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Question
Why did RBI have to change its role from controller to facilitator of financial sector in India?
Solution
- 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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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.
- According to the given text, ____________ was adopted as the guiding principle of governance and all governments since 1991.
Which other monetary policy instrument the RBI cannot use?
Inventory is a ______ concept whereas the change in inventory is a ______ concept.
Which of following is a direct tax?
Which of the following statements is not true regarding the benefit of GST?
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| 1 | GST | (a) | Indirect Tax |
| 2 | Income Tax | (b) | Burden can be shifted |
| 3 | Fine | (c) | Direct Tax |
| 4 | Tax Receipts | (d) | Capital Receipt |
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Which of the following is a stock?
Identify the correctly matched pair in Column A and Column B from the following:
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| 1 | Uniformity of taxes | (a) | Effect of 2016 Demonetisation |
| 2 | At the State Level | (b) | Benefit of GST |
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| 4 | Brought an end to black money | (d) | SGST |
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.
