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Since independence, India followed the mixed economy.

The Economic liberalization in India refers to ongoing

Economic reforms in India that started in 1991

Growth in Real GDP Averaged at 6% per Year during 1980-2005.

In 1991, India met with economic crisis and govt. was not able

to make repayments on its borrowings from abroad and foreign

exchange reserves.

All this led the govt. to introduce a new set of policy measures

which changed the direction of our developmental strategies.

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The new neo-liberal policies included opening forinternational trade and investment, deregulation,initiation of privatization, tax reforms, and inflation-

controlling measures.

Break from the Hindu rate of grown of 3.75% peryear from 1950-80.

Macroeconomic crisis of 1991

Approach to IMF and the World Bank

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The origin of financial crisis can be traced from the inefficient

management of the Indian economy in 1980s

For implementing various policies, the govt. generates funds

such as taxation.

When expenditure is more than income, the government

borrows to finance the deficit from banks and from people within

the country and from international institution.

Indiaapproached International bankfor reconstructionanddevelopment (IBRD)

Indiaagreed to the conditions of world bankand announced

new economic policy.

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The low annual growth rate of the economy of Indiabefore 1980, which stagnated around 3.5% from 1950s to

1980s ,

while percapita income averaged 1.3%.Infrastructure investment was poor because of the

public sector monopoly.

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It was introduced in Industrial licensing,

Export import policy,

Fiscal policy,

Financial sector, Foreign exchange market etc.

to put an end to various restrictions and open up

various sectors of economy.

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These were concerned with the

reforms in Governments taxation

and public expenditures policies

known as fiscal policies.

There are two types of taxes:-

Direct-consist of taxes on incomes

of individuals as well as profits of

business enterprises.

Indirect-taxes levied on

commodities to facilitate commonnational market for goods and

commodities.

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It implies shedding of the ownership of a govt. owned

enterprise.

Govt. companies can be converted into private companies in

two ways :- By withdrawal of govt. from ownership and management of

public sector companies.

By outright sale of public sector companies.

Privatization of PSU by selling off part of the equity of

PSUS to the public is known as disinvestments.

Its main aim was to improve financial discipline and

facilitate modernization.

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In economics, growth of an economy is measured by

the gross domestic product(GDP).

GDP has increased from 5.6%during 1980-1991 to

6.4% during 1992-2001.

The opening up of the economy has led to the

increase in foreign direct investment and foreign

exchange reserves.

Foreign direct investment has increased from about

100million US$ to 150 billion US$.

India is seen as a successful exporter of auto parts,

IT software and textiles in reform period.

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Public investment in agriculture sector especially in

infrastructure, which includes irrigation, power, roads, etc has

been reduced in the reform period.

Removal of subsidy has led to increase in the cost of production,which has affected small & marginal farmers.

This sector has been experiencing a no. of policy changes such as

reduction in import duties on agricultural products, removal of

minimum support price, etc.

There has been a shift from production for domestic market

towards production for domestic market towards production for

the export market focusing on cash crops in lieu of production of

food grains.

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Decreased demand of industrialgoods due to cheap imports, inadequateinvestment, etc led to decrease in theindustrial growth.

Cheaper imports have replaced thedemand for domestic goods.

The infrastructure facilities, includingpower supply etc, has remainedinadequate due to lack of investment.

Moreover, a developing country likeIndia still does not have access todeveloped countries market because ofhigh non-tariff barriers.

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The PSEs made a significant contribution to industrial

production, 100 per cent in lignite, over 80 per cent

in coal, crude oil and zinc, almost 50 per cent in

aluminium and over 30 per cent in finished steel.

In terms of profitability, the PSEs showed diverse

patterns. In 2000-01, 122 enterprises made a profit

with the top 10 among them - giants such as the Oil

and Natural Gas Corporation (ONGC), the NationalThermal Power Corporation (NTPC), the Indian Oil

Corporation (IOC) and the Videsh Sanchar Nigam

Limited (VSNL) - accounting for close to 70 per cent of

the total net profit of Rs.19,604 crores.

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Globalization is an opportunity in terms ofgreater

access to global market, higher technology etc.

It has increased income and quality andconsumptions of only high income groups like real

estate, IT, rather than vital sector like agriculture.

Attract larger inflows of

FDI including inmanufacturing

Have to move away from protectionism