3. Need for
liberalization
A Balance of payments (BOP) crisis
in 1991 which pushed the country
to near bankruptcy.
BOP Crisis
01
The Rupee devalued and economic
reforms were forced upon India.
Devalued Currency
02
Indian Central Bank had refused new
credit and foreign exchange reserves
had reduced to the point that India
could barely finance 3 weeks worth of
imports.
Forex Depleted
03
There were no FDI & FII investments.
Investments
04
5. Objectives :
The key objective of industrial policy was
rapid industrialization of the country
To maintain sustained growth in the
productivity and gainful employment
To attain international competitiveness
Therefore, the basic philosophy of the new IP,
1991 has been the continuity with a change
Liberalization refers to relaxation of previous
government restrictions usually in areas of social and
economic policies
Thus when government liberalizes trade it means it
has removed the tariff, subsidies and other restrictions
on the flow of goods and services between countries
6. B C
D E
Some reforms introduced
by liberalization
A
B
C
E
D
Abolition of industrial licensing and registration.
Liberalizing the MRTP act
Freedom for expansion and production .
Increase in the investment limit of the
small industries.
Freedom to import technology and
capital goods
7. Sectors Impacted by liberalization
F
F T
I
FINANCIAL SECTOR
FISCAL
SECTOR
INDUSTRIAL SECTOR
TRADE
SECTOR
8. Financial sector reforms are :
Reforms in Banking Sector
Reform in stock market
Reform in insurance
Financial sector reforms refers to the
deregulation of domestic financial markets and
the liberalization of the capital account
9. Industrial sector reforms are :
Abolition of industrial
licensing
Restriction was removed on
expansion
Reduction in the reservation
of public sector
Industrial Sector Reform was among the
first sector to be liberalized in India in a series of
measures
Industrial learning has been abolished except in a
small number of sectors where it has been rtained on
statergic considerations
10. Trade sector reforms are :
Elimination of import
licensing
Rationalization of tariff
structure
Adoption of flexible
exchange rate
Trade sector reforms refers to the
trade policy which allows domestic providers
(of goods & services) to compete more freely
in world markets and foreign providers to
compete more freely in domestic markets
11. Fiscal sector reforms helps to
raise the rate of savings and investment
in India. This further helps to enhance
the productivity of public expenditures
India has established itself
as one of the fastest
growing economies in the
world. India is also
advancing towards the
economical growth and
improvement in literacy
13. Impact of liberalization
Average annual growth of services shifted from
6.9% during 1981-1991 to 8.1% in 1991-2001
Average growth
Rapid growth in communication services , financial
services, business services & community services
Service sector growth
Exports of information technology enabled
services particularly strong
IT Advancement
14. Major M&A Deals Undertaken Abroad by
India
Tata Steel buys Corus Plc
TATA STEEL
Hindalco acquired Novelis Inc
HINDALCO
Vodafone buys Hutch
VODAFONE
Aditya Birla group increased its stake in
Idea Cellular by acquiring 48.14% stake
ADITYA BIRLA GROUP
Essar steel acquired Algoma steel.
ESSAR STEEL
Videocon acquired Daewoo
Electronics Corporation limited
VIDEOCON
Suzlon Energy
acquired RE Power
SUZLON ENERGY
Microsoft spent on its
development operations in
India over the last 4 years.
Microsoft
15. Arguments in favor of liberalization
01
03
02
04
Growth Rate
There is a sharp increase in
growth rate of the country’s
economy
Disparities
Liberalization have helped us
reduce disparities and reduce
poverty and inequality
Competitiveness
Liberalization increases the
competitiveness among
companies in the industrial
sector
Fiscal deficit fall
There was a fall in fiscal deficit
05 06
Price Control
There was seen a price control
on the goods and services
provided
BOP Deficit fall
A fall in BOP Deficit was
observed after liberalization
16. Arguments against liberalization
01
03
02
04
Pressure
There was pressure by IMF &
World Bank
Dependance on Foreign
Technology
A heavy dependance on
foreign technology was
observed
Foreign Debt
India was becoming more
dependent on foreign debt
Privatization
Undue importance was given
to privatization
05 Unemployment
The issue of unemployment is
also a serious problem
17. Conclusion
The New Industrial Policy, 1991 certainly differs significantly from
the earlier philosophies, approaches etc of the government. For
instance, prior to 1991, scope of public sector was expanded by
reserving more number of industries for the public sector
But now, its scope has been reduced drastically by reducing the
number of industries reserved for the public sector. Like this, a
large number of changes can be noticed in the new policy
This process has been continuing even in post
liberalization era. Adding to this, the government has
taken a number of steps to give effect to its policy
decisions included in the new industrial policy,1991
Though the economy has been benefited significantly
from these measures, the economy has not been able
to reap the full benefits of the economic reform package
owing to the political instability
