liberalisation3.ppt (1)

7/26/2019 liberalisation3.ppt (1)

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BMP-MBA 504

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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3

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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