It will be a cliche to say that Indian reforms are path-breaking.
Though there are still many grey areas it has neverthless made giant
strides in its ambitious reforms process.
The reforms process can be traced back to 1985 when Rajiv Gandhi was
at the helm. But the real impetus was given from July 1991 by the then
Prime minister Mr. P. V. Narasimha Rao when the country was at the
verge of a macroeconomic and balance of payment crisis. The process
which started with the abolition of antiquated FERA and MRTP acts
changed our mindsets and ushered us into a new era of free market
economy.
The significant changes that took place from July 1991 are summed up
below
Abolition of FERA, MRTP acts.
Slashing of customs duty from a peak of 400% to 65% now.
Raising the ceiling on foreign equity.
Opening up of Public sector for Private investment.
Reduction of import licensing.
Easing of Rupee convertiblity.
Relaxation of earlier guidelines to attract more Foreign Capital-
Direct and Portfolio.
This had a far reaching impact on our economy which includes
Repayment of IMF loans ahead of schedule.
A steady growth rate of 5.9 percent per annum for the last four
years against the Plan target of 5.6 percent - soon expected to
go over 7% or even 8%.
Foreign Direct investment of $1.5 billion. ($150 million in 1991)
Foreign portfolio investment of $3.5 billion ( Almost nil in 1991)
Single digit inflation.
While the grey areas of the reform has been
Infrastructure development has been minimal and therefore
bottlenecks are likely to hamper the growth in the future.
While Foreign Portfolio investments have increased tremendously
Direct investments have been low.
Imports have outpaced the growth in exports leading to a larger
trade deficit.
Credit squeeze and the resultant rise in the interest rates have
lowered industrial growth.
Growth in GDP has been mainly due to growth in service sector
and manufacturing sector while contribution of agriculture has
come down.
Some of the touchy and politically sensitive issues still to be tackled
A Fully convertible rupee.
Individual foreign investors to make portfolio investment in the
capital market.
Still a high corporate tax.
Antiquated labour laws.
Public sector dominance in key infrastructural areas like Railways,
Telecom etc.
Insurance and banking sector has to open up.
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