LPG

• After forty years of planned development, India has been able to achieve a strong industrial base and became self-sufficient in the production of food grains.
• A major segment of the population continues to depend on agriculture for its livelihood.
• In 1991, a crisis in the balance of payments led to the introduction of economic reforms in the country.
• The reform process has had various implications for India.
• The mixed economy framework in India combined the advantages of the capitalist economic system with those of the socialist economic system.
• Some scholars argue that the policy of combining the advantages of the capitalist economic system with those of the socialist economic system resulted in the establishment of a variety of rules and laws, which were aimed at controlling and regulating the economy, ended up instead in hampering the process of growth and development.
• Others state that India, which started its developmental path from near stagnation, has since been able to achieve growth in savings, developed a diversified industrial sector which produces a variety of goods and has experienced sustained expansion of agricultural output which has ensured food security.
• In 1991, India met with an economic crisis relating to its external debt, the government was not able to make repayments on its borrowings from abroad.
• 2008-09: 6.7
• 2005-06: 9.5
• 2001-02: 5.4
• 2012-13: 4.5
• 2003-04: 8.0
• 2002-03: 3.9
• 2006-07: 9.6
• 2011-12: 6.7
• GDP Growth Rate (%) 2000-01: 4.1
• 2007-08: 9.3
• 2004-05: 7.1
• 2009-10: 8.6
• 2010-11: 8.9
• Foreign exchange reserves, which we generally maintain to import petrol and other important items, dropped to levels that were not sufficient for even a fortnight.
• The crisis was further compounded by rising prices of essential goods.
• All these led the government to introduce a new set of policy measures which changed the direction of our developmental strategies.
• The origin of the financial crisis can be traced from the inefficient management of the Indian economy in the 1980s.
• The government generates funds from various sources such as taxation, running of public sector enterprises etc.
• Industrial sector growth has slowed down due to availability of cheaper imports and lower investment.
• Globalisation is the outcome of the policies of liberalisation and privatisation.
• The objective of the WTO is to establish a rule based trade regime to ensure optimum utilisation of world resources.
• India changed its economic policies in 1991 due to a financial crisis and pressure from international organisations like the World Bank and IMF.
• The crisis that erupted in the early 1990s was an outcome of the deep-rooted inequalities in Indian society and the economic reform policies initiated as a response to the crisis by the government, with externally advised policy package, further aggravated the inequalities.
• There has also been a decline in public investment in this sector.
• This was done through disinvestment and liberalisation measures.
• Reforms have not benefited the agriculture sector.
• Outsourcing is an emerging business activity.
• During the reforms, growth of agriculture and industry has gone down but the service sector has registered growth.
• The economy was facing problems of declining foreign exchange, growing imports without matching rise in exports and high inflation.
• Major external sector reforms included foreign exchange deregulations and import liberalisation.
• Major reforms were undertaken in the industrial and financial sectors in the domestic economy.
• With a view to improving the performance of the public sector, there was a consensus on reducing its role and opening it up to the private sector.