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What were the category of economic policies that were introduced in India and what were their goals?

The policies of NEP can be classified into two categories namely:

Stabilization measures

Structural reform measures

Stabilization measures were short term in nature and where introduced to control inflation and to overcome some of the weakness that had developed and disrupted the balance of the economy. In other words, they were introduced to maintain sufficient foreign reserves and to bring inflation under control.

Structural measures reform measures were long term in nature and were made with the aim of improving the efficiency of the economy and increase international competitiveness by removing the rigidity of the Indian economy. The government introduced various policies which can be categorized as :






List the reforms that were introduced in the industrial sector.

The industrial reform policies brought in a lot of changes. Following are the reforms that were introduced in 1991:

1. License was abolished for most of the industries. The only industries which required a license were alcohol, cigarettes, hazardous drugs and chemicals, pharmaceuticals, aerospace, explosives and electronics.

2. The industries which were handled by the public sector were defense equipments, atomic energy generation and railway transports.

3. Dereservation of many of the goods produced by the small scale industries happened.

4. In many of the industries, the market was allowed to fix the price and the government did not have a hand in the price fixing.


How did the reforms change the role of RBI?

The main purpose of these financial reforms that were introduced in 1991 was to reduce the role of RBI from being a regulator to a facilitator.

Foreign investment limit in the banks of India was raised about 50%.

Banks were given freedom to generate resources from abroad and within India, but RBI was still vested with certain authority in order to safeguard the interests of the public.

Banks which fulfilled certain criterion were allowed to set up branches without having to take approval from the RBI.

Foreign Institutional Investors (FII) like mutual funds, pension funds, merchant banks etc were allowed to invest in India from 1991.


What were the reforms in the Trade and Investment Policy?

The reforms were: Quantitative restrictions were lifted.
Import licensing was abolished in almost all fields except in the field of hazardous and environment sensitive industries.
Export duties were also removed in order to help the Indian goods attain better competitive positions in the international markets.


What is privatization and how can it be achieved?

Privatization is the shedding of ownership or management of a government owned firm. This can be achieved in two ways:

1. By direct sale of the public sector enterprise

2. By the withdrawal of the government from the ownership and management of the public sector firm.


Explain the term globalization.

The outcome of liberalization and privatization is globalization. It is generally thought of as the integration or gelling of the economy of a nation with that of the world economy. It is a very complex phenomenon. Globalization is the result of various policies which has been formed with the intention of changing the world and taking it towards greater integration and interdependence. Globalization involves activities which transcend social, cultural and geographical barriers. It also involves the creation of networks. It tries to connect all the nations of the world in such a way that happenings in one nation are affected by happenings of another nation. Globalization aims and is turning the world into one with no limits or boundaries.


What has been the impact of these reforms on the various sectors of our economy?

The reforms have resulted in the growth of the GDP, but there has been no generation of employment and hence the growth has just been a jobless growth.

The agricultural sector was adversely affected by the reforms. Public investment in this sector declined and the farmers were adversely affected.

Industrial growth during the period of reforms had retarded. This was mainly because of cheap imports, inadequate investment, poor infrastructure etc. In the globalized era, developing nations are forced to open their markets for the developed worlds and hence their domestic products get replaced by cheaper imported products. This affected the industries adversely.

The disinvestment policies have also resulted in huge losses to the government.

The reforms in taxation did not bring in as much revenue as planned. Evasion still continues to be a major issue.

The reforms have opened our doors for globalization but or access to markets in developed countries like the USA remained limited.


Discuss the economic scenario which lead to the introduction of reforms.

The various factors which lead to the introduction of the economic reforms were:


Inefficient management of funds.

The government had to overspend in order to tackle poverty, unemployment and rural development.

Income from taxation and other internal revenues were low.

Lack of attention for exports meant that there was no revenue from exports.

The foreign reserves were low and there was a huge need for money in order to meet foreign debts.

The government approached the World Bank for cash and the World Bank wanted some economic reforms to be introduced in lieu of the loan given.


Present a brief account of the industrial scenario before the introduction of industrial reforms.

The scenario was as follows:

1. License had to be obtained by every entrepreneur to start a new industry, close a firm or even increase the production.

2. Some goods were exclusively reserved for the small scale industries

3. The private sector was not allowed in many sectors

4. Prices of certain commodities and distribution of certain industrial products was controlled by the government.


Give a brief account of India’s role as a member of WTO.

India is an important member of the WTO and has been in the forefront by framing rules which are fair, by framing regulations and safeguarding the interests of the developing world.

India has removed quantitative restrictions on imports and reduced tariff rates, thereby keeping her commitment to the WTO.

There are a set of scholars who are skeptical about the usefulness of India being a member of the WTO because a bigger volume of trade occurs in developed nations than in developing ones.

The scholars feel that while the developing nations are forced to open their markets for the developed countries they do not have access to the market in the developed nations because developed nations always oppose subsidies given to agriculture.

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