Present by Chetan Panara(M00086) Submitted to Prof.

Kaushal Mandalia

The Indian currency, the rupee, was inconvertible and high tariffs and import licensing prevented foreign goods reaching the market. India also operated a system of central planing for the economy, in which firms required licenses to invest and develop.

Why new Economic Policy 1991

Restriction on Private Investment Socialism

Mixed Economy
Internal debt liability increased to 53% of GDP.

Integration with world economy with. dismantling of tariff wall. Protection of foreign direct investment. upgrading the technology of production. Financial stability. Outward looking policies. Deregulation of domestic market.

 Correcting the disequilibrium in foreign exchange

market through demand reduction. Reform in trade policy Reduction in fiscal deficit Dismantling of barrier to free flow of capital. Depreciation of exchange rate.

Exchange rate.
Trade and industrial policy. Policies concerning the public sector.

financial sector.
Capital market.

Liberalization
Privatization Globalization

Amendment in MRTP act. Emphasis to be on controlling and regulating monopolistic, restrictive and unfair trade practices
Except the six industries , all other kinds of industrial license have been abolished.

Thrust of policy to be on controlling unfair or restrictive business practices Need for achieving economies of scale for ensuring higher productivity and competitive advantage in the international market, the interference of the government through the MRTP Act has to be restricted

 Disinvestment
selling of govt. equity, partially or wholly, to

private parties.
Mergers
acquisition

 Outsourcing

Reduction in trade barriers.

Free flow of technology Free movement of labor capital among different

countries.

Increase in GDP growth rate Increase in foreign direct investment Increase in foreign exchange
Fulfilled a long-felt demand of the corporate sector for declaring in very clear terms that licensing was abolished for all industries except 18 industries which included coal, petroleum, sugar, motor cars, cigarettes, hazardous, chemicals, pharmaceuticals and some luxury items

Increase in per capita income

Increase in foreign trade.(Import,Export,FDI,FII,Merger ) Increase mobility of factor of production Outsourcing

Growing unemployment
Neglect of agriculture Growing personal disparities

Infrastructural inadequacies
Wide spread poverty.

Demonstration effect (luxury goods)

Indian small scale industries badly affected Failure of MRTP to break the monopolistic or Oligopolistic character of the Indian market

60 50 40 30 20 10 0

32.2

40.6 27.2

43.9 28.1 28.0

48.9 27.2 23.8

52.4 27.1 20.5

1990-91

1995-96 Agriculture

2000-01 Industry Services

2004-05

India - One of the fastest growing economies in the world Average GDP growth (1995 -2005) : 6.2 % per annum Average annual growth (1995 - 2005) Agriculture & Allied Industry :+ 2.1 % per annum :+ 6.6 % per annum

Services

+ 7.8 % per annum

Average Per Capita Income growth (1995 - 2005): 3.8 % per annum Inflation down to a single digit level continuously for the last ten years Foreign exchange reserves increased from US $ 2 b (March 1991) to US $ 145 b (September 2005) Merchandise Exports : +20 % average rate of growth in last three years

Booming Services Exports from US $ 4.6 b in 1990-91 to US $ 51.3 b in

 Balance of Payments surplus (US $ 26 b in 2004 - 05) External Debt Service Ratio down from 26.2 % in 1995 to 6.2 % in 2005 Foreign Direct Investment (FDI) : Average +US $ 5 b pa in the last five years. Foreign Portfolio Investment : US $ 11.4 b in 2003-04 and US $ 8.9 b in 2004-05 Reforms continuing and have unleashed dynamic forces putting the economy on a trajectory of unparalleled economic growth in the future

India the worlds most irrigated land mass worlds 2nd largest exporter of rice & 5th largest exporter of wheat

Food production: Indias Ranking in the World

1st
2nd

Tea, Milk
Rice, wheat, sugar

THANK YOU!