Economic Reforms In India

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New Industrial Policy

Under Industrial Policy, keeping in view the priorities of the country and its Economic Development, the roles of the public and private sectors are clearly decided.

Under the New Industrial Policy, the industries have been freed to a large extent from the licenses and other controls. In order to encourage modernisation, Stress has been laid upon the use of latest technology.

A great reduction has been effected in the role of the public sector. Efforts have been made to encourage foreign Investment. Investment decision by companies has been facilitated by ending restrictions imposed by the MRTP Act. Similarly, Foreign Exchange Regulation Act (FERA) has been replaced with Foreign Exchange Management Act (FEMA).

Some important points of the New Industrial Policy are as follows:

Abolition of Licensing

Before the advent of the New Industrial Policy, the Indian industries were operating under strict licensing system. Now, most industries have been freed from licensing and other restrictions.

Freedom to Import Technology

The use of latest technology has been given prominence in the New Industrial Policy. Therefore, foreign technological collaboration has been allowed.

Contraction of Public Sector

A policy of not expanding unprofitable industrial units in the public sector has been adopted. Apart from this, the government is following the course of Disinvestment in such public sector undertaking.

MRTP Restrictions Removed

Monopolies and Restrictive Trade Practices Act has been done away with. Now the companies do not need to seek government permission to issue Shares, extend their area of operation and establish a new unit.

FERA Restrictions Removed

Foreign Exchange Regulation Act (FERA) has been replaced by Foreign Exchange Management Act (FEMA). It regulates the foreign transactions. These transactions have now become simpler.

New Trade Policy

Trade policy means the policy through which the Foreign Trade is controlled and regulated. As a result of liberalisation, trade policy has undergone tremendous changes. Especially the foreign trade has been freed from the unnecessary controls. The age-old restrictions have been eliminated at one go. Some of the chief characteristics of the New Trade Policy are as follows:

Restrictions on the exports-imports have almost disappeared leaving only a few items.
Export-import tax on some items has been completely abolished and on some other items it has been reduced to the minimum level.
Import-export procedure has been simplified.
Foreign Capital Market has been established for sale and purchase of foreign exchange in the open market.

Fiscal reforms

The policy of the government connected with the income and expenditure is called Fiscal Policy. The greatest problem confronting the Indian government is excessive Fiscal Deficit. In 1990-91, the fiscal deficit was 8% of the GDP.

In order to handle the problem of fiscal deficit, basic changes were made in the tax system. The following are the major steps taken in this direction:

The rate of the individual and Corporate tax has been reduced in order to bring more people in the tax net.
Tax procedure has been simplified.
Heavy reduction in the import duties has been implemented.

Monetary Policy

Monetary policy is a sort of control policy through which the central bank controls the Money/”>Supply of Money with a view to achieving the objectives of the general economic policy. Reforms in this policy are called monetary reforms. The major points with regard to the monetary reforms are given below:

Statutory Liquidity Ratio (SLR) has been lowered. (A commercial bank has to maintain a definite Percentage of liquid funds in relation to its net demand and time liabilities. This is called SLR. In liquid funds, cash investment in permitted securities and balance in Current Account with nationalised banks are included.)

The banks have been allowed freedom to decide the rate of interest on the amount deposited.
New standards have been laid down for the income recognition for the banks. (By recognition of income, we mean what is to be considered as the income of the bank. For example, should the interest on the bad debt be considered as the income of the bank directions have been issued in this context.

Capital Market reforms

The market in which securities are sold and bought is known as the capital market. The reforms connected with it are known as capital market reforms. This market is the pivot of the economy of a country. The government has taken the following steps for the development of this market:

Under the Portfolio Investment Scheme, the limit for investment by the NRIs and foreign companies in the shares and Debentures of the Indian companies has been raised. (Portfolio Investment Scheme means investing in securities.)
In order to control the capital market, the Securities and Exchange Board of India (SEBI) has been established.
The restriction in respect of interest on debentures has been lifted. Now, it is decided on the basis of demand and supply.

Phasing out Subsidies

Cash Compensatory Support (CCS) which was earlier given as Export Subsidy has been stopped. CCS can be understood with the help of an example. If an exporter wants to import some raw material which is available abroad for 100, but the same material is available in India for 120 and the governments wants the raw material to be purchased by the exporter from India itself for the protection of indigenous industries, the government is ready to pay the difference of 20 to the exporter in the form of subsidy. The payment of 20 will be considered as CCS. In addition to this, the CCS has been reduced in case of Fertilizers and petro products.

