GPE Presentation1

8/3/2019 GPE Presentation1

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Modern India Economic

Reforms 1991

Group 1

IMI


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Sir, I do not minimise the difficulties that lie ahead on thelong and arduous journey on which we have embarked.

But as victor Hugo once said, no Power on earth can stop

an idea whose time has come.

I suggest to this august House that the emergence of Indiaas a major economic power in the world happens to be one

such idea. Let the whole world hear it loud and clear.

India is now wide awake.

We shall prevail. We shall overcome.

-Dr. Manmohan Singh

(budget speech 1991)


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Pre 1991 India: A Closed Economy

Rupee inconvertible

License Raj

High tariff and import duties Restrictive Labour laws

State run affairs


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Need for Reforms?

The current account deficit was 3.1% of GDP

The central governments fiscal deficit was

7.9% of GDP in 1989-90 Foreign-exchange reserves was of US$2.2

billion.

Indian economy was facing bankruptcy.


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Role Of IMF and World Bank

IMFs reasons for Indias situation:

The balance of payments crisis:

brought on when India ramped up exports to the

erstwhile Soviet Union by 50% in hard currency.

Debt waiver for small farmers.

The IMF and WB blamed the poor macroeconomic

policies under the Congress regime of the 1980s.


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IMFs Solution

Indias two choices:

1. To undertake reforms that will promise the

needed external support.

2. disorderly and painful transition

Loans only on fulfilment of demand:

Shipment of Gold


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Reform Measures

Devaluation

Disinvestment

Abolishment of License Regime Allowing Foreign Direct Investment (FDI)

Abolition of the (MRTP) Act

Wide-ranging financial sector reforms

The removal of quantitative restrictions onimports.


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Impact of Economic Reforms


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Overall Impact

Improvement in Performance of the Economy the average annual growth rate between 1992-93 and 1999-2000 was 6.3%

Growth in EmploymentOpportunities and Better Emoluments

coming up of many new domestic private companies as well as multinationalcompanies

Large Reserves of Foreign Exchange

increased from US$ 5.8 billion in 1990 to US$ 42.2 billion in 2001.

Easy Availability of Bank Loans

Easier Access to Foreign Technology

Significant Fall in Poverty Ratio

The poverty ratio decreased from 36% in 1993 - 94 to 26.1% in 1999 2000

significant growth in the government expenditure on health and educationsector


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Increase expenditure in health and education

life expectancy : 63.3 years in 2000

infant mortality rate : 69 per thousand live births in 2000.

Fall in Inflation Rate

Remarkable Growth in Foreign Trade

Increasing Foreign Direct Investment

Growth rate in FDI inflows: 244% between 1980-81 and

1990-91 and 588% between 1990-91 and 2002-03.


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Serv

ice Sector


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Civil Aviation Growth in Air Travel

1 March 1994 : Repealment of the AirCorporation Act .

1 February 1995 : Six operators given thestatus of scheduled operators .

Growth : no. of passengers carried in the

domestic sector increased from 42% during1981 to 1990-91 to 76% during 1990-91 to2002-03 .


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Telecom Industry

Pre-reforms : government could never meet

the demand for telephones.

Post reforms :

Prices of services felldrastically.

no. of telephone connections

1991 : 5.07 million(fixed lines)

2003 : 54.62 million


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I.T. Industry

Growth : US $ 150 million in 1991-92 to US $

5.7 in 1999-2000.

exports software and services to nearly 95countries around the world.


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Manufacturing Sector


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Growth of Automobile industry

The number of registered motor vehicles increased from 51.73lakhs in 1980-81 to 2.14 crores in 1990-91 and to 5.5 crores in2000-01

Increase in technological sophistication Adherence to the global environmental norms regarding emission

standards

Quality certifications.

The upward trend in exports also reflects the changing nature

of technological sophistication of the Indian automotive sector.

The growth is much more apparent in segments such aspassenger cars, and recently, in the 2- and 3- wheelers


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METALLURGY ( Steel and Iron)

Major developments Large plant capacities that were reserved for public

sector were removed;

Export restrictions were eliminated;

Import tariffs reduced from 100 percent to 5 percent;

Decontrol of domestic steel prices;

Foreign investment was encouraged, and the steelindustry was part of the high priority

industries for foreign investments and implyingautomatic approval for foreign equity participation upto 100 percent;


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PRODUCTION OF FINISHED CARBON STEEL (In million tonnes)Year Main

Producers

Secondary

Producers

Grand

Total

% of share of

Secondary Producers

1991-1992 7.96 6.37 14.33 14.5%

1992-1993 8.41 6.79 15.20 44.7%

1993-1994 8.77 6.43 15.20 42.3%

1994-1995 9.57 8.25 17.82 46.3%

1995-1996 10.59 10.81 21.40 50.6 %

1996-1997 10.54 12.18 22.72 53.6 %

1997-1998 10.44 12.93 23.37 55.32 %

1998-1999 9.86 13.24 23.82 57.32 %

1999-2000 11.20 15.51 26.71 58.07 %

2000-2001 12.51 17.19 29.7 57.88 %

2001-2002 13.05 17.58 30.63 57.40 %

2002-2003 14.39 19.28 33.67 57.27 %

2003-2004 15.19 21.00 36.19 58.03 %

2004-2005 15.61 24.44 40.05 61.02 %

2005-06 (Prov.) 16.236 26.400 42.636 61.92 %

2006-2007 17.390 37.756 55.146 68.46 %

2007-2008 17.765 40.565 58.233 69.54 %

2008-2009 17.216 46.229 63.445 72.86%

2009-2010 18.038 51.093 69.131 73.9 %

2010-2011

(Prov)

18.280 57.461 75.741 75.86%


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PRODUCER - WISE PRODUCTION OF PIG IRON (In million tonnes)

Year Main

producers

Secondary

producers

Grand

total

%age share of the

Secondary Producers

1991-1992 1.49 0.10 1.59 6.3%

1992-1993 1.68 0.17 1.85 9.2%

1993-1994 1.98 0.27 2.25 12.0%

1994-1995 2.01 0.78 2.79 28.0%

1995-1996 1.74 1.06 2.80 37.9%

1996-1997 1.73 1.57 3.30 47.5%

1997-1998 1.70 1.68 3.39 49.5%

1998-1999 1.37 1.60 2.97 53.87%

1999-2000 1.24 1.94 3.18 61.08%

2000-2001 0.96 2.15 3.11 69.13%

2001-2002 1.02 3.05 4.07 75.04 %

2002-2003 1.11 4.18 5.29 79.05 %

2003-2004 0.97 4.25 5.22 81.48 %

2004-2005 0.625 2.603 3.228 80.63 %

2005-06 (Prov) 1.006 2.850 3.856 73.91 %

2006-2007 0.860 4.133 4.993 82.77%

2007-2008 0.936 4.378 5.314 82.38 %

2008-2009 0.589 5.662 6.211 90.51 %

2009-2010 0.731 5.215 5.946 87.7 %

2010-2011

(Prov)

0.579 5.006 5.585 89.63 %


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Financial Sector


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Regulated Capital Market Free for all atmosphere too many scandals

SEBI

Transparent Market

Investor rights.

Exchange Control and Convertibility On Current account transactions

Foreign Institutional Investment in India Equity

International borrowings

The Insurance sector New players-new insurance based product

Intense Competition

IRDA


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Banking and credit policy

Reduced CRR and SLR

Deregulation of Interest Rate

Fixing prudentialNorms

Introduction of CRAR

Operational Autonomy

Banking Diversification New Generation Banks

Improved Profitability and Efficiency


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Agriculture Sector


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In the early 1950s, half of Indias GDP came from theagricultural sector. By 1995, that contribution was halvedagain to about 25 per cent.

Private sector has been allowed and encouraged toparticipate in the import and export of major agricultural

products.

This shift from agriculture based economy has been good forIndia and as of now 52% of GDP comes from service industry

Year 1951 1965 1976 1985 1991 1999

Percentage share ofGDP 52.2 43.6 37.4 32.8 28.3 24.4


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Conclusion

Indias economy clearly is on the move and most

certainly has the potential to emerge as a global

economic power within next twenty to twenty-

five years. However, this potential can be made

a reality only if India mobilizes adequate political

will and quickly commits itself to design and

fully implement the next phase of deepersecond-generation reforms.


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