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प्रश्न
Why did RBI have to change its role from controller to facilitator of financial sector in India?
उत्तर
- Prior to liberalisation, RBI used to regulate and control the financial sector that includes financial institutions like commercial banks, investment banks, stock exchange operations and foreign exchange market.
- With the economic liberalisation and financial sector reforms, RBI needed to shift its role from a controller to facilitator of the financial sector.
- This implies that the financial organisations were free to make their own decisions on many matters without consulting the RBI.
- This opened up the gates of financial sectors for the private players.
- The main objective behind the financial reforms was to encourage private sector participation, increase competition and allowing market forces to operate in the financial sector.
- Thus, it can be said that before liberalisation, RBI was controlling the financial sector operations whereas in the post-liberalisation period, the financial sector operations were mostly based on the market forces.
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संबंधित प्रश्न
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India’s post-1990 economic strategy entailed three important breaks with the past:
- To dismantle the vast network of controls and permits that dominated the economic system.
- To redefine the role of the state as a facilitator of economic transactions and as a neutral regulator rather than the primary provider of goods and services.
- To move away from a regime of import substitution and to integrate fully with the global trading system.
The 1991 reforms unleashed the energies of Indian entrepreneurs and gave untold choices to the consumers and changed the face of the Indian economy. The reform agenda constituted a paradigm shift and has defined the broad contours of economic policymaking for three decades.
Liberalization was adopted as the guiding principle of governance and all governments since 1991, have broadly stuck to that path.
Today we don’t need a paradigm shift. We need to look at individual sectors and see which one of these needs, reforms to create a competitive environment and improve efficiency. The power sector, the financial system, governance structures, and even agricultural marketing need reforms.
Today’s reforms also require much more discussion and consensus-building. The central government needs to work in tandem with state governments and consult different stakeholders impacted by reform decisions. Timing and sequencing are critically important in the new reforms’ agenda.
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Assertion (A): In 1991, as an immediate measure to resolve the Balance of Payments crisis, the rupee was devalued against foreign currencies.
Reason (R): Devaluation of currency was eminent, to replenish the deteriorated foreign exchange reserves.
