The entire world economy has been experiencing dramatic changes during late 80’s and 90’s. Economic reforms are nothing but some policy measures which change the socio-economic structure of an economy. So friends, In today’s article we are going to know about What is Economic reforms? (Economic reforms in India) . So let’s discuss in details.
The primary aim of economic reforms is to achieve competitiveness and over come the crises.
Economic reforms in India
The 1st phase of economic reforms started in India during 1985. At that time it provided importance on improvement in productivity modern technology and fuller utilization of capacity. But the 1st phase failed to create expected result.
The 2nd phase of economic reform started in India in 1991 under the leadership of Dr. Manmohan Singh, the Finance Minister of India.
What are the main features of Economic reforms?
The new economic reform policy includes various measures relating to industry, public sector, fiscal policy, price policy, etc. The main important features of economic reforms are given in the following grounds-
• Liberalization – Liberalization means liberalizing the economy from unnecessary controls and regulations. Under economic reforms, liberalization indicates liberalizing the trade and industry from unwanted restrictions.
• Privatization – The word privatization means introduction of private ownership in publicly owned and managed enterprises. In other words it signifies introduction of private controls and management in public sector enterprises.
Under economic reforms private sector has been allowed to play a major role in respect of economic activities.
• Globalization – Globalization means opening up of the economy for world market to achieve competitiveness. Thus it indicate interaction of the country relating to production, trading and financial transactions with the developed countries of the world.
• New Public Sector Policy – Another important features of new economic reforms policy 1991 is its change in public sector policy. The new policy has shifted its importance from public to private sector.
In order to assess the role of the industries, the govt of India introduced new policy in 1991.
• Modernisation – The economic reform provided high priority to the introduction of modern techniques in production system. Major importance provided on computer information and technology.
• Fiscal Reforms – Another important features of new economic policy 1991 is to introduce fiscal policy reforms. The main objective of this policy is to reduce the fiscal deficit of the country.
• Financial Reforms – The new economic policy has undertaken various measures for the reform of its financial sector. This reforms includes the reform measure regarding banking sector, capital and money market.
Positive Impact of Economic Reforms
The positive impact of economic reforms or favourable consequence of economic reforms or positive impact of globalisation in India are given in the following grounds-
• High rate of growth – Before globalization the growth rate of Indian economy was very low. It was just 4% per annum before 1991. But due to globalization it increases 8.6%.
• Consumer Freedom – The globalisation expanded the market of consumer goods. As a result consumers are new enjoying variety of products and services. It increases the volume of world class consumption.
• Rise in foreign direct investment (FDI) – Globalisation increases the volume of foreign direct investment in Indian economy. The multinational corporations are providing foreign direct investment in our economy in form of capital and technology. As a result productivity and quality of services has increased.
• Decrease in the price level – Due to globalization, the annual rate of inflation has been reduced from the pick level. Huge foreign competition reduced the price level of different product and services.
• Reduce in fiscal deficit – Globalization reduces the amount of fiscal deficit. In 1991 the fiscal deficit of India was 8.5%. Due to reformative measures fiscal deficit reduced to 5.9% in 2010-11.
Negative Impact of Economic Reforms
The Negative impact of economic reforms or Adverse consequence of economic reform or Negative impact of globalisation in India are given in the following grounds-
• Neglect of firm sector – Economic reforms measures influence only industrial and service sector. It does not influence the firm sector of the economy. As a result the firm sector is suffering from several defects such as high price level, competitive and low development.
• Unemployment – Globalization creates employment opportunities only in the MNCs. On the other hand, due to privatization the employment opportunities contracts in the public sectors.
• Growing Regional Disparities – Globalization helps the city based economy of the country. It did not affect significantly the backward rural economy. Thus it creates the problem of imbalance. It creates the problem of rural to urban migration.
• Undesirable Social Consequences – Globalization means opening up of the economy for world market. As a result it imported some undesirable customs and social behavior or practices. These undesirable imported practices are against of Indian culture and tradition.
• Poverty Problem – The globalization process did not influence the poverty problem in different ways. Such as it creates the gap between rich and poor, developed and under developed areas.
What are the objectives of Economic Reforms?
The government of India introduced the economic reform in order to save the economy from the following objective of economic reforms of India-
• The public sector enterprises are facing the problem of low productivity and poor performance. In order to make necessary remedy to these problems economic reforms is necessary.
• The current economic reform made provision for increased flow of foreign investment. Which would help the country to modernise its technology and also for increasing its productivity.
• The Indian economy is facing the problem of rising fiscal deficit. In order to reduce the fiscal deficit, economic reform is necessary.
• The new economic reforms has faced the industrial sector from unnecessary regulation and control of the government.
• Another objective of economic reform is to modify the export sector. This is because through the development of export sector the country can earn foreign exchange.
• The major objective of of economic reform is to make the national economy or income more competitive.
So friends, this was the concept of Economic reforms 1991 in India. Hope you get the full details about it and hope you like this article.
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