FORE SCHOOL OF MANAGEMENTSWOT ANALYSIS OF NEW ECONOMIC POLICY Milan Dhingra 201076 FMG 20 B
INTRODUCTIONIn response to an unprecedented balance of payments crisis -- which left India with about two weeks offoreign-exchange reserves -- Singh, with the support of Prime Minister P.V. Narasimha Rao, announced ahost of reforms in his inaugural budget speech on July 24, 1991. His two-hour oration left no one in doubtthat he intended to turn a crisis into an opportunity.The economic policy thus is called as the New Economic Policy of India or LPG Policy which liberalized,privatized and globalized our Indian economy to new heights. SWOT ANALYSIS OF NEW ECONOMIC POLICY OF INDIASTRENGTHS: Devaluation of Rupee by around 18 percent as a result forex reserves have increased from $5.8 billion in 1990-91 to $274 billion in 2010-11 hence taking care of BOP issues. High rate of growth in the economy. Our economy has increased from 10.8 lakh Indian Rupees in 1990-91 to 48.8 lakh Indian Rupees in 2010-11. Opening up of the Indian economy which led to increase in FDI inflows to $30.3 billion in 2010- 11 from a meager $0.13 billion in 90-91 The number of billionaires of India has risen due to this policy. The combined wealth of the Indian billionaires marked an increase of 60 per cent from $ 106 billion in 2006 to $ 170 billion in 2007. The 40 Indian billionaires have assets worth about Rs. 7.50 lakh crores whereas the cumulative investment in the 91 Public Sector Undertakings by the Central Government of India is Rs. 3.93 lakh crores only. Integration of economies of the world through uninhibited trade and financial flows, mutual exchange of technology and knowledge, free inter-country movement of labor as can be seen from growth of exports to $245 billion in 10-11 from just $ 18 billion in 90-91. The per-capita income has increased from Rs. 11,535 in 90-91 to Rs. 41,129 in 10-11 and as a result poverty rate has dipped from 65% to 35 % during the same period. Dismantling of The Industrial Licensing Regime Abolition of the (MRTP) Act, which necessitated prior approval for capacity expansion The removal of quantitative restrictions on imports. The reduction of the peak customs tariff from over 300 per cent prior to the 30 per cent rate that applies nowWEAKNESS: A sharp reduction in government spending, especially on capital formation development and social welfare. The reforms were more under pressure from the world economies and IMF to close the fiscal deficit and to prevent India from defaulting on loan repayments. Weakness in Company Act, 1956 regarding safeguards on use of loans and investments in group companies remained ineffective.
A severe cutback in government subsidies for food, fertilizers and power, accompanied by a rise in the costs of borrowing for government resulting from financial deregulation leading to higher interest rates. Deregulation of industry and gradual removal of protective legislation for labour. Challenges for the SMEs to survive in the new competitive environment. Exposed workers to competition from imports and technology which threatened their jobs. Ignored code of conduct for private industrialists to inform about their social obligations.OPPORTUNITY: Opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India and development of advanced means of communication, Allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad Carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties. Internationalization of financial markets. The better technology brought in by the MNCs induce the domestic firms to absorb similar technology. This improved their competitiveness and expansion. Asking Indian Corporate to improve their efficiencies in order to compete with the world competitionTHREATS: Active promotion of stock markets and speculation meant that economy was more prone to fluctuations than before. Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive system and low post-harvest value addition continued to be a drag on the agricultural sector’s performance. With more than half the population directly depending on this sector, low agricultural growth had serious implications for the inclusiveness of growth. Despite the concerted development in manufacturing and service sectors, despite the remarkable inflow and overflow of foreign reserves, agriculture is still the largest industry providing employment to about 60 per cent of the workforce in the country. The lives of the educated and the rich had been enriched by globalization. But the benefits had not yet reached the majority, and new risks had cropped up for the losers. the socially deprived and the rural poor. Significant numbers of non-perennial poor, who had worked hard to escape poverty, were finding their gains reversed. The FDI inflows have in no way assisted in improving the health and environment conditions of the people. On the other hand, the financial capital of India and the political capital of India are set to become the topmost slum cities of the world. Our progress in education has been slow and superficial, without depth and quality, to compete the international standards.