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Question
Read the following text carefully and answer the given questions on the basis of the same and common understanding.
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The stabilisation and structural adjustment measures, initiated under the 1991 “Economic Reforms” mark a watershed moment in India's economic policies. For almost three decades since independence, India’s development strategy and economic policies were guided by the objectives of accelerating the growth of output and employment with social justice and equity. Ever since the 1970s, it was realised that many of the regulations on economic activities have outlived their usefulness and were in fact hampering economic growth and development. In response to this, the government initiated some milder liberalisation reforms for almost a decade since the early 1980s. However, the Indian economy soon had to face the Gulf crisis and consequently:
These led to the Indian economy on the verge of Economic crisis. In response to this emerging crisis, the Government initiated a set of stabilisation and. structural reforms like:
The key objective of stabilisation policy was to bring the growth of aggregate demand in line with long term growth path of the economy. In conjunction, the structural adjustment measures like;
Were taken to improve the supply side of the economy. This shifted the long-term growth path of the economy itself completely. |
- Discuss any two reason behind the introduction of Economic Reforms in 1991.
- “In response to the emerging crisis in 1991, the Government initiated a set of stabilisation and structural reforms”.
Briefly discuss any three of such measures.
Solution
- Reasons behind Introduction of Economic Reforms in 1991:
- Serious BOP position: Due to the low quality and high pricing of domestically manufactured items, India's imports surged significantly but exports did not expand as planned. It resulted in a BOP deficit.
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Huge debt burden: There was significant government spending in comparison to domestic revenue. It resulted in an increase in borrowing from the rest of the world. It increased the burden of loan principle and interest. Furthermore, PSUs were unable to generate revenue for the government.
As a result, India was forced to approach the IMF and World Bank for a loan contingent on economic changes (liberalisation, privatisation, and globalisation) in the country.
- Stabilisation and Structural Reforms in 1991:
- Liberalisation: It refers to the freedom of the manufacturing sector from physical government regulations. Except for a few businesses, industrial licensing was discontinued. The government was hired. Tax and foreign exchange reforms were implemented.
- Privatisation: It is the process of involving the private sector in the ownership or management of public sector enterprises. Disinvestment was a significant step in this direction. PSUs with high performance have been designated as Navratnas. It increased competition and efficiency.
- Globalisation: It refers to a country's economic integration with the rest of the world. The equity ceiling for foreign investment has been raised. Import quantitative restrictions have been lifted. It resulted in an increase in foreign exchange reserves and increased competition in the international market.
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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.
Read the following statements carefully and choose the correct alternatives given below:
Statement 1 - 1991 was a landmark moment in India’s post-independence history as that changed the nature of the economy in fundamental ways.
Statement 2 - India’s economic establishment launched a multipronged reforms agenda to repair India’s macroeconomic balance sheet and ignite growth.
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.
- In the light of the given text and common knowledge, identify the incorrect statement -
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.
Read the following statements carefully and choose the correct alternatives given below:
Statement 1 - Timing and sequencing are critically important in the post-economic reform agenda.
Statement 2 - Post pandemic reforms in India require a paradigm shift.
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.
Read the following statements - Assertion (A) and Reason (R):
Assertion (A) - The 1991 reforms released the vitalities of Indian businesspersons.
Reason (R) - The reform agenda established a paradigm shift and defined the broad outlines of economic policymaking for years to come.
From the given alternatives choose the correct one:
LPG stands for:
