Table of Contents
- Economic Crisis of India of 1991
- New Industrial Policies
- Stabilization Measures
- Structural Reforms
- Liberalization
- Privatization
- Globalization
- Explain the New Industrial Policies in India. (UPSC 2016, 200 words, 15 marks)
- Define Globalization and Privatisation. Discuss their objectives. ( UPPSC 2022)
Economic Crisis of India of 1991:
- High Taxation (There were high income and corporate taxes which led to tax evasion)
- Huge loss in Public sector enterprises
- There were huge deficits in the government's Budget
- The deficit from Bank, people, and international institutions
- Growing Unemployment, poverty, and population exploitation
The following are the main features of the economic crisis in 1991:
- The Indian government was not able to pay loans borrowed abroad.
- The foreign exchange reserve was depleted.
- Did not have sufficient reserve of petrol and important items.
- Prices of essential commodities were high.
- No international funding was willing to lend to India.
India went to the World Bank and International Monetary Fund (IMF) for help and received a 7$ billion loan, India promised to liberalize the Indian economy and agreed to open the Indian economy to private companies.
India's New Economic Policy or New Industrial Policies:
It consists of economic reforms and it can be categorized into two groups:
- Stabilization Measures
- Structural Reforms
Stabilization measures:
- Stabilization measures include short-term measure and it was intended to correct the weakness of the economy.
- It focuses on the balance of payments.
- It aimed to maintain sufficient foreign exchange.
- It aimed to keep the inflation within in limit.
Structural reforms:
- Liberalization
- Privatization
- Globalization
Liberalization:
The liberalization of the Indian economy in 1991 refers to a series of economic reforms and policy changes that were initiated to open up and liberalize India's economy. These reforms were undertaken to address a severe balance of payments crisis and to promote economic growth and development. Key aspects of the liberalization process included:
- Deregulation of Industrial Sectors
- Financial Sector Reforms
- Tax reforms
- Foreign Exchanges reforms
- Trade and Investment Policy reforms
Deregulation of Industrial Sectors:
The following were the old scenario:
- Almost every industry requires an industrial license to start or stop the manufacturing or volume of production from government officials.
- Private sectors were not allowed to start a business in many sectors.
- Some goods were reserved for production only from small-scale industries.
- The government has also control over the price of commodities.
In New reforms:
- Abolished industrial licensing to all industrial sectors except alcohol, cigarettes, hazardous chemicals, and pharma.
- Only three sectors are reserved for public sectors that are defense equipment, atomic energy, and railways.
- The price of goods will now be decided by the demand and supply of the goods in most of cases.
Financial Sector Reforms:
- Banking and financial sector reforms were introduced to modernize the banking system, encourage private sector participation in banking, and improve the efficiency of the financial markets.
Tax reforms:
- From 1991; individual income tax and corporate tax rates gradually reduced and now it is in a moderate position.
- The introduction of GST also comes with Indirect tax reforms
Foreign exchange reforms:
- The FDI policy was liberalized, making it easier for foreign companies to invest in India. This attracted foreign capital, technology, and expertise.
- Rupees were devalued against foreign currency leading to an increase in foreign currency
- Now Market determines the exchange rate
Trade and Economic Policies Reforms:
- Tariffs and import restrictions were reduced, allowing for more foreign goods to enter the Indian market and encouraging competition. This opened up the Indian market to global products and ideas.
Privatization:
- The government began the process of privatizing state-owned enterprises to improve their efficiency and reduce the burden on the public sector.
Globalization:
Globalization means the integration of the economy of the country with the world economy.
It is the outcome of various policies such as:
- Creation of networks communication networks and ports
- Transcending economic, social, and geographical boundaries
- Globalization turned global into a borderless world.
- Reflection of events caused in the USA can be observed and felt in India or other parts of the world.
Question.
Explain the New Industrial Policies in India.
(UPSC 2016, 200 words, 15 marks)
Answer.
The following are New Industrial Policies in India:
Make in India:
Make in India was launched in 2014. The "Make in India" initiative aimed to promote India as a global manufacturing hub. It sought to attract foreign direct investment (FDI) and encourage domestic manufacturing across various sectors, including electronics, automobiles, defense, and more.
