
the economy. • The target annual GDP growth rate
was 4.5%.
The second five year plan achieved actual growth rate
of 4.27%. (Very close to the planned target).
SECOND FIVE YEAR PLAN
1956 - 1961

Target Growth

Actual Growth

0% 1% 2% 3% 4% 5%
THIRD FIVE YEAR PLAN
1961 - 1966

Based on Indian economist Dhanjay Ramchandra

Gadgil and it is known as “Gadgil Yojna”.
Due to Sino-India (1962) and India Pakistan war
(1965), third year plan could not achieve the plan
target of 5.6% growth rate.
It achieved the actual growth rate of 2.4%.
Plan holiday were declared by the Government of India
(1966-69).
THIRD FIVE YEAR PLAN
1961 - 1966

Traget Growth

Actual Growth

0% 2% 4% 6%
FOURTH FIVE YEAR PLAN
1969 - 1974

Based on two main objectives: Growth with stability

and progressive achievement of self reliance.
Nationalisation of 14 banks.
Extension on Green revolution.
Slogan of “Garibi Hatao” became popular during 1971
elections.
FOURTH FIVE YEAR PLAN
1969 - 1974

Target Growth

Actual Growth

0% 2% 4% 6%
FIFTH FIVE YEAR PLAN
1974 - 1979

Based on the Idea of D.P. Dhar.

Main Focus: Agriculture, Industry and Mines.
Also focussed on Employment, poverty eradication and
justice.
The twenty-point programme, Indian national highway
systems and minimum needs programme were
introduced.
FIFTH FIVE YEAR PLAN
1974 - 1979

The plan was successful to achieved the growth rate of

4.8% against the target growth rate of 4.2%. Later in 1978,
the plan year was terminated by the Janta party
government
Rolling Plan: This plan was started with an annual plan
for 1978-79 and as a continuation of the terminated fifth
year plan.
FIFTH FIVE YEAR PLAN
1974 - 1979

Target Growth

Actual Growth

0% 1% 2% 3% 4% 5%
SIXTH FIVE YEAR PLAN
1980 - 1985

It mark the beginning of economic liberalisation.

Poverty eradication
Technological self reliance.
Based on investment yojna, infrastructural changing
and trend to growth model.
Establishment of NABARD
SIXTH FIVE YEAR PLAN
1980 - 1985

Target Growth

Actual Growth

0% 2% 4% 6%
SEVENTH FIVE YEAR PLAN
1985 - 1990

Increasing economic productivity

Production of food grains
Generating employment through "Social Justice“.
The establishment of the self sufficient economy
Opportunities for productive employment.
SEVENTH FIVE YEAR PLAN
1985 - 1990

For the first time the private sector got the priority
over public sector. Its growth target was 5.0% but it
achieved 6.0%.
Annual Plans: Eighth five Plan could not take place
due to volatile political situation at the centre. So two
annual programmes are formed in 1990-91& 1991-92.
SEVENTH FIVE YEAR PLAN
1985 - 1990

Target Growth

Actual Growth

0% 2% 4% 6%
EIGHTH FIVE YEAR PLAN
1992 - 1997

• Based on great Indian Statistician P.C. Mahalanobis

model.
• Main objective was to improve the industrial bases in the
economy.
• The target annual GDP growth rate was 4.5%.
• The second five year plan achieved actual growth rate of
4.27%. (Very close to the planned target).
EIGHTH FIVE YEAR PLAN
1992 - 1997

Target Growth

Actual Growth

0% 1% 2% 3% 4% 5%
 NINTH FIVE YEAR PLAN
1997 - 2002

Some of the objectives:

Population control
Reduction of poverty; Ensuring proper availability of food
Availability of Primary health care facilities
Primary education to all children in the country;
Acceleration in the growth rate of the economy with the
help of stable prices.
 NINTH FIVE YEAR PLAN

1997 - 2002

Strategies & Performances

Structural transformations
Developments in the Indian economy.
New initiatives and initiation of corrective steps to meet
the challenges in the economy.
Efficient use of scarce resources to ensure rapid
growth. Involvement and participation of Panchayati
Raj institutions/bodies and Nagar Palikas in the
development process.
NINTH FIVE YEAR PLAN
1997 - 2002

Target Growth

Actual Growth

0% 2% 4% 6% 8%
TENTH FIVE YEAR PLAN
2002- 2007

Based on the aims to double the per capita income of

India in the next 10 years. Also aims to reduce the
poverty ratio 15% by 2012.

