Economic liberalisation in India

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The economic liberalisation in India refers to the ongoing economic liberalization, initiated
in 1991, of the country's economic policies, with the goal of making the economy more
market-oriented and expanding the role of private and foreign investment. Specific changes
include a reduction in import tariffs, deregulation of markets, reduction of taxes, and greater
foreign investment. Liberalization has been credited by its proponents for the high economic
growth recorded by the country in the 1990s and 2000s. Its opponents have blamed it for
increased poverty, inequality and economic degradation. The overall direction of
liberalisation has since remained the same, irrespective of the ruling party, although no party
has yet solved a variety of politically difficult issues, such as liberalizing labour laws and
reducing agricultural subsidies.[1] There exists a lively debate in India as to what made the
economic reforms sustainable.[2]
Indian government coalitions have been advised to continue liberalisation. India grows at
slower pace than China, which has been liberalising its economy since 1978.[3] The McKinsey
Quarterly states that removing main obstacles "would free India's economy to grow as fast as
China's, at 10% a year".[4]
There has been significant debate, however, around liberalisation as an inclusive economic
growth strategy. Since 1992, income inequality has deepened in India with consumption
among the poorest staying stable while the wealthiest generate consumption growth.[5] As
India's gross domestic product (GDP) growth rate became lowest in 2012-13 over a decade,
growing merely at 5%,[6] more criticism of India's economic reforms surfaced, as it apparently
failed to address employment growth, nutritional values in terms of food intake in calories,
and also exports growth - and thereby leading to a worsening level of current account deficit
compared to the prior to the reform period.[7]

Contents

1 Pre-liberalisation policies
o 1.1 Pre-1991 liberalization attempts
o 1.2 Impact

2 First Round of Reforms (19911996)

o 2.1 Crisis

3 Later reforms

4 Impact of reforms

5 Challenges to further reforms

o 5.1 Reforms at the state level

6 See also

7 References

8 External links

Pre-liberalisation policies
Part of a series on the

History of modern India

Pre-independence

Independence movement
Rebellion / Mutiny / First
War of Independence
British Raj
Partition

18571858
18581947
1947

Post-independence

Political integration
Non-Aligned Movement
States Reorganisation Act
Indo-Pakistani War
Green Revolution
Indo-Pakistani War
Emergency

19471949
1953present
1956
1965
1970s
1971
19751977

1990s

Economic liberalisation
See also

History of India
History of South Asia

India portal

Further information: Economic history of India and Licence Raj

Indian economic policy after independence was influenced by the colonial experience (which
was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian
socialism. Policy tended towards protectionism, with a strong emphasis on import
substitution, industrialisation under state monitoring, state intervention at the micro level in
all businesses especially in labour and financial markets, a large public sector, business
regulation, and central planning.[8] Five-Year Plans of India resembled central planning in the
Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and
electrical plants, among other industries, were effectively nationalised in the mid-1950s.[9]
Elaborate licences, regulations and the accompanying red tape, commonly referred to as
Licence Raj, were required to set up business in India between 1947 and 1990.[10]
Before the process of reform began in 1991, the government attempted to close the Indian
economy to the outside world. The Indian currency, the rupee, was inconvertible and high
tariffs and import licencing prevented foreign goods reaching the market. India also operated
a system of central planning for the economy, in which firms required licences to invest and
develop. The labyrinthine bureaucracy often led to absurd restrictionsup to 80 agencies had
to be satisfied before a firm could be granted a licence to produce and the state would decide
what was produced, how much, at what price and what sources of capital were used. The
government also prevented firms from laying off workers or closing factories. The central
pillar of the policy was import substitution, the belief that India needed to rely on internal
markets for development, not international tradea belief generated by a mixture of
socialism and the experience of colonial exploitation. Planning and the state, rather than
markets, would determine how much investment was needed in which sectors.
BBC[11]

Pre-1991 liberalization attempts

Attempts were made to liberalise the economy in 1966 and 1985. The first attempt was
reversed in 1967. Thereafter, a stronger version of socialism was adopted. The second major
attempt was in 1985 by prime minister Rajiv Gandhi. The process came to a halt in 1987,
though 1967 style reversal did not take place.[12]
In the 80s, the government led by Rajiv Gandhi started light reforms. The government
slightly reduced Licence Raj and also promoted the growth of the telecommunications and
software industries.[citation needed]
The Vishwanath Pratap Singh (19891990) and Chandra Shekhar Singh government (1990
1991) did not add any significant reforms.

Impact

The low annual growth rate of the economy of India before 1980, which stagnated
around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%.[13] At the
same time, Pakistan grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by
10% and Taiwan by 12%.[14]

Only four or five licences would be given for steel, electrical power and
communications. Licence owners built up huge powerful empires.[11]

A huge private sector emerged. State-owned enterprises made large losses.[11]

Income Tax Department and Customs Department became efficient in checking tax
evasion.

