Ramesh Singh Test : Economic Reforms

• As these economies were dominated by foreign colonisers, they worried that opening the economy to foreign investment would lead to a new form of domination, the domination by large multinationals.

• That is why most of these countries went for a protectionist economic policy with import substitution as one method, side by side.

• By the early 1980s, a new development strategy emerged. Though it was not new, it was the old idea getting vindicated after failure a comparatively newer idea.

• Governments of the socialist or the planned economies were urged/ suggested to privatise and liberalise, to sell off state-owned companies and eliminate government interventions in the economy.

• These governments were also suggested to take measures which could boost the aggregate demand in the economy (i.e., macroeconomic stability measures). The broad outlines of such a development strategy were regarded as being inspired by the Washington Consensus.

• On July 23, 1991, India launched a process of economic reforms in response to a fiscal balance-of-payment (BoP) crisis. The reforms launched a process to a fiscal and balance of payment crisis.

• The reforms were going to change the very face and the nature of the economy in the coming times.

• Back in the mid-1980s, the governments had taken its first steps to economic reforms. While the reforms of the 1980s witnessed rather limited deregulation and partial liberalisation of only a few aspects of the existing control regime, the reforms started in early 1990s in the fields of industries, trade, investment and later to include agriculture, were much wider and deeper.

• The process of economic reforms started in India with the slogan 'reforms with human face'

• The slogan has utterly failed to garner the empathy of the masses.

The IMF conditions put forth for India were as under

• (i) Devaluation of the rupee by 22 per cent.

• (ii) Drastic reduction in the peak import tariff from the prevailing level of 130 per cent to 30 per cent.

• (iii) Excise duties to be hiked by 20 per cent to neutralise the revenue shortfalls due to the custom cut.

• (iv) All government expenditure to be cut down by 10 per cent, annually (i.e., cutting the cost of running the government and denotes, interests, pays, pension PF and subsidies).

• Precisely seen, liberalisation shows the direction of reform, privatisation shows the path of reform and globalisation shows the ultimate goal of the reform.

• However, it would be useful to see the real meanings of these terms and the exact sense in which they are being used worldwide and particularly in India.

• All the economic policies which directly or indirectly seem to promote the expansion of the private sector or the market (economy) have been termed by experts and the governments as the process of privatisation.

• We may cite a few examples from India-de-licencing and de-reservation of the industries, even cuts in the subsidies, permission to foreign investment, etc.

• Fourth Generation Reforms. This is not an official generation' of reform in India. Basically, in early 2002, some experts coined this generation of reforms which entail a fully ‘information technology-enabled India.

They hypothesised a ‘two-way connection between the economic reforms and the information technology (IT), with each one reinforcing the other.

The correct combination is I) and II).

Explanation:

Industrial deregulation refers to the process of reducing government control over industries, allowing them to operate more freely and efficiently. This typically involves removing restrictions and regulations that hinder the growth and development of industries.

I) Restrictions imposed by Licensing policy was removed: Deregulation involved the removal of licensing restrictions, which were barriers to entry for new firms in the industry. By removing these restrictions, industries were opened up to more competition, promoting efficiency and innovation.

II) Price fixation and controls were removed: Another aspect of deregulation was the removal of price controls, which allowed industries to set their prices according to market forces. This encouraged competition and led to more efficient allocation of resources in the economy.

III) Private sector was not allowed to enter the public space: This statement is incorrect. One of the main objectives of industrial deregulation was to allow the private sector to enter industries that were previously reserved for the public sector. This increased competition and efficiency in the industries, leading to better products and services for consumers.