After independence, India adopted a socialist economic model with centralized planning that led to slow growth averaging 3.5% annually until the early 1990s. Facing a severe balance of payments crisis, India began economic reforms in 1991 under pressure from the IMF that liberalized trade and investment. Reforms reduced licensing, opened sectors to private and foreign investment, and increased growth rates. However, challenges remain including fiscal deficits, inflexible labor markets, and the need for further agricultural and infrastructure reforms.

1. INDIAN ECONOMIC EVOLUTION

2. BRIEF HISTORY SINCE 1947
• After independence India envisaged as socialist inspired
economic model, “USSR” like centralized and nationalized
five year plan.
• The "Peruvian Socialist rate of growth" is used to refer to
the low annual growth rate of the economy of India before
1991. It stagnated at around 3.5% from the 1950s to 1980s,
while per capita income growth averaged extremely low
1.3% a year.
• From FY 1951 to FY 1979, the economy grew at an average
rate of about 3.1 per cent a year in constant prices, or at an
annual rate of 1.0 per cent per capita. During this period,
industry grew at an average rate of 4.5% a year, compared
with an annual average of 3.0% for agriculture.

3. BRIEF HISTORY SINCE 1947
• To maintain the rationality in allocation of scarce
resources the PERMIT RAJ was introduced. But after a
time period it became an instrument for corruption.
• This Licensing and quantitative restriction were placed
on all goods coming into the country which placed
serious limitation on private sector companies to do
business in India.
• Indian economy was in excessive turmoil by expanding
its reach by and issuing 2nd IPR in 1956, government
had control of 12 more sectors including banking,
insurance, fertilizer by issuing more complex licenses.

4. BRIEF HISTORY SINCE 1947
• During this period most private sector companies were
regulated by government with regard to their location,
production levels, and employment rules.
• Throughout the 1960 and 1970,inefficency, slow growth,
technological stagnation were hall marks of Indian
economy which led to the devaluation of Indian rupee upto
56%.
• The war with Pakistan and china derailed our growth rate,
along with the famine in 1965-66 pushed us to the edge of
bankruptcy.
• In 1980 the public debt has significantly increased as a
result of subsidizing the sick units of public sector
companies.

5. ECONOMIC LIBERALISATION IN 1990
• India started having balance of payments problems since
1985, and by the end of 1990, under the leadership of PV
Narshima Rao it was in a serious economic crisis. The CAD
was about 3% of GDP.
• The government was close to default, its central bank had
refused new credit and foreign exchange reserves had
reduced to the point that India could barely finance three
weeks’ worth of imports
• It had to pledge 20 tonnes of gold to Union Bank of
Switzerland and 47 tonnes to Bank of England as part of a
bailout deal with the International Monetary Fund (IMF).
Most of the economic reforms were forced upon India as a
part of the IMF bailout

6. ECONOMIC LIBERALISATION IN 1990
• After two government fell due to unrest , the collapse of
soviet union being a primary reason. The new elected
Prime minister Narshima Rao faced a severe balance of
payments.
• Under the pressure of IMF and leadership of FM Man
Mohan Singh, India took systematic approach to improve
national efficiency and removing barriers to growth.
• Indian Govt. reduced tariffs and taxes, encouraged foreign
investment, eliminated numerous licensing requirements,
and improve fiscal discipline.
• Between 1993-94 and 1996-97, India experienced a growth
rate of 7.1%

7. LATER REFORMS
• The Bharatiya Janata Party (BJP)-Atal Bihari
Vajpayee administration surprised many by continuing
reforms, when it was at the helm of affairs of India for five
years.
• The BJP-led National Democratic Alliance Coalition began
privatising under-performing government owned business
including hotels, VSNL, Maruti Suzuki, and airports, and began
reduction of taxes, an overall fiscal policy aimed at reducing
deficits and debts and increased initiatives for public works.

8. LATEST REFORMS
• Towards the end of 2011, the Congress-led UPA-2 Coalition
Government initiated the introduction of 51% Foreign
Direct Investment in retail sector. But due to pressure from
fellow coalition parties and the opposition, the decision
was rolled back. However, it was approved in December
2012
• In the early months of 2015, the second BJP-led NDA
Government under Narendra Modi further opened up the
insurance sector by allowing up to 49% FDI. This came
seven years after the previous government attempted and
failed to push through the same reforms and 16 years after
the sector was first opened to foreign investors up to 26%
under the first BJP-led NDA Government under Atal Bihari
Vajpayee's administration

9. LATEST REFORMS
• The second BJP-led NDA Government also opened up the coal
industry through the passing of the Coal Mines (Special
Provisions) Bill of 2015. It effectively ended the Indian central
government's monopoly over the mining of coal, which
existed since nationalization in 1973 through socialist
controls. It has opened up the path for private, foreign
investments in the sector, since Indian arms of foreign
companies are entitled to bid for coal blocks and licences, as
well as for commercial mining of coal. This could result in
billions of dollars investments by domestic and foreign miners.
The move is also beneficial to the state-owned Coal India
Limited, which may now get the elbow room to bring in some
much needed technology and best practices.

