Economic reforms may be a future multi-dimensional package of varied policies including Liberalisation, globalization and privatization) and programme for the fast growth, efficiency in production and to form a competitive environment. In 1991, Economic reforms were adopted by the Indian Govt.
Factor’s liable for Economic reforms are as follows:
Adverse balance of payments resulted in repayment crisis
Fall in exchange reserve: as imports grew faster than exports
The rise in prices, which has a negative impact on Investment.
Mounting fiscal deficit as govt. expenditure grew faster than revenue
The Gulf crisis increases petroleum prices which negatively affected BOP.
The collapse of the soviet block.
High rate of deficit financing
New Economic Policy: – It refers to economic reforms introduced in 1991 to enhance the productivity and profitability of the economy and to form the economy globally competitive.
Measures of the latest policy
Stabilization measures: These short-run measures are introduced by Govt. to regulate the rise in price, fall in foreign ex-change reserve, and adverse balance of payment.
Structural adjustment: These end-of-the-day policies are aimed toward improving the efficiency of the economy and increasing the international competiveness of the economy by removing the rigidity in various segments of the Indian economy.
In the new policy 1991, Structural reforms are often seen with reference to.
Liberalization: Liberalization refers to the process of removing all not so important control and restrictions for example permits licences and protectionist duties quotas etc. Also, it is defined as the loosening of govt. regulation during a country to permit for personal sector companies to work business transactions with fewer restrictions.
Objectives of liberalization:-
To decrease the debt burden of the country
To expand the size of the market
to extend competition among domestic industries
To encourage export and import of products and services.
Economic reforms under liberalization.
Industrial sector reforms
Abolition of commercial Licensing
Contraction off Public Sector
Freedom to Import capital goods
Financial sector reforms.
Reducing various Ratios(SLR, CRR)
De-regulation of interest rates
Fiscal reforms/Tax reforms
Devaluation of rupee
Trade and investment reforms.
Privatization: Privatization refers to a process of including the private sector within the ownership and operation of a enterprises owned by state.
Policies adopted for privatization
Contraction of the public sector.
Abolish the ownership of Govt. within the management of public enterprises.
Sale of shares of public enterprises.
Objectives of Privatisation:-
Raising funds from Disinvestment
Improving the economic condition of the govt. .
Bringing healthy competition within an economy
Making Way for Foreign Direct Investment
Globalization: Globalization could also be defined as a process related to increasing openness, growing economic interdependence and deepening economic integration within the world economy.
Policy promoting globalization.
Increase in equity limit of foreign investment.
Future national trading policy.
Reduction in tariff.
An Appraisal of LPG Policies
Increase in foreign investment.
Increase in exchange reserves.
A check of inflation.
Increase in value.
Increase in exports.
Neglect of agriculture.
Increase income inequalities.
The adverse effect of disinvestment policy.
Spread of consumerism.
Encourages economic colonialism
World Trade Organisation (WTO)
World Trade Organisation, as an establishment was established in 1995. It replaced General Agreement on Trade and Tariffs (GATT) which was in situ since 1946.
The overriding objective of the planet Trade Organisation is to assist trade flow smoothly, freely, fairly and predictably; to satisfy its objective WTO performs the subsequent functions:-
Administering W.T.O Trade Agreements.
Acting as a forum for trade negotiations.
Settling and Handling Trade disputes
Monitoring and reviewing national trade policies,
Helping the member in trade policies via training programmes and technical assistance
Technical assistance and training for developing countries.
Co-operation with other world organization
Need for Economic Reforms:
The economic reforms introduced by the govt of India in 1991 brought a number of neo-liberal policies aimed toward a rapid economic process. The reforms were targeted at various sectors like the economic sector, trade, public sector, financial sector, etc.
The need for the introduction of the reforms was due to the subsequent factors: