BRIEFLY EXPLAIN THE BACKGROUND OF ECONOMIC REFORMS IN INDIA?
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India Economic Reform
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The economy of India is one of the fastest growing economies in the world. Since its independence in the year 1947, a number of economic policies have been taken which have led to the gradual economic development of the country. On a broader scale, India economic reform has been a blend of both social democratic and liberalization policies.
Economic reforms during the post independence period
The post independence period of India was marked by economic policies which tried to make the country self sufficient. Under the economic reform, stress was given more to development of defense, infrastructure and agricultural sectors. Government companies were set up and investment was done more on the public sector. This was made to make the base of the country stronger. To strengthen the infrastructure, new roads, rail lines, bridges, dams and lots more were constructed.
During the Five Years Plans initiated in the 1950s, the economic reforms of India somewhat followed the democratic socialist principle with more emphasis on the growth of the public and rural sector. Most of the policies were meant towards the increase of exports compared to imports, central planning, business regulation and also intervention of the state in the finance and labor markets. In the mid 50's huge scale nationalization was done to industries like mining, telecommunications, electricity and so on.
Economic Reforms during 1960s and 1980s
During the mid 1960's effort was made to make India self sufficient and also increase the production and export of the food grains. To make the plan a success, huge scale agricultural development was undertaken. The government initiated the ‘Green Revolution’ movement and stressed on better agricultural yield through the use of fertilizers, improved seed and lots more. New irrigation projects were undertaken and the rural banks were also set up to provide financial support to the farmers.
The first step towards liberalization of the economy was taken up by Rajiv Gandhi. After he became the Prime Minister, a number of restrictions on various sectors were eased, control on pricing was removed, and stress was given on increased growth rate and so on.
Economic Reforms during 1990s to the present times
Due to the fall of the Soviet Union and the problems in balance of payment accounts, the country faced economic crisis and the IMF asked for the bailout loan. To get out of the situation, the then Finance Minister, Manmohan Singh initiated the economic liberation reform in the year 1991. This is considered to be one of the milestones in India economic reform as it changed the market and financial scenario of the country. Under the liberalization program, foreign direct investment was encouraged, public monopolies were stopped, and service and tertiary sectors were developed.
Since the initiation of the liberalization plan in the 1990s, the economic reforms have put emphasis on the open market economic policies. Foreign investments have come in various sectors and there has been a good growth in the standard of living, per capital income and Gross Domestic Product.
Due to the global meltdown, the economy of India suffered as well. However, unlike other countries, India sustained the shock as an important part of its financial and banking sector is still under government regulation. Nevertheless, to cope with the present situation, the Indian government has taken a number of decisions like strengthening the banking and tertiary sectors, increasing the quantity of exports and lots more.
Answer:
Here is a background of economic reform in India:
Explanation:
Since 1980, there has been a financial crisis. We all know that to implement various programs, the government must raise finances through various means, such as taxation and the operation of public-sector firms. When expenditure exceeds revenue, the government borrows to balance the budget from banks, as well as from individuals within the country and from overseas banks.
The varied development policies necessitate massive funding. However, funds were scarce. Even when revenues were low, the government had to overreach to confront difficulties like unemployment, poverty, and population growth.
- The government's ongoing investment in development programmes generated little more money. At the same time, the government was unable to create finances on its own.
- When the government spent a big portion of its revenue on sectors that did not produce immediate returns, there was a need to employ the remainder of its revenue in an extremely efficient manner.
- The income from public-sector enterprises was likewise insufficient to satisfy rising expenditures.
During the late 1980s, the government's spending outpaced its revenue. Many necessary goods' prices have risen. Imports increased dramatically. Foreign exchange reserves have decreased significantly and are now insufficient to cover our imports for more than two weeks. There was a lack of finances even to pay interest to overseas lenders, and no country or international bank was willing to lend to India any further.
In this situation, India contacted the International Bank for Reconstruction and Development and the International Monetary Fund for a loan of $7 billion to deal with the problem.
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