Main Objectives:
Attain 8% GDP growth per year. Reduction of poverty
rate by 5% by 2007.
TENTH FIVE YEAR PLAN
2002- 2007

Providing gainful and high-quality employment

Reduction in gender gaps in literacy and wage rates
Target growth: 8.1% – growth achieved: 7.7%.
The Tenth Plan was expected to follow a regional
approach rather than sectoral approach to bring
down regional inequalities.
TENTH FIVE YEAR PLAN
2002- 2007

Target Growth

Actual Growth

0% 2.5 % 5% 7.5 % 10 %
ELEVENTH FIVE YEAR PLAN
2007 - 2012

The plan was coined by C Rangarajan. Main theme

was based on “faster and more inclusive growth” .

Main Objective was:

Higher education of 18-23 years.
Rapid and inclusive growth (poverty reduction) and
reduction of gender inequality.
ELEVENTH FIVE YEAR PLAN
2007 - 2012

Emphasis on social sector and delivery of service

therein.
Empowerment through education and skill
development. Environmental sustainability.
To increase the growth rate in agriculture, industry and
services to 4%, 10% and 9% respectively.
Reduce total fertility rate to 2.1 and provide clean
drinking water for all by 2009. Its growth rate target was
8.1% but it achieved 7.9%.
ELEVENTH FIVE YEAR PLAN
2007 - 2012

Target Growth

Actual Growth

0% 2.5% 5% 7.5% 10%

TWELFTH FIVE YEAR PLAN
2012 - 2017

Main objectives:
50 million new work opportunities.
Gender and social gap in school enrolment.
Access to higher education.
To reduce malnutrition among children aged 0-3 years.
Electricity to all villages.
To ensure that 50% of the rural population have accesses to
proper drinking water.
Increase green cover.
Access to banking services.
TWELFTH FIVE YEAR PLAN
2012 - 2017

Target Growth

Actual Growth

0% 2.5% 5% 7.5% 10%

 Stabilisation Reforms
The aim of the stabilization policy, on the
one hand, was to restore macroeconomic
stability and attain fiscal balance by
addressing the issues of external and

ECONOMIC
internal balance.

REFORM
MEASURES Structural Reforms
Structural reforms are the institutional and
regulatory framework in which businesses
and people operate. They are designed to
ensure the economy is fit and better able
to realise its growth potential in a
balanced way.
 Fauget Tech

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01 Psyche of Conquest through Commerce
WHY ARE
ECONOMIC 02 Elitist and Confined Reforms

REFORMS NOT Accentuates regional, income and

03
02
ACCEPTED IN class disparities

INDIA? 04 Sole Identification with Foreign

Investment

05 Issues of Globalisation and Scams

2028
of Liberalization
 A better Demand driven
anf Bottoms-Up
Approach
Making
Economic Eliminate sterile debates
on FDI
Reforms
Acceptable Democratic processes
are a given

Politicians need to be
less risk-averse

www.reallygreatsite.com Date//Time//Year
 First Generation Reforms
Generation (1991–2000)

of Second Generation

Economic Reforms (2000–01

onwards)
Reforms Third Generation Reforms

Fourth Generation Reforms

www.reallygreatsite.com Date//Time//Year
First Generation
Reforms (1991–2000)