10. IMPACT ON ECONOMY POST REFORMS
• The combined fiscal deficit of the central and state
governments was successfully reduced from 9.4 percent of
GDP in 1990-91 to 7 percent in both 1991-92 and 1992-93
and the balance of payments crisis was over by 1993.
• However the public savings deteriorated steadily from +1.7
percent of GDP in 1996-97 to –1.7 percent in 2000-01. This
was reflected in a comparable deterioration in the fiscal
deficit taking it to 9.6 percent of GDP in 2000-01. Not only
is this among the highest in the developing world, it is
particularly worrisome because India’s public debt to GDP
ratio is also very high at around 80%.

11. IMPACT ON ECONOMY POST REFORMS
• To increase the public savings The Advisory Group on Tax
Policy for the Tenth Plan recently made a number of
proposals for modernizing tax administration, including
especially computerization, reducing the degree of
exemption for small scale units and integration of services
taxation with taxation of goods (Planning Commission,
2001a).
• Post the reforms Indian entrepreneurs were encouraged by
loosening restriction on the import technology and absence
of taxes on software exports, Indian entrepreneurs began
building there own IT firms, including such notable firm as
WIPRO,TATA CONSULTANCY SERVICES,INFOSYS. The total
valuation of the Indian IT firms is around $10billion.

12. INDUSTRIAL POLICY REFORMS
• Industrial policy has seen the greatest change, with most central
government industrial controls being dismantled. The list of
industries reserved solely for the public sector -- which used to
cover 18 industries, including iron and steel, heavy plant and
machinery, telecommunications and telecom equipment, minerals,
oil, mining, air transport services and electricity generation and
distribution
• Industrial licensing by the central government has been almost
abolished except for a few hazardous and environmentally sensitive
industries.
• The requirement that investments by large industrial houses
needed a separate clearance under the Monopolies and Restrictive
Trade Practices Act to discourage the concentration of economic
power was abolished and the act itself is to be replaced by a new
competition law which will attempt to regulate anticompetitive
behavior in other ways

13. TRADE POLICY REFORMS
• Import licensing was abolished relatively early for capital
goods and intermediates which became freely importable
in 1993, simultaneously with the switch to a flexible
exchange rate regime.
• Quantitative restrictions on imports of manufactured
consumer goods and agricultural products were finally
removed on April 1, 2001, almost exactly ten years after the
reforms began, and that in part because of a ruling by a
World Trade Organization dispute panel on a complaint
brought by the United States.
• the weighted average import duty rate declined from the
very high level of 72.5 percent in 1991-92 to 24.6 percent in
1996-97. However, the average tariff rate then increased by
more than 10 percentage points in the next four years.

14. FOREIGN DIRECT INVESTMENT
• The policy now allows 100 percent foreign ownership in a
large number of industries and majority ownership in all
except banks, insurance companies, telecommunications
and airlines
• Indian companies have upgraded their technology and
expanded to more efficient scales of production. They have
also restructured through mergers and acquisitions and
refocused their activities to concentrate on areas of
competence.
• Industrial growth increased sharply in the first five years
after the reforms, but then slowed to an annual rate of 4.5
percent in the next five years. Export performance has
improved, but modestly.

15. FOREIGN DIRECT INVESTMENT
• The share of exports of goods in GDP increased from 5.7
percent in 1990-91 to 9.7 percent, but this reflects in part
an exchange rate depreciation.
• One reason why export performance has been modest is
the slow progress in lowering import duties that make India
a high cost producer and therefore less attractive as a base
for export production.
• Inflexibility of the labor market is a major factor reducing
India’s competitiveness in exports and also reducing
industrial productivity generally, The increased competition
in the goods market has made labor more willing to take
reasonable positions, because lack of flexibility only leads
to firms losing market share.

