Development of Indian economy has passed from many phases. We followed the policy of Import Substitution and restrictive trade policies. we liberalized the economy gradually and slowly. After 1991 Industrial policy India followed path of Liberalization.

1. Changes in the Policy perspectives on the Role of
Institutional framework after 1991
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2. Fiscal Policy Reforms
• Reducing Government expenditure-
• Crisis of 1991 due to fiscal imbalance revenue deficit increased
from 0.2 % of GDP in 1981-82 to 3.3% of GDP in 1990-91.
• Gross Fiscal Deficit of the centre had increased from 5.6% of
GDP in 1980-81 to 6.6% of GDP in 1990-91.
• Mobilization of Resources- tax and non tax resources
• Reducing Government Borrowing including borrowing from RBI
• Internal debt is that part of the total debt that is owed to
lenders within the country. External debt is owed to creditors
outside the country.
• Rationalising the grant of subsidy
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3. Monetary Policy reforms
• Reduced CRR and SLR
• Increased Micro Finance
• Fixing Prudential Norms
• Introduction of CRAR- Capital to Risk Weighted Assets Ratio (CRAR)
was started in 1992. Almost all the banks in India has reached the
capital adequacy ratio (CAR) above the statutory level of 9%.
• Diversification of Banks
• New generation Banks- ICICI Bank, Axis Bank, HDFC Bank
• Operational Autonomy
• Improved Profitability and Efficiency
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4. Price policy Reforms
•System of Administered Prices of Industrial products like Natural
Gas, Petroleum products, Coal, Electricity, has been abandoned
•In the case of fertiliser, food grains and kerosene sold through the
public distribution system, consumers pay below-market rates. The
gap between the market price and the lower consumer price for
these products is covered by the subsidy.
•Now, subsidy is directly transferred to the bank account of the
beneficiary.
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5. Industrial sector Policy Reforms
Removing of licencing system
Change in the Public Sector Policy
 Reduction in areas reserved for the public sector
 Navratna Industries given more autonomy
 Disinvestment of equity in selected enterprises
Foreign Exchange Policy - Foreign exchange crisis in 1991. Rupee was devalued
against foreign currencies in 1991. System of market determined exchange rate was
introduced.
Easy procedures
Single window clearances
Reduction in quantitative restrictions
Import policy- reducing tariffs
Automatic approval to foreign technological collaboration
Automatic clearance for import of capital goods
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6. • Disinvestment.
• Market based pricing
• Competition and efficiency- Navaratnas and Mini ratnas
• Integrating the domestic economy to world economy
• Imports liberalised
• Outsourcing
• Rupee value to be determined by market forces and free convertibility of rupee
in the current account of B0P.
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7. Financial Sector Reforms: Financial sector includes financial
institutions such as commercial banks, investment banks, stock exchange
operations and foreign exchange market. Foreign Institutional Investors
(FII) such as merchant bankers, mutual funds and pension funds are now
allowed to invest in Indian financial markets.
Liberalization of financial sector in India
Dismantling of the system of administered interest rates.
Security market reforms- FII, SEBI,
Banking sector reforms-CRR, SLR, Bank Rate
External sector reforms
Setting up institutions in the private sector
Non-Banking Financial Institutions (NBFCs) registration with
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8. Trade and Investment Policy Reforms
To increase competitiveness and to invite foreign Investment and technology
policy was changed after 1991.
Quantitative restrictions on imports and exports removed
Reduction in Tariff Rates
Import licensing was abolished except in case of hazardous and
environmentally sensitive industries.
Export duties have been removed to increase competitiveness of
Indian goods
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