Economic Reforms

• The term economic reforms broadly indicates

necessary structural adjustments to external events.
It requires reduction of country's spending to the
level parallel to its income and thereby reducing its
fiscal deficit considerably. This requires gradual
reduction of import restrictions and also elimination
of export restrictions. These adjustments also
requires market obtained structural change in order
to make economy more efficient and flexible
Economic Reforms in India
• The first phase of economic reforms had its
origin in 1985 initiated by the young prime
minister Mr.Rajiv Gandhi soon after taking
the office. The public sector has entered in
into too many areas where it should not be.
We shall open the economy to the private
sector in several areas. Consequently
number of measures were taken to remove
controls ,open areas to private sector player
Second Phase of Reforms
• The first phase of economic reforms failed to yield the
expected results on most of fronts. The deficit in BOP
gradually increased .In order to save the situation
govt.approached the world Bank and IMF to take the
loan .At that time Finance minister Dr.Manmohan Singh
made a commitment to the IMF Managing director that
govt. of India had set certain macro economic targets
and also had initiated certain policy measures in order to
bring about structural readjustment of the economy
Second Generation Reforms

• In 2000-2001 Mr. Yashwant Sinha the Finance

Minister presented budget in which he stated
that goverenment wanted to attain second
generation reforms.Accoprding to him “Growth is
not the only objective itself.It is a source of
expansion of employment and to raise the
standard of living especially of down trodden
class
Features of New Economic Policy
• New economic policy comprises mainly of
• Liberalization
• Privatization
• Globalization of Economy
• New Public Sector Policy
• Modernization
• Financial Reforms
• Fiscal Reforms

•
• Liberalization: - It has abolished the
system of industrial licensing for all
industrial undertaking except for a short
list of 8 industries
• Privatization:- Introduction of private
ownership in public owned units and
public managed enterprises. Reduced no.
of reserved industries from 17 to 8
• Globalization of economy:- Opening up of the
economy for world market by attaining
international competitiveness.Automatic
permission is given for high tech. industry and
for hire foreign technicians
• New Public Sector Policy:- The new policy has
shifted its emphasis from public to private
sector, Reduction in list of reserved industries
from 17 to 8, Disinvestment of shares in
PSE,Policy for sick PSEs be designed
• Modernization:-The policy has been providing high
priority to the introduction of modern techniques in
production system. Special provision of tax initiated to
facilitate corporate mergers and collaboration to face
new challenges ahead
• Financial reforms:- Reduction in liquidity ratio, Free
determination of credit programme,Making provision for
Non Performing assets, Establishment of speedy
machine for recovery loans, Reconstitution of banking
system, Introducing capital market reforms
• Fiscal Reforms Govt.has introduced various controls over
public expenditure and took initiative to raise both tax
and non tax revenues