Dismantling Price Control

The government has taken steps to remove price control in case of many products. (Price Control means that the companies will sell goods at the prices determined by the government.) The efforts to remove price control were mostly in respect of fertilizers, steel and iron and petro products. Restrictions on the import of these products have also been removed.

Economic Reforms are changes in the way a country’s economy is managed. They can be implemented for a variety of reasons, such as to improve economic efficiency, increase economic Growth, or reduce POVERTY.

There are many different types of economic reforms, but some of the most common include:

Liberalization-2/”>Liberalization: This involves reducing government control over the economy, such as by deregulating industries or privatizing state-owned enterprises.
Privatization: This involves selling state-owned enterprises to private investors.
Disinvestment: This involves reducing the government’s ownership stake in state-owned enterprises.
Deregulation: This involves reducing government regulation of businesses, such as by removing restrictions on prices or entry into markets.
Foreign Direct Investment (FDI): This involves encouraging foreign companies to invest in the country.
Trade Reforms: This involves reducing tariffs and other barriers to trade.
Fiscal Reforms: This involves reforming the government’s tax and spending policies.
Monetary Reforms: This involves reforming the country’s central bank and monetary policy.
Financial Sector Reforms: This involves reforming the country’s financial system, such as by privatizing banks or strengthening prudential regulations.
Labor Market Reforms: This involves reforming the country’s labor laws, such as by making it easier for businesses to hire and fire workers.
Agricultural Reforms: This involves reforming the country’s agricultural sector, such as by privatizing land or deregulating agricultural markets.
Education Reforms: This involves reforming the country’s education system, such as by increasing spending on education or improving the quality of education.
Health Care Reforms: This involves reforming the country’s health care system, such as by increasing access to health care or improving the quality of health care.
Infrastructure-2/”>INFRASTRUCTURE Reforms: This involves investing in the country’s infrastructure, such as roads, bridges, and Airports.
Environmental Reforms: This involves taking steps to protect the Environment, such as reducing pollution or conserving natural Resources.
Governance Reforms: This involves improving the way the government is run, such as by reducing Corruption or increasing transparency.
Institutional Reforms: This involves reforming the country’s institutions, such as the judiciary or the central bank.

Economic reforms can have a significant impact on a country’s economy. They can lead to increased economic growth, improved efficiency, and reduced poverty. However, they can also lead to short-term pain, such as job losses or higher prices.

The success of economic reforms depends on a number of factors, such as the country’s initial conditions, the design of the reforms, and the implementation of the reforms. In some cases, economic reforms have been very successful, such as in China and India. In other cases, economic reforms have been less successful, such as in Russia and Argentina.

Overall, economic reforms can be a powerful tool for improving a country’s economy. However, they must be carefully designed and implemented in order to be successful.

Here are some examples of economic reforms that have been implemented in different countries:

In China, the government has implemented a series of economic reforms since the late 1970s. These reforms have led to rapid economic growth and improved living standards for many Chinese people.
In India, the government has implemented a series of economic reforms since the early 1990s. These reforms have led to increased economic growth and improved efficiency in the Indian economy.
In Russia, the government implemented a series of economic reforms in the early 1990s. These reforms led to the collapse of the Soviet Union and the transition to a market economy. However, the reforms were not successful in preventing a deep economic Recession.
In Argentina, the government implemented a series of economic reforms in the early 1990s. These reforms led to economic growth and Inflation stabilization. However, the reforms were not successful in preventing a financial crisis in 2001.

Economic reforms can be a complex and challenging process. However, they can also be a powerful tool for improving a country’s economy.

What is economic reform?

Economic reform is the process of restructuring an economy to make it more efficient and competitive. It can involve changes to government policies, regulations, and institutions.

What are the goals of economic reform?

The goals of economic reform vary depending on the country and the specific reforms being implemented. However, some common goals include:

Increasing economic growth
Reducing poverty
Improving efficiency
Increasing competition
Attracting foreign investment

What are the different types of economic reform?

There are many different types of economic reform, but some common examples include:

Privatization: The sale of state-owned enterprises to private investors.
Deregulation: The removal of government regulations from the economy.
Trade liberalization: The reduction or elimination of tariffs and other trade barriers.
Financial liberalization: The deregulation of the financial sector.

What are the benefits of economic reform?

Economic reform can have a number of benefits, including:

Increased economic growth: Economic reforms can lead to increased economic growth by making the economy more efficient and competitive.
Reduced poverty: Economic reforms can help to reduce poverty by creating jobs and increasing incomes.
Improved efficiency: Economic reforms can help to improve efficiency by reducing waste and duplication.
Increased competition: Economic reforms can help to increase competition by removing barriers to entry and exit.
Attracting foreign investment: Economic reforms can help to attract foreign investment by making the economy more attractive to investors.

