Economic reforms in India refer to the fundamental changes that were launched in 1991 with the plan of liberalizing the economy and quickening its rate of economic growth. The Narasimha Rao Government, 1991, started the economic reforms to rebuild internal and external faith in the Indian economy.
The reforms intended at bringing in larger cooperation of the private sector in the growth method of the Indian economy. Policy changes were proposed regarding technology up-gradation, industrial licensing, removal of restrictions on the private sector, foreign investments, and foreign trade. The essential features of the economic reforms are Liberalisation, Privatisation, and Globalisation,
Examples of Economic Reforms in India
1. Liberalization: Right from the 1980s India has witnessed significant Reforms which fall under the following two groups.
Stabilization Measures – These are short-term measures that are aimed at reducing the crisis by maintaining foreign exchange reserves.
Structural Reform Policies – These are long-term measures that work at the root of Economic policies. They are geared towards enhancing international competitiveness and discarding hindrances like rigid rules and restraining regulations.
Breaking these shackles was the major part of the liberalization of India’s Economy. Many changes were done in the following areas.
- Import of technology.
- Protection of domestic industries from foreign competition by imposing quantitative restrictions on imports.
- Import of capital goods along with an affordable rate of public investment.
- The industrial licensing system was eradicated barring a few industries like alcohol, drugs, cigarettes, harmful chemicals, industrial explosives, aerospace, electronics, and pharmaceuticals.
- India allowed investment by foreign institutional investors like mutual funds, merchant Bankers, pension funds, etc. in the Indian financial arena.
The following are some of the beneficial effects of liberalization of the Economy in India.
- Rise in stock market values.
- India is now one of the prominent exporters of IT products and services.
- There was a reduced political risk for the investors.
- Privatization: Privatization means giving private players a chance into segments that were earlier monopolized by the Government. This included transforming Government companies into private companies by the following three means.