16. REFORMS IN AGRICULTURE
• The index of agricultural prices relative to manufactured
products has increased by almost 30 percent in the past ten
years (Ministry of Finance, 2002, Chapter 5). The share of
India’s agricultural exports in world exports of the same
commodities increased from 1.1 percent in 1990 to 1.9
percent in 1999, whereas it had declined in the ten years
before the reforms.
• The main reason why public investment in rural
infrastructure has declined is the deterioration in the fiscal
position of the state governments and the tendency for
politically popular but inefficient and even iniquitous
subsidies to crowd out more productive investment

17. REFORMS IN AGRICULTURE
• In recent years, support prices have been fixed at much
higher levels, encouraging overproduction. Indeed, public
food grain stocks reached 58 million tons on January 1,
2002, against a norm of around 17 million tons! The
support price system clearly needs to be better aligned to
market demand if farmers are to be encouraged to shift
from food grain production towards other products.
• Development of a modern food processing sector, which is
essential to the next stage of agricultural development, is
also hampered by outdated and often contradictory laws
and regulations. These and other outdated laws need to be
changed if the logic of liberalization is to be extended to
agriculture.

18. INFRASTRUCTURE DEVELOPMENT
• Independent statutory regulators have been established to
set tariffs in a manner that would be perceived to be fair to
both consumers and producers. Several states are trying to
privatize distribution in the hope that this will overcome
the corruption which leads to the enormous distribution
losses.
• Telecommunication has been much better.Teledensity,
which had doubled from 0.3 lines per 100 population in
1981 to 0.6 in 1991, increased sevenfold in the next ten
years to reach 4.4 in 2002
• Two private sector domestic airlines, which began
operations after the reforms, now have more than half the
market for domestic air travel.

19. INFRASTRUCTURE DEVELOPMENT
• In the case of ports, 17 private sector projects involving
port handling capacity of 60 million tons, about 20 percent
of the total capacity at present, are being implemented.
• Indian road networks are now on growth phase and new
initiative with PPP model is being implemented for
development of road network.
• Some exorbitant reforms have been taken in railways
sector, The Expert Group on Indian Railways (2002) recently
submitted a comprehensive program of reform converting
the railways from a departmentally run government
enterprise to a corporation, with a regulatory authority
fixing the fares in a rational manner

20. FINANCIAL SECTOR REFORMS
• Measures for liberalization, like dismantling the complex
system of interest rate controls, eliminating prior approval
of the Reserve Bank of India for large loans, and reducing
the statutory requirements to invest in government
securities.
• Measures designed to increase financial soundness, like
introducing capital adequacy requirements and other
prudential norms for banks and strengthening banking
supervision.
• Measures for increasing competition like more liberal
licensing of private banks and freer expansion by foreign
banks. These steps have produced some positive outcomes.

21. FINANCIAL SECTOR REFORMS
• The government has announced its intention to reduce its equity
share to 33-1/3 percent, but this is to be done while retaining
government control. Improvements in the efficiency of the banking
system will therefore depend on the ability to increase the
efficiency of public sector banks.
• The government has recently introduced legislation to establish a
bankruptcy law which will be much closer to accepted international
standard. This would be an important improvement but it needs to
be accompanied by reforms in court procedures to cut the delays
which are a major weakness of the legal system at present.
• An important recent reform is the withdrawal of the special
privileges enjoyed by the Unit Trust of India, a public sector mutual
fund which was the dominant mutual fund investment vehicle
when the reforms began

22. FINANCIAL SECTOR REFORMS
• Reforms implemented in the stock market include establishment of
a statutory regulator; promulgation of rules and regulations
governing various types of participants in the capital market and
also activities like insider trading and takeover bids; introduction of
electronic trading to improve transparency in establishing prices;
and dematerialization of shares to eliminate the need for physical
movement and storage of paper securities.
• The insurance sector (including pension schemes), was a public
sector monopoly at the start of the reforms. The need to open the
sector to private insurance companies was recommended by an
expert committee (the Malhotra Committee) in 1994, but there was
strong political resistance. It was only in 2000 that the law was
finally amended to allow private sector insurance companies, with
foreign equity allowed up to 26 percent, to enter the field

23. PRIVATISATION
• the government adopted a limited approach of selling a
minority stake in public sector enterprises while retaining
management control with the government, a policy
described as “disinvestment” to distinguish it from
privatization. The principal motivation was to mobilize
revenue for the budget, though there was some
expectation that private shareholders would increase the
commercial orientation of public sector enterprises.
• In 1998, the government announced its willingness to
reduce its shareholding to 26 percent and to transfer
management control to private stakeholders purchasing a
substantial stake in all central public sector enterprises
except in strategic areas.

24. CONCLUSION
• The industrial and trade policy reforms have gone far,
though they need to be supplemented by labor market
reforms which are a critical missing link.
• The logic of liberalization also needs to be extended to
agriculture, where numerous restrictions remain in
place
• Reforms aimed at encouraging private investment in
infrastructure have worked in some areas but not in
others. The complexity of the problems in this area was
underestimated, especially in the power sector.