What are the risks of economic reform?

Economic reform can also have a number of risks, including:

Increased inequality: Economic reforms can lead to increased inequality if the benefits of growth are not shared equally.
Job losses: Economic reforms can lead to job losses, especially in the short term, as businesses restructure and become more efficient.
Social unrest: Economic reforms can lead to social unrest if they are not implemented carefully and if the benefits of growth are not shared equally.
Environmental damage: Economic reforms can lead to environmental damage if they are not implemented in a sustainable way.

What are the challenges of economic reform?

Economic reform can be a complex and challenging process. Some of the challenges of economic reform include:

Political opposition: Economic reforms can be opposed by vested interests, such as businesses that benefit from the status quo.
Institutional weaknesses: Economic reforms can be difficult to implement in countries with weak institutions, such as a lack of an Independent Judiciary or a corrupt Bureaucracy.
Social unrest: Economic reforms can lead to social unrest if they are not implemented carefully and if the benefits of growth are not shared equally.
Environmental damage: Economic reforms can lead to environmental damage if they are not implemented in a sustainable way.

What are the lessons learned from economic reform?

There are a number of lessons that can be learned from the experience of economic reform in different countries. Some of these lessons include:

Economic reform is a complex and challenging process.
Economic reform should be implemented gradually and carefully.
Economic reform should be accompanied by social safety nets to protect the poor and vulnerable.
Economic reform should be supported by strong institutions.
Economic reform should be implemented in a sustainable way.

The First Five Year Plan in India was launched in:
(A) 1951
(B) 1956
(C) 1961
(D) 1966
The main objective of the Green Revolution in India was to:
(A) Increase agricultural production
(B) Increase industrial production
(C) Increase EMPLOYMENT
(D) Reduce poverty
The Mandal Commission was set up in India in:
(A) 1979
(B) 1980
(C) 1981
(D) 1982
The main objective of the Mandal Commission was to:
(A) Provide reservation for Other Backward Classes (OBCs) in government jobs and educational institutions
(B) Provide reservation for Scheduled Castes (SCs) and Scheduled Tribes (STs) in government jobs and educational institutions
(C) Provide reservation for Women in government jobs and educational institutions
(D) Provide reservation for minorities in government jobs and educational institutions
The Naxalite Movement in India began in:
(A) 1967
(B) 1968
(C) 1969
(D) 1970
The main objective of the Naxalite movement is to:
(A) Establish a communist government in India
(B) Establish a socialist government in India
(C) Establish a democratic government in India
(D) Establish a secular government in India
The Babri Masjid was demolished in India in:
(A) 1992
(B) 1993
(C) 1994
(D) 1995
The main reason for the demolition of the Babri Masjid was:
(A) A dispute over the ownership of the land on which the mosque was built
(B) A dispute over the religious significance of the site
(C) A dispute over the historical significance of the site
(D) A dispute over the political significance of the site
The Pokhran-II nuclear tests were conducted by India in:
(A) 1998
(B) 1999
(C) 2000
(D) 2001
The main objective of the Pokhran-II nuclear tests was to:
(A) Demonstrate India’s nuclear capability
(B) Deter nuclear threats from other countries
(C) Develop nuclear weapons for use in war
(D) Develop nuclear weapons for use in peacetime
The Indo-US nuclear deal was signed in:
(A) 2005
(B) 2006
(C) 2007
(D) 2008
The main objective of the Indo-US nuclear deal was to:
(A) Promote cooperation between India and the United States in the field of Nuclear Energy
(B) Facilitate the sale of nuclear technology to India by the United States
(C) Allow India to import nuclear fuel from the United States
(D) Allow India to export nuclear fuel to the United States
The Goods and Services Tax (GST) was implemented in India in:
(A) 2017
(B) 2018
(C) 2019
(D) 2020
The main objective of the GST is to:
(A) Replace the existing indirect taxes with a single, unified tax
(B) Reduce the tax burden on businesses and consumers
(C) Make the tax system more efficient and transparent
(D) Make the tax system more equitable
The demonetization of â¹500 and â¹1,000 notes was announced by the Indian government in:
(A) 2016
(B) 2017
(C) 2018
(D) 2019
The main objective of demonetization was to:
(A) Crack down on black money and counterfeit currency
(B) Promote digital transactions
(C) Reduce the fiscal deficit
(D) Increase tax revenue
The Rafale fighter jet deal was signed between India and France in:
(A) 2016
(B) 2017
(C) 2018
(D) 2019
The main objective of the Rafale fighter jet deal is to:
(A) Strengthen