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    India Economic Reform of 1991

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    Divanshu Sachdeva
    The 1991 economic reforms in India, known as the LPG reforms, were introduced to liberalize, privatize, and globalize the Indian economy. The reforms were introduced due to a balance of payments crisis in 1991 that made the existing state-controlled economic model unsustainable. The key reforms included industrial deregulation, reduced import tariffs, and increased foreign direct investment. While the reforms led to strong GDP growth and increased trade, full implementation of reforms was still needed in areas like banking, land acquisition, and labor laws to sustain higher long-term growth.

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    India Economic Reform of 1991

    Uploaded by

    Divanshu Sachdeva
    59 views21 pages
    The 1991 economic reforms in India, known as the LPG reforms, were introduced to liberalize, privatize, and globalize the Indian economy. The reforms were introduced due to a balance of payments crisis in 1991 that made the existing state-controlled economic model unsustainable. The key reforms included industrial deregulation, reduced import tariffs, and increased foreign direct investment. While the reforms led to strong GDP growth and increased trade, full implementation of reforms was still needed in areas like banking, land acquisition, and labor laws to sustain higher long-term growth.

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    The 1991 economic reforms in India, known as the LPG reforms, were introduced to liberalize, privatize, and globalize the Indian economy. The reforms were introduced due to a balance of payments crisis in 1991 that made the existing state-controlled economic model unsustainable. The key reforms included industrial deregulation, reduced import tariffs, and increased foreign direct investment. While the reforms led to strong GDP growth and increased trade, full implementation of reforms was still needed in areas like banking, land acquisition, and labor laws to sustain higher long-term growth.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    59 views21 pages

    India Economic Reform of 1991

    Uploaded by

    Divanshu Sachdeva
    The 1991 economic reforms in India, known as the LPG reforms, were introduced to liberalize, privatize, and globalize the Indian economy. The reforms were introduced due to a balance of payments crisis in 1991 that made the existing state-controlled economic model unsustainable. The key reforms included industrial deregulation, reduced import tariffs, and increased foreign direct investment. While the reforms led to strong GDP growth and increased trade, full implementation of reforms was still needed in areas like banking, land acquisition, and labor laws to sustain higher long-term growth.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 21

    India Economic Reform of

    1991

    LPG MODEL
    WHY?
     While the crisis hit India in 1990-91, it
    had been building for half a decade prior
    to the crisis year.
     India's industry became uncompetitive
    using outdated technology, producing
    the same old models and was unable to
    sell its products overseas.
     The year 1990-91 ended with a fiscal
    deficit of 8.4% of GDP.

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 2


    COMPETITION GRAPHIC

    Convenient

    CHINA
    UNITED STATES OF AMERICA

    Affordable Expensive

    UNITED KINGDOM
    INDIA

    GERMANY OTHERS
    Inconvenient

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 3


    PROBLEM

    Market gap Financials Customers

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 4


    SOLUTION

    Close the gap Target audience Cost savings Easy to use

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 5


    UNIQUE

    AUTHENTIC
    LPG MARKET
    ORIENTED

    NEW
    TRANSITION
    TO TAX AND
    BUSINESS

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 6


    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 7
    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 8
    Company
    overview
    Transition to a market oriented economy

    “By June 1991, the balance of payments


    crisis had become overwhelming Ly a
    crisis of confidence in the Government's
    ability to manage the balance of payments“

    For the first time, foreign investment up to


    51 per cent equity was automatically
    allowed in a wide range of industries.
    Industrial licensing was virtually abolished
    and Monopolies and Restrictive Trade
    Practices (MRTP) clearances dispensed
    with.

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 10


    Import duty reduction

    Reforms of the early nineties focused on trade and industry.

    Expert committee based process helped in charting an agenda


    forreforms.

    Some reforms were introduced in the scale and financial sector

    Till the mid-nineties, the government used to borrow directly from


    the RBI through the issue of ad-hoc treasury bills.

    Automatic monetization of debt was discontinued: The Centre was


    soon barred from direct borrowing from the RBI through ad hoc
    treasury bills to instill greater fiscal discipline, an idea that was
    mooted by Manmohan Singh in 1994, but implemented in 1997 by
    P. Chidambaram, who was then finance minister in the United
    Front
    government.

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 11


    Banking sector was left out

    When people set up factories


    and invest, they need money.

    Steady ow of finance
    requires a competitive
    banking system.

    Restrictions on banking:
    dominance of public sector
    banks continued even after
    1991.

    Existing banks had a


    preference for their
    traditional customers further
    helping the incumbents to
    borrow more.

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 12


    Factor market reforms

    The first generation of reforms


    focused on product markets.
    Reforms in the land, labor and
    capital markets were left
    untouched.

    One such norm is the Industrial


    Disputes Act (IDA) that
    prevented companies with more
    than 100 employees from ring
    people without
    government permission.

    States have taken some steps to


    rationalize the existing labor
    law restrictions.

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 13


    Consolidation of labor laws into 4 codes

    The government has consolidated 44 labor laws


    under 4 categories of Codes namely, Wage
    Code, Social Security Code, Occupational
    Safety, Health & Working Conditions Code
    and the Industrial Relations Code .

    The rules for these four Labor Codes are yet to


    be framed and notified, thanks to the lack of
    unanimity among the states.

    A consultative and collaborative framework


    with states needs to be set up

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 14


    Land acquisition problems

    In India, land acquisition by the private sector has been made


    complex by the land acquisition act enacted in 2013.

    Requires a mandatory social impact assessment, a series of


    permissions, compensation up to 4 times the market value of the
    land.

    Lack of a robust mechanism for price determination.

    Any attempt to amend the `Right to Fair Compensation and


    Transparency in Land Acquisition, Rehabilitation and Resettlement
    Bill' has met with opposition and is labelled as anti-farmers.

    As a result, acquisition of land for industrial purposes is has become


    tedious and slow. This discourages new projects in the private sector.

    2021 INIDA ECONOMIC REFORM 1991 – LPG MODEL 15


    GDP GROWTH

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 16


    INDIA TRADE BALANCE

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 17


    FOREIGN DIRECT INVESTMENT (FDI)

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 18


    Market overview

    $3 $12,833 $5.5
    Trillion Billion Trillion

    India is the 8th largest market in terms of India’s wealth grew up from 2019 despite India’s financial wealth likely to grew up by
    market cap. of COVID aimed and taking the global 10% pa by 2025 to $5.5T.
    wealth share of 3.1%

    2021 INDIA ECONOMIC REFORM 1991 – LPG MODEL 19


    Summary
    Reforms need to be expedited for sustained higher growth

     Substantial fiscal consolidation


     Privatization of state owned entities
     Reduction in import duties to foster competition

    2021 INDIAN ECONOMIC REFORM 1991 – LPG MODEL 20


    Thank you

    ARUSHI SINGH
    (A42304619025)
    &
    DIVANSHU SACHDEVA
    (A42304619021)

    B.COM (HONS.) 5TH SMESTER

    2021 INDIAN ECONOMIC REFORM 1991 – LPG MODEL 21

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