Question

negative economic reforms of 1991

Answer 1

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It is useful to remember that India reformed not because it elected a reform minded government. India reformed because the policy makers were backed into a corner by a severe balance of payment crisis. The country ran out of Dollars - there was just about enough left for 3 weeks of import and the old ways were not possible anymore.

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Answer 2

The strategy of reforms introduced in India in July 1991 presented a mixture of macroeconomic stabilization and structural adjustment. It was guided by short-term and long-term objectives. Stabilization was necessary in the short run to restore balance of payments equilibrium and to control inflation. At the same time changing the structure of institutions themselves through reforms was equally important from long term point of view.

The new government moved urgently to implement a programme of macroeconomic stabilization through fiscal correction. Besides this, structural reforms were initiated in the field of trade, industry and the public sector.