Economics Reforms in India
By Jaya MeraSkill.com
Economics Reforms in India
Index Background Industrial sector Financial sector External sector Tax Reforms Impact of Economic Reforms on the Indian Economy Hurdles in reforms
Background After Independence -model of planned growth -but policies conservative Drawbacks - Low forex reserves, Burden of National debts,Inflation Economic reforms were introduced in 1991 in Industrial sector Finance sector External sector Taxation
Industrial sector Industrial licensing was abolished except- strategic and security concern. At present 5 Industry groups still require Industrial licensing 2 Industries reserved for public sector Atomic Energy and Rail Transport.
Industrial sector MRTP Act 1969 (Monopolistic and Restrictive Trade Practice Act)- was abolished -MRTP Act was replaced by the Competition Act 2002 It was amended in 2007 and 2009.
Financial sector Related to 3 categories- Banking,Capital & Insurance Sector Banking Sector Reforms- earlier highly regulated environment CRR was lowered from 15% (4% in July 2014) SLR was lowered from 38.5% (22% in Sep 2014) Prime lending rates are set by banks themselves but the rate of savings a/c and rates of interest on export credit are still subject to regulation Bank rate reduced Rate of interest on savings deposit was reduced from 4.5% to 3.5% (since April 2011 it is 4%)
Financial sector RBI issued guidelines for new bank licenses in 2013 Public sector banks have been encouraged to raise money from public For reducing NPA’s banks should tone up their credit risk management system The Securitisation & Reconstruction of financial assets and Enforcement of Security Interest Act was passed Derivative products such as Forward Rate Agreement & Interest rate swaps were introduced Basel II (2008) & Basel III(2013) Framework has been laid down by RBI to ensure financial stability and strengthen capital requirement
External sector Major measures undertaken to reform external sector Exchange rate stabilisation- Indian Rupee was devalued twice in 1991 Foreign Investment - FDI & FPI FDI - Foreign Direct Investments - Long Term FPI - Foreign Portfolio Investment- Short Term
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