Ease of Doing Business:
The Indian government took steps to improve the ease of doing business in the country. Reforms included simplifying regulations, reducing red tape, and digitizing processes to make it easier for both domestic and foreign businesses to operate in India.
Atmanirbhar Bharat (Self-Reliant India):
Announced in response to the COVID-19 pandemic, this policy emphasized self-reliance and reduced dependency on imports. It included initiatives to promote domestic manufacturing, particularly in critical sectors such as healthcare, electronics, and defense.
National Manufacturing Policy:
The National Manufacturing Policy aimed to increase the share of manufacturing in India's GDP and create millions of jobs in the sector. It included provisions for the development of National Investment and Manufacturing Zones (NIMZs) and improving infrastructure.
Industrial Corridors:
India planned and developed industrial corridors like the Delhi-Mumbai Industrial Corridor (DMIC) and Chennai-Bengaluru Industrial Corridor (CBIC) to promote industrialization, attract investment, and boost connectivity.
Startup India:
To foster entrepreneurship and innovation, the Startup India initiative was launched to provide support, incentives, and a conducive regulatory environment for startups and small businesses.
FDI Liberalization:
India continued to liberalize foreign direct investment policies, allowing higher levels of FDI in various sectors, including retail, defense, and e-commerce, to attract foreign investment and technology.
Green and Sustainable Industrial Practices:
There was an increasing emphasis on adopting environmentally sustainable practices in industries to address issues related to pollution and climate change.
Skill Development:
Skill development programs were implemented to enhance the employability of the workforce and align it with the evolving needs of industries.
Question.
Define Globalization and Privatisation. Discuss their objectives.
(UPPSC Mains General Studies-I/GS- 2022)
Answer.
Globalization:
Globalization is a multifaceted process characterized by the increased interconnectedness and interdependence of countries, economies, cultures, and societies across the world.
It involves the flow of goods, services, information, technology, capital, ideas, and people across national borders.
The primary objectives of globalization are as follows:
Integration of Markets:
Globalization seeks to create a single global marketplace where goods, services, and capital can move more freely, facilitating international trade and investment.
Economic Growth:
One of the key objectives is to promote economic growth by opening up new markets, increasing efficiency, and fostering innovation and competition.
Access to Resources:
Globalization aims to provide access to resources, both natural and human, from around the world, enabling countries to tap into resources not readily available within their own borders.
Cultural Exchange:
Globalization promotes cultural exchange and the sharing of ideas, values, and traditions among different societies, fostering greater understanding and tolerance.
Technological Advancements:
Globalization encourages the spread of technology and knowledge, leading to advances in science, communication, and industry.
Political Cooperation:
Globalization can promote political cooperation and diplomacy among nations, especially in addressing global challenges like climate change, terrorism, and health crises.
Privatization:
Privatization is the process of transferring ownership and control of public assets, services, or enterprises from the government or public sector to the private sector, typically through the sale or lease of state-owned assets.
The objectives of privatization are as follows:
Efficiency:
Privatization aims to improve the efficiency and performance of formerly government-run enterprises. Private firms are often driven by profit motives and are expected to operate more efficiently.
Reduced Government Intervention:
It seeks to reduce the direct involvement of the government in various sectors of the economy, allowing market forces to play a greater role in resource allocation and decision-making.
Increased Competition:
Privatization often introduces competition in industries that were previously monopolized by the government. Competition can lead to improved services and lower prices for consumers.
Resource Mobilization:
Governments may opt for privatization to raise capital by selling state-owned assets. This revenue can be used for various purposes, such as reducing public debt or investing in other critical areas.
Innovation:
Private ownership can stimulate innovation and investment in research and development, as private companies have incentives to develop new products and services to remain competitive.
Improved Accountability:
Privatization can lead to greater accountability, as private firms are subject to market pressures and customer feedback. Poorly performing companies may lose customers or go out of business.
Job Creation:
In some cases, privatization can lead to job creation as private companies expand and invest in their operations.
It's important to note that the success and impact of globalization and privatization can vary widely depending on the specific circumstances, policies, and regulatory frameworks in place in each country.
Balancing the objectives of these processes with social, economic, and environmental considerations is often a complex and ongoing challenge for governments and policymakers.
You may like also:
ConversionConversion EmoticonEmoticon