Infrastructure investment was poor because of the public sector monopoly.[11]

Licence Raj established the "irresponsible, self-perpetuating bureaucracy that still

exists throughout much of the country"[15] and corruption flourished under this system.
[16]

The fruits of liberalisation reached their peak in 2007, when India recorded its highest GDP
growth rate of 9%.[17] With this, India became the second fastest growing major economy in
the world, next only to China.[16] The growth rate has slowed significantly in the first half of
2012.[18] An Organisation for Economic Co-operation and Development (OECD) report states
that the average growth rate 7.5% will double the average income in a decade, and more
reforms would speed up the pace.[19]

First Round of Reforms (19911996)

The former prime minister P V Narasimha Rao, who spearheaded economic liberalisation
policies in the early 1990s. Rao was often referred to as Chanakya for his ability to steer
tough economic and political legislation through the parliament at a time when he headed a
minority government.[20][21]

Crisis
Main article: 1991 India economic crisis
By 1991, India still had a fixed exchange rate system, where the rupee was pegged to the
value of a basket of currencies of major trading partners. India started having balance of
payments problems since 1985, and by the end of 1990, it was in a serious economic crisis.
The government was close to default,[22][23] its central bank had refused new credit and foreign
exchange reserves had reduced to the point that India could barely finance three weeks worth
of imports. It had to pledge 20 tonnes of gold to Union Bank of Switzerland and 47 tonnes to
Bank of England as part of a bailout deal with the International Monetary Fund (IMF). Most
of the economic reforms were forced upon India as a part of the IMF bailout.[24]
A Balance of Payments crisis in 1991 pushed the country to near bankruptcy. In return for an
IMF bailout, gold was transferred to London as collateral, the rupee devalued and economic
reforms were forced upon India. That low point was the catalyst required to transform the
economy through badly needed reforms to unshackle the economy. Controls started to be
dismantled, tariffs, duties and taxes progressively lowered, state monopolies broken, the
economy was opened to trade and investment, private sector enterprise and competition were
encouraged and globalisation was slowly embraced. The reforms process continues today and
is accepted by all political parties, but the speed is often held hostage by coalition politics and
vested interests.
India Report, Astaire Research[16]

Later reforms
This list is incomplete; you can help by expanding it.

The Bharatiya Janata Party (BJP)-Atal Bihari Vajpayee administration surprised many
by continuing reforms, when it was at the helm of affairs of India for five years.[25]

The BJP-led National Democratic Alliance Coalition began privatising underperforming government owned business including hotels, VSNL, Maruti Suzuki, and
airports, and began reduction of taxes, an overall fiscal policy aimed at reducing
deficits and debts and increased initiatives for public works.

The United Front government attempted a progressive budget that encouraged

reforms, but the 1997 Asian financial crisis and political instability created economic
stagnation.

Towards the end of 2011, the Government initiated the introduction of 51% Foreign
Direct Investment in retail sector. But due to pressure from fellow coalition parties
and the opposition, the decision was rolled back. However, it was approved in
December 2012.[26]

Impact of reforms

The HSBC Global Technology Centre in Pune develops software for the entire HSBC group.
[27]

The impact of these reforms may be gauged from the fact that total foreign investment
(including foreign direct investment, portfolio investment, and investment raised on
international capital markets) in India grew from a minuscule US$132 million in 199192 to
$5.3 billion in 199596.[28]
Cities like Chennai, Bangalore, Hyderabad, NOIDA, Gurgaon, Ghaziabad, Pune, Jaipur,
Indore and Ahmedabad have risen in prominence and economic importance, become centres
of rising industries and destination for foreign investment and firms.
Annual growth in GDP per capita has accelerated from just 1 per cent in the three decades
after Independence to 7 per cent currently, a rate of growth that will double average income
in a decade. [...] In service sectors where government regulation has been eased significantly
or is less burdensomesuch as communications, insurance, asset management and
information technologyoutput has grown rapidly, with exports of information technology
enabled services particularly strong. In those infrastructure sectors which have been opened
to competition, such as telecoms and civil aviation, the private sector has proven to be
extremely effective and growth has been phenomenal.
OECD[19]

Election of AB Vajpayee as Prime Minister of India in 1998 and his agenda was a welcome
change. His prescription to speed up economic progress included solution of all outstanding
problems with the West (Cold War related) and then opening gates for FDI investment. In
three years, the West was developing a bit of a fascination to India's brainpower, powered by
IT and BPO. By 2004, the West would consider investment in India, should the conditions
permit. By the end of Vajpayee's term as prime minister, a framework for the foreign
investment had been established. The new incoming government of Dr. Manmohan Singh in
2004 is further strengthening the required infrastructure to welcome the FDI.
Today, fascination with India is translating into active consideration of India as a destination
for FDI. The A T Kearney study is putting India second most likely destination for FDI in
2005 behind China. It has displaced US to the third position. This is a great leap forward.
India was at the 15th position, only a few years back. To quote the A T Kearney Study
India's strong performance among manufacturing and telecom & utility firms was driven
largely by their desire to make productivity-enhancing investments in IT, business process
outsourcing, research and development, and knowledge management activities.