Promotion to Private Sector

Public Sector Reforms

External Sector Reforms

Financial Sector Reforms

Tax Reforms

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 Fauget Tech

Second Generation 01 Factor Market Reforms

Reforms
(2000–01 onwards)
02 Public Sector Reforms

03
02 Reforms in Government and Public
Institutions

04 Legal Sector Reforms

05 Reforms in Critical Areas

Third Generation Reforms & Fourth Generation Reforms

PANCHAYATI RAJ INSTITUTION (PRIS) INFORMATION TECHNOLOGY

Growth story in Post-Reform period:
Annual Growth Rate Gross Domestic Product

During the period between 1994 and

1997, for the first time, Indian
economy registered an average
growth of 7 per cent per annum for
consecu tive three years.
In 1997, growth slowed due to the
impact of the Asian financial crisis
and fell to 4.5 per cent.
Indian economy appeared to be
positively bullish.
India is now being billed as the
fastest growing large
economy in the world, with a growth
rate of 7.6% in 2015–16.
Foreign Direct Investment
1991 - 2000s

The first year of reforms saw a total foreign investment of

only $74 million.
The year 2008 recorded the highest FDI inflow of $43.40
billion.
The biggest spurt in inflow was between 2005 and 2006—
175.54%.a
In 2015, India received
$63 billion and replaced China as the top FDI destination.
The government Abolished the FIPB in 2017–18.

FDI -'FDI is an investment that a parent company

makes in a foreign country.'

Foreign Institutional Investment
1991 - 2000s

In 1992–93, FII inflows stood at a meagre $4.2 million

In 1994-95, the figure had risen to $2.43 billion
However, there was a net outflow of $386 million for the first
time in 1998–99 in the wake of the East Asian financial
crisis.
Another major outflow was $9.83 billion in 2008–09, the
period of global financial crisis.
FII inflows raised to $45.69 billion in 2014–15 from $8.87
billion in 2013–14, a 414% spike in just one year.

FII -'An investment made by an investor in the markets of

a foreign nation.'
Foreign Exchange Reserves
$1 Billion to $640.1 Billion

In 1991, it stood at just $5.8 billion but declined

to a mere $1 billion later that year.
The biggest jump in reserves was witnessed
between 2007 and 2008 when the kitty bulged
55% to hit $309.2 billion.
In 1991, the import coverage is for only 2-3
weeks.
But Now, the forex reserves are at a record
high, and usually import coverage of 11-12
months is considered sufficient.

'Foreign currency assets, special drawing rights and gold

held by the central banks of the country.'

Per Capita Income

1388% Jump
In 2015-16 it is ₹93,293 from a mere

₹6,270 in 1991 which is a whopping

jump of 1,388% compared to 1990–91.

The World Bank reported, "The per

capita income of India is often more

100,000

than the per capita income of the

average Pakistani." 75,000

50,000

25,000

0
1991 2012-13 2013-14 2014-15 2015-16
External Debt:
In 1991, the country’s external debt stood at $83.8 billion.
The rise has been steady with the figure hitting $485.6 billion at the end of March 2016,

primarily on account of a rise in outstanding NRI deposits with the RBI.

Though the figure looks huge, as a % of GDP the external debt has declined.
Between 2007 and 2008, external debt rose by more than 30% which is the steepest rise in the

last twenty-five years.

 1990-91 2000-01 2009-10 2015-16
60

40

20

0
Agriculture Industry Services
% share of GVA at current prices

In 2017, After demonetisation some sectors faced heavy blow but some eventually tried to recover
Manufacturing sector - grew YoY 10.45% in Q2 than its contraction of 17.46% Q1
Hence, Corporate sector shows significant improvement
Construction sector - grew 2.6% in Q2 from 2% in Q1
 Life expectancy (Years)
Infant mortality (per 1000 births)

75
Key Social 80

50 60

25
Indicators 40
20
Literacy rate
0 0
1991 2015 2019 1991 2015 2019
Maternal mortality
52.1% 73% 75% % of poor
600 (per Lakh live birth) 50
1991 2011 2021 40
400
30
20
200
10
0 0
1991 2015 2018 1991 2015
Thank You