liberalisation3.ppt (1)
TRANSCRIPT
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1M.S Ramaiah School of Advanced Studies - Bangalore
Session 3
i!erali"ation
Session S#ea$er
%a&ashree '
Asst. Professor
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LIBERALIZATION
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INTRODUCTION
i!erali"ation of the econom& means to free it from
direct or #h&sical controls im#osed !& the
government.
)conomic reforms *ere !ased on the assum#tion
that mar$et forces could guide the econom& in a
more effective manner than government control.
)+am#les of one of other undevelo#ed countries li$e
'orea, hailand, Singa#ore, etc. that had achieved
ra#id economic develo#ment as a result of
li!erali"ation *ere $e#t in consideration.
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hat made /ndia to li!erali"e
A Balance of Pa&ments crisis in 11 *hich#ushed the countr& to near !an$ru#tc&.
the Ru#ee devalued and economic reforms *ere
forced u#on /ndia.
/ndia central !an$ had refused ne* credit and
foreign e+change reserves had reduced to the #ointthat /ndia could !arel& finance three *ee$s2 *orth
of im#orts
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Reforms ta$en during
li!erali"ation
A!olition of industrial licensing and registration i!erali"ing the MRP act
reedom for e+#ansion and #roduction
/ncrease in the investment limit of the small
industries reedom to im#ort ca#ital goods
reedom to im#ort technolog&
ree determination of interest rates
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/m#act of these reforms
Annual gro*th in 6P
A rate of gro*th that *ill dou!le averageincome in a decade
Ra#id ro*th in all sectors.
)+#orts of information technolog&ena!led services #articularl& strong.
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89MP9:):S
9
/B)RA/;A/9:
/ndustrial
i!erali"ation
rade
i!erali"ation
inancial
i!erali"ation
iscal Sector
Reforms
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uit& ca#ital of units manufacturing items
reserved for the small scale industries.
oreign /nvestment Promotion Board ?/PB@ is a
com#etent !od& to consider and recommend
foreign direct investment.
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rade #olic& allo*ing domestic #roviders ?of goods andorservices@ to com#ete more freel& in *orld mar$ets and
foreign #roviders to com#ete more freel& in domestic
mar$ets.
(. rade i!erali"ation
TRADE SECTORREFORMS
/M/:A/9:9 /MP9R
/8):S/:
RA/9:A/SA/9:
9 AR/
SR8R)
A69P/9:
9 )C/B)
)C8DA:)
RA)
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inancial li!erali"ation ?@ refers to the deregulation of
domestic financial mar$ets and the li!erali"ation of the
ca#ital account.
/n one vie*, it strengthens financial develo#ment and
contri!utes to higher long-run gro*th. /n another vie*, it
induces e+cessive ris$-ta$ing, increases macroeconomic
volatilit& and leads to more fre>uent crises.
3. inanciali!erali"ation
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Financia Li!erai"ation re#orms
R)9RMS /:
:'/: S)89R
R)9RMS /:8AP/A MAR')
R)9RMS /:
/:SRA:8)
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4. iscal Sector Reforms
/ndiaEs fiscal sector reforms hel# to raise the rate of savings
and investment in /ndia. his further hel#s to enhance the
#roductivit& of #u!lic e+#enditures
/ndia has esta!lished itself as one of the fastest gro*ing
economies in the *orld. /ndia is also advancing to*ards the
economical gro*th and im#rovement in literac&.
6uring 1-(000, /ndiaEs domestic savings and investment
*as estimated to gro* !& (3= and /ndian econom& *as
e+#ected to gro* !& .4= although the average gro*th rate
declined to .0= in com#arison to earlier &ear.
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/n the first five &ear #lan, /ndia had attained anaverage annual gro*th rate !& 3.5=.
/ndian econom& sho*ed an average gro*th rateof .4=, *hich *as 5.= in the
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Indian Foreign E$c%ange Reserves& a stead' rise
a#ter i!erai"ation
Foreign exchange reserves (US$ billion)
2.2 17.0
54.1
75.4
118.3
0
50
100
150
1990-91 1995-96 2001-02 2002-03 2003-04
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Foreign Investments a#ter i!erai"ation
103
5,138 5,385 6,789
8,152
5,639
15,872
0
2000
4000
6000
8000
10000
1200014000
16000
18000
1990-91 1994-95 1997-98 2000-01 2001-02 2002-03 2003-04
Total Foreign Investment (U! million"US$ million
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Im(ort d)t' Red)ctions a#ter i!erai"ation
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