Challenges to further reforms

For 2010, India was ranked 124th among 179 countries in Index of Economic Freedom World
Rankings, which is an improvement from the preceding year.

Slow growth of the agricultural sector, where half of Indians earn most of their
income[29]

Highly restrictive and complex labour laws.[30][19][31][32][33][34][35][36][37]

High inflation[29]

High poverty[29]

Corruption and graft[29]

Lack of political consensus and will[29][38]

OECD summarised the key reforms that are needed:

In labour markets, employment growth has been concentrated in firms that operate in sectors
not covered by India's highly restrictive labour laws. In the formal sector, where these labour
laws apply, employment has been falling and firms are becoming more capital intensive
despite abundant low-cost labour. Labour market reform is essential to achieve a broaderbased development and provide sufficient and higher productivity jobs for the growing labour
force. In product markets, inefficient government procedures, particularly in some of the
states, acts as a barrier to entrepreneurship and need to be improved. Public companies are
generally less productive than private firms and the privatisation programme should be
revitalised. A number of barriers to competition in financial markets and some of the
infrastructure sectors, which are other constraints on growth, also need to be addressed. The
indirect tax system needs to be simplified to create a true national market, while for direct
taxes, the taxable base should be broadened and rates lowered. Public expenditure should be

re-oriented towards infrastructure investment by reducing subsidies. Furthermore, social

policies should be improved to better reach the poor andgiven the importance of human
capitalthe education system also needs to be made more efficient.
OECD[19]

Reforms at the state level

See also: Economic disparities in India
According to an OECD survey of the Indian economy [19] states that had more liberal
regulatory regimes had better economic performance. The survey also concluded that were
complementary measures for better delivery of infrastructure, education and basic services
implemented, they would boost employment creation and poverty reduction.

Prevention of Corruption Act, 1988

From Wikipedia, the free encyclopedia

Prevention of Corruption Act,

1988

An Act to consolidate and amend the law

relating to the prevention of corruption and for
matters connected therewith.
Citation

Act No. 49 of 1988

The whole of India except Jammu

Territorial
and Kashmir. Applies also to all
extent
citizens of India outside India.
Enacted
by

Parliament of India

Date
enacted

9 September 1988

The Prevention of Corruption Act, 1988 (No. 49 of 1988) is an Act of the Parliament of
India enacted to combat corruption in government agencies and public sector businesses in
India.[1]
Contents

1 Provisions
o

1.1 Chapter I: Preliminary

1.1.1 Section 3: Appointment of special Judges

1.1.2 Section 4: Cases triable by special Judges

1.1.3 Section 5: Procedure and powers of special Judge

1.2 Chapter III: Offences and penalties

1.3 Chapter IV: Investigation

2 Prominent cases
o

2.1 2G Spectrum Scam

3 Analysis

4 See also

5 References

Provisions

The act consists of 5 chapters spread across 31 sections.[2]

Chapter I: Preliminary

This chapter contains sections describing title, territorial extend, basic definitions, etc.
Following are some sections:
Section 3: Appointment of special Judges

Power To Appoint Special Judges: The Central and the State Government is empowered to
appoint Special Judges by placing a Notification in the Official Gazette, to try the following
offences: Any offence punishable under this Act. Any conspiracy to commit or any attempt
to commit or any abetment of any of the offences specified under the Act. The qualification
for the Special Judge is that he should be or should have been a Session Judge or an
Additional Session Judge or Assistant Session Judge under the Code of Criminal Procedure,
1973
Section 4: Cases triable by special Judges

The offences punishable under this act can be tried by special Judges only. When trying any
case, the special Judge is empowered to try any offence other than an offence punishable
under this act, with which the accused may be charged at the same trial. It is recommended
that the special Judge should hold the trial daily.[3]
Case Trial By Special Judges: Every offence mentioned in Section 3(1)shall be tried by the
Special Judge for the area within which it was committed. When trying any case, a Special
Judge may also try any offence other than what is specified in S. 3, which the accused may
be, under Cr.P.C. be charged at the same trial. The Special Judge has to hold the trial of an
offence on day-to-day basis. However, while complying with foretasted, it is to be seen that
the Cr.P.C. is not bifurcated.
Section 5: Procedure and powers of special Judge

The following are the powers of the Special Judge: He may take cognizance of the offences
without the accused being commissioned to him for trial. In trying the accused persons, shall
follow the procedure prescribed by the Cr.P.C. for the trial of warrant cases by Magistrate. he
may with a view to obtain the evidence of any person supposed to have been directly or
indirectly concerned in or privy to an offence, tender pardon to such person provided that he

would make full and true disclosure of the whole circumstances within his knowledge or in
respect to any person related to the offence.
Except as for S. 2(1), the provisions of Cr.P.C. shall apply to the proceedings before a Special
Judge. Hence, the court of the Special Judge shall be deemed to be a Court of Session and the
person conducting a prosecution before a Special Judge shall be deemed to be a public
prosecutor. The provisions of secs. 326 and 475of the Cr.P.C. shall apply to the proceedings
before a Special Judge and for purpose of the said provisions, a Special Judge shall be
deemed to be a magistrate.
A Special Judge may pass a sentence authorized by law for the punishment of the offence of
which a person is convicted. A Special Judge, while trying any offence punishable under the
Act, shall exercise all powers and functions exercised by a District Judge under the Criminal
Law Amendment Ordinance,1944.
Power to try summarily: Where a Special Judge tries any offence specified in Sec. 3(1),
alleged to have been committed by a public servanet in relation to the contravention of any
special order referred to in Sec.12-A(1) of the Essential Commodities Act, 1955 or all orders
referred to in sub-section (2)(a) of that section then the special judge shall try the offence in a
summarily way and the provisions of s. 262 to 265 (both inclusive) of the said code shall as
far as may be apply to such trial. Provided that in the case of any conviction in a summary
trial under this section this shall be lawful for the Special Judge to pass a sentence of
imprisonment for a term not exceeding one year. However, when at the commencement of or
in the course of a summary trial it appears to the Special Judge that the nature of the case is
such that a sentence of imprisonment for a term exceeding one year may have to be passed or
it is undesirable to try the case summarily, the Special judge shall record all order to that
effect and thereafter recall any witnesses who may have been examined and proceed to hear
and re-hear the case in accordance with the procedure prescribed by the said code for the trial
of warrant cases by Magistrates. Moreover, there shall be no appeal by a convicted person in
any case tried summarily under this section in which the Special Judge passes a sentence of
imprisonment not exceeding one month and of fine not exceeding Rs. 2000.
Chapter III: Offences and penalties

The following are the offences under the PCA along with their punishments:- Taking
gratification other than legal remuneration in respect of an official act, and if the public
servant is found guilty shall be punishable with imprisonment which shall be not less than 6
months but which may extend to 5 years and shall also be liable to fine. Taking gratification
in order to influence public servant, by corrupt or illegal means, shall be punishable with
imprisonment for a term which shall be not less than six months but which may extend to five
years and shall also be liable to fine. Taking gratification, for exercise of personal influence
with public servant shall be punishable with imprisonment for a term which shall be not less
than six months but which may extend to five years and shall also be liable to fine.
Abetment by public servant of offences defined in Section 8 or 9, shall be punishable with
imprisonment for a term which shall be not les than six months but which may extend to five

years and shall also be liable to fine. Public servant obtaining valuable thing without
consideration from person concerned in proceeding or business transacted by such public
servant, shall be punishable with imprisonment for a term which shall be not les than six
months but which may extend to five years and shall also be liable to fine. Punishment for
abetment of offences defined in Section 7 or 11 shall be punishable with imprisonment for a
term which shall be not less that six months but which may extend to five years and shall also
be liable to fine. Any public servant, who commits criminal misconduct shall be punishable
with imprisonment for a term which shall be not less than one year but which may extend to 7
years and shall also be liable to fine. Habitual committing of offence under Section 8, 9 and
12 shall be punishable with imprisonment for a term which shall be not less than two years
but which may extend to 7 years and shall also be liable to fine.
Chapter IV: Investigation

Investigation shall be done by a police officer not below the rank of: a] Incase of Delhi, of an
Inspector of Police. b] In metropolitan areas, of an Assistant Commissioner of Police. c]
Elsewhere, of a Deputy Superintendent of Police or an officer of equivalent rank shall
investigate any offence punishable under this Act without the order of a Metropolitan
Magistrate or a magistrate of first class, or make any arrest therefore without a warrant.
If a police officer no below the rank of an Inspector of Police is authorized by the State
Government in this behalf by general or special order, he may investigate such offence
without the order of a Metropolitan Magistrate or Magistrate of First class or make arrest
therefor without a warrant.

"The government's recent policy measures, such as diesel price deregulation, a

greater focus on local manufacturing, as well as the Reserve Bank's efforts to
contain inflationary pressures and raise banking system efficiency, could
increase savings, investment and productivity in the economy," Moody's said.
the recent steps are augmented with additional steps next year to address
infrastructure gaps and attract foreign direct investment inflows, government
policies can support the sovereign credit profile through higher medium term
GDP growth.