Questions for today

1. W.r.t General goals , what was the success story of our planning by 1990?
2. Why did India opt for planning.
3. Why is Indian economy called mixed economy?
4. ‘Growth with social justice’ explain as a central objective of planning.
5. When was the planning commission set up?
6. How import substitution protect domestic industries?
7. What is land reform? Mention 3 land reform measures followed in India.
8. Why was Green rev. implemented in India and how did it benefit the
farmers?
9. Match i) Inward looking trade strategy a) land to the tiller
ii) Small scale industries b) Import substitution
iii) Land ceiling c) Labour intensive
iv)Abolition of intermediaries d) Element of IPR1956
v) Three fold classification of Industries e)Reduction in concentration of landhold
10. Inward looking trade strategy, explain.

https://www.youtube.com/watch?v=pj-bAgqtS2U
 Explain The Terms

• PSUs IOC, ONGC, SAIL, BSNL,NTPC……246 in 1990

• Fiscal deficit= GOVT exp –receipt excluding borrowing
• Balance of payment=outflow-inflow
• Gulf countries
• Deficit financing: Borrowing from RBI
• RBI, Commercial Banks
• Foreign exchange reserve with RBI
• Uni lateral transfer. Transfer income or payment
• Public Borrowing
• International Bank for Reconstruction and Development (IBRD) ,IMF
• Devaluation of Rupee
• Make in India 2014
• MUDRA Bank 2015, Micro units Development and Refinance Agency
 CONTENT

• Need
• NEP 1991
• Policy Measures: Liberalisation,
Privatisation, Globalisation.
• Success
• Failure
 Need for NEP1991
1. Failure of PSUs: Monopoly control…….
2. Fiscal deficit: Govt. Exp-Govt. revenue excluding borrowing =how to
finance this deficit?
3.Adverse BOP= Inflow of foreign exchange-Outflow
4.Gulf crisis: War with Iraq increased prices of petroleum + Decline of
remittances from NRIs….
5.Depletion of foreign exchange reserve
6. Rise in prices
Conclusion: 7 Billion $ as loan from World Bank and IMF, under condition of
liberalising and open up the economy by removing restrictions on private
sector and international trade and investment.
NEP: Liberalisation, Privatisation, Globalisation
 NEP/ECONOMIC REFORMS1991

Liberalisation Privatisation Globalisation

•Freedom from •Private •Economic
direct or ownership and
physical controls integration
management
imposed by the
in state owned in the
Govt. on
industries and enterprises/pu world
trade. blic sector. economy
 Policy of Liberalisation
Freedom from direct and physical
controls imposed by Govt.

Industrial Sector Reform

Financial Sector Reform

 Industrial Sector Reform
de-Regulation of Industrial sector
1.Abolition of Industrial Licensing: except(5), alcohol, cigarette, defence equipments,
industrial explosives , hazardous chemicals.

2. Contraction of Public Sector: 17 to 2, Atomic Energy, Railways.

3. De-reservation of Production by SSI: 836 reserved for SSI reduced to 114 in

2007….by2015 all items are dereserved. SSI can invest upto 5 crore.
MUDRA bank was set in 2015.
4. Expansion of Production capacity: MRTP Act 1969 was replaced by the competition
Act, 2002. Price determination by market forces.

5.Freedom to import capital goods: To upgrade their technology and plant capacity.
6. ‘A Manufacturing Hub’ Make in India programme was launched in 2014.
 Financial Sector Reform
• RBI, Commercial Banks, Foreign Banks, FII.
1. Role of RBI from regulator to facilitator of financial sector.
2. Commercial banks can determine rate of interest according to the need of the
market.
3. Banks can set new branches without approval of RBI.
4. India opened its stock market to foreign investors in 1992.
5. Establishment of private sector banks both Indian and foreign.
6. CRR(cash reserve ratio) and SLR(statutory liquidity ratio) were reduced.
7. Jan Dhan Yojana was started in 2014
 Fiscal Reform/Tax Reform
• 1. Reduction and simplification in direct
taxes(corporate tax and income tax)
• 2. Reform in indirect taxes: Sales tax to
VAT2005 and then GST2016, to reduce the
burden of indirect tax….
• 3. Simplification in tax paying procedure: like
on line payment, extended time period etc.
 External Sector Reform
• Foreign exchange reforms:
• i) Devaluation of Rupee: Increase export and
to encourage FDI, FII……
• ii) Determination of foreign exchange rate:
introduction of flexible foreign exchange rate
system
• [fixed exchange rate, Govt. fix the rate in
terms of gold or dollar]