Name – Sejal

Roll No – 1797
CouRSe – Ba (politiCal
SCieNCe) hoNouRS
SuBjeCt – DevelopmeNt
pRoCeSS aND SoCial
movemeNtS iN
CoNtempoRaRy iNDia
SemeSteR – 6th
yeaR – 3
 Assignment

Ques. Write a short essay on Liberalisation and economic

reform in India .
Introduction – In 1991, the Indian government began a significant
economic reform programme with The goal of transitioning the Indian
economy from a planned to a market-oriented framework. In order to
achieve this, the administration made a number of policy initiatives
aimed at Reassuring fiscal discipline, financial market liberalization and
deregulation, privatization of public sector enterprises (PSEs), and
foreign investment. These economic reforms can be Characterized into
three categories: liberalization, privatization, and globalization.

Economic Reforms – Economic reforms are the basic adjustments

that began in 1991, intending to liberalise the economy and accelerate
its development rate. In 1991, the Narasimha Rao government began
economic reforms in an attempt to restore faith in the Indian economy
both internally and outside. The changes aimed to Increase private
sector participation in India’s economic growth strategy. Technology
advancement, industrial licensing, the lifting of constraints on the private
sector, foreign investments, and international commerce were all
recommended as policy improvements. Liberalisation, Privatisation, and
Globalisation (often referred to as LPG) are the three key aspects of
economic reforms.

Need to Introduce Economic Reforms in India

o The public sector was underperforming.
o Imports outnumber exports, or the BOP is unfavourable.
o The value of foreign exchange reserves was decreasing.
o The government owes a huge amount of money.
 o Inflationary pressure is a term used to describe the pressure that
exists as prices rise.
Indian Economic Reforms – Impact
The economic reforms that were initiated in India in the early 1990s had
a significant impact on the country’s economy and society. Here are
some of the major impacts of the economic reforms in India.

• Increased economic growth: The economic reforms helped to open

up the Indian economy to global competition, which led to an
increase in foreign investment and trade. This, in turn, helped to
boost economic growth in India.
• Reduction of poverty: The increase in economic growth that was
spurred by the economic reforms helped to reduce poverty in India.
According to the World Bank, the poverty rate in India fell from 45%
in 1994 to 12.4% in 2016.
• Creation of new industries and jobs: The economic reforms helped
to create new industries and jobs in India. This was due to the
increase in foreign investment and the privatization of state-owned
enterprises.
• Improvement in infrastructure: The economic reforms led to an
improvement in infrastructure in India, as the government invested
in areas such as roads, airports, and ports. This helped to create a
better business environment and made it easier for companies to
operate in India.
• Increased urbanization: The economic reforms also led to an
increase in urbanization in India, as people moved from rural areas
to cities in search of employment opportunities. This led to the
development of new cities and urban areas in India.
• Rise of the middle class: The economic reforms helped to create a
new middle class in India. This was due to the increase in job
opportunities and the growth of industries such as IT and
outsourcing.
While the economic reforms had many positive impacts, they also led to
some negative consequences such as increased income inequality and
environmental degradation. Overall, however, the economic reforms
played a crucial role in transforming the Indian economy and laying the
foundation for its growth over the past three decades.

Indian Economic Reforms – Liberalisation in Indian Economy

As the word suggests, liberalisation means to become free or to get
liberated. This liberation was from the shackles of licence-raj, which was
causing a bottleneck for the economic growth in India. Major Impacts of
Liberalisation in Indian Economy. Today, India is one of the leading
exporters of software, services and IT products. Stock market values
rose. Reduced the political risk to investors.

Liberalisation
The process or technique through which the state’s influence over
economic activity is removed is referred to as liberalisation. It gives
businesses more decision-making liberty while removing government
intervention. In simple words, “liberalisation” means the removal of
constraints on specific private person activities, most commonly in the
economic sector. Liberalisation is most commonly used to describe a
government’s relaxation of previously imposed economic or social policy
limits.
➢ Liberalisation in India – The Indian economy has undergone a
significant transformation since the New Economic Strategy was
adopted in 1991. Since the onset of liberalisation, the government
has regulated the private sector to conduct commercial
transactions with fewer constraints. Liberalisation brought about a
slew of economic reforms, including increased production capacity,
de-servicing of producing areas, the abolition of government-issued
industrial licences, and the ability to import commodities.
 ➢ Features of Liberalisation
o Abolition of the Licence Raj system: Between 1947 and 1990, a
complex system of rules, licences, and limits were established to
manage and start enterprises.
o Interest rates and tariffs reduction
o Taking steps to remove the public sector’s monopoly on many
aspects of our economy.
o Foreign direct investment approval in a variety of fields.

➢ Objectives of Liberalisation -To increase domestic business

competition. To stimulate international trade while also regulating
imports and exports. Improving technologies and attracting foreign
investments. To build a global market. To avoid a looming balance of
payment crisis in India. To increase the contribution of the private
sector to India’s economic growth. Increase the amount of foreign
direct investment in Indian companies. To encourage local Indian
enterprises to compete against one another.

➢ Economic Reforms during Liberalisation- Several sectors were

affected by the impact of Liberalisation. A few economic reforms
were. Financial Sector Reforms. Tax Reforms / Fiscal Reforms. Foreign
Exchange Reforms / External Sector Reforms. Industrial Sector
Reforms.

➢ Conclusion- Economic reforms are policy changes aimed at

increasing a country’s economic efficiency. Economic reforms are
mostly required due to distortions induced by international legislation
or the government. Liberalisation or a decrease in the size of the
government are both examples of economic reforms. It is also
accomplished by reducing or removing market distortions in certain
economic sectors.