25. CONCLUSION
• Progress has been made in several areas of financial sector
reforms, though some of the critical issues relating to
government ownership of the banks remain to be
addressed.
• However the slow pace of implementation has meant that
many of the reform initiatives have been put in place
recently and their beneficial effects are yet to be felt.
• Both the central and state governments are under severe
fiscal stress which seriously undermines their capacity to
invest in certain types of infrastructure and in social
development where the public sector is the only credible
source of investment.

26. GDP GROWTH FROM 1950-1989
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
GDP IN CRORES
GDP IN CRORES

27. REAL GDP GROWTH RATE
6.00
4.00
2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
GROWTH YOY
GROWTH YOY

28. GDP GROWTH FROM 1990- 2015
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
GDP
GDP

29. GDP GROWTH RATE 1990-2015
0.00
2.00
4.00
6.00
8.00
10.00
12.00
GDP YOY
GDP YOY

30. CONTRIBUTION OF DIFF SECTORS TO
GDP
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000 1950-51
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
AGRICULTURE
MINING
MANUFACTURING
SERVICES

31. FOREIGN EXCHANGE RESERVE
0
50000
100000
150000
200000
250000
300000
350000
1950-51
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
FOREIGN EXCHANGE(IN CR)
FOREIGN EXCHANGE(IN
CR)

32. INDIA’S POPULATION GROWTH
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
1,400,000,000
POPULATION
POPULATION

33. POPULATION GROWTH RATE
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
Series 1
Series 1

34. INDIA’S EXTERNAL DEBT
0
50
100
150
200
250
300
350
400
450
500
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
IN $ BILLION
IN $ BILLION

35. INDIA’S IMPORT AND EXPORT
0
100000
200000
300000
400000
500000
600000
1949-50
1953-54
1957-58
1961-62
1965-66
1969-70
1973-74
1977-78
1981-82
1985-86
1989-90
1993-94
1997-98
2001-02
2005-06
2009-10
2013-14
Exports
Imports

36. INFLATION
-10
-5
0
5
10
15
1957-58
1960-61
1963-64
1966-67
1969-70
1972-73
1975-76
1978-79
1981-82
1984-85
1987-88
1990-91
1993-94
1996-97
1999-2K
2002-03
2005-06
2008-09
2011-12
2014-15
IN %
IN %

37. GROWTH OF IIP YOY
-2
0
2
4
6
8
10
12
14
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
2012-2013
2014-2015
Series 1
Series 1

38. CURRENT ACCOUNT BALNCE
-100
-80
-60
-40
-20
0
20
Current account balance(in billion)
Current account…

39. CURRENT ACCOUNT DEFICIT WRT TO
GDP
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
Series 1
Series 1

40. EXCHANGE RATE (USD)
0.0000
10.0000
20.0000
30.0000
40.0000
50.0000
60.0000
70.0000
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
EXCHANGE RATE(INR)
EXCHANGE RATE(INR)

41. LITERACY GROWTH RATE
0
10
20
30
40
50
60
70
80
1951 1961 1971 1981 1991 2001 2011
IN%
IN%

42. LITERACY RATE STATE WISE
0
10
20
30
40
50
60
70
80
90
100
Jammu&Kashmir
Punjab
Uttarakhand
Delhi
UttarPradesh
Sikkim
Nagaland
Mizoram
Meghalaya
WestBengal
Odisha
MadhyaPradesh
Daman&Diu
Maharashtra
Karnataka
Lakshadweep
TamilNadu
Andaman&Nicobar…
1951
1961
1971
1981
1991
2001
2011

43. LITERACY RATE STATE WISE
0
10
20
30
40
50
60
70
80
90
100
Mizoram
Tripura
Meghalaya
Assam
WestBengal
Jharkhand
Odisha
Chhattisgarh
MadhyaPradesh
Gujarat
Daman&Diu
Dadra&NagarHaveli
Maharashtra
AndhraPradesh
Karnataka
Goa
Lakshadweep
Kerala
TamilNadu
Puducherry
Andaman&Nicobar…
1951
1961
1971
1981
1991
2001
2011

44. EMPLOMENT STATUS(RURAL FEMALE)
0
100
200
300
400
500
600
700
800
900
1000
primary sectors
secondary sectors
Tertiary sectors

45. EMPLOYMENT STATUS(RURAL MALE)
0
100
200
300
400
500
600
700
800
900
PRIMARY SECTOR
SECONDARY SECTOR
TERTIARY SECTOR

46. EMPLOYMENT BY SECTORS
0.00
50.00
100.00
150.00
200.00
250.00
300.00
Employment (in millions)
1999-2000
Employment (in millions)
2004-05
Employment (in millions)
2009-10