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An appraisal view/ analysis of economic reforms during 1991 industrial reforms period in India. Change in Indian Economy after LPG reforms 1991 with data. Suitable for all purposes. Main topics with detial are- Goals of Economic Reforms. GDP growth and Poverty Reduction. GDP growth and Employment Growth Rate. Improvement in industrial relations. Increase in productivity and Real Wage earnings. Neglect of Agriculture. Reforms and Industrial Growth. Performance of Public Sector. Economic reforms and inflation. Growth in infrastructure. Foreign trade and balance of payment. Foreign Investment. Regional Disparities. Social Infrastructure and Human Development. Conclusion
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© 2014, Harsh Agrawal
Disclaimer All rights reserved. No part of this work may be copied,
reproduced, adapted, abridged or translated, stored or transmitted in any form by any means.
While every effort has been made to avoid any mistake or omission, the author is not liable in any manner to any person by reasons of any mistake or omission. All data shown in this slide are collected from various surveys.
All disputes will be subjected to exclusive jurisdiction of Monika Mam.
Goals of Economic Reforms A higher rate of growth
Enlargement of employment leading to full employment
Reduction in population living BPL
Promotion of equity
Reduction in regional disparities
1. GDP growth and Poverty Reduction
Except first two years, growth rate averaged to more than 7%
Poverty declined from 36.0% in 1993 to 27.5% in 2005
Rural poverty ratio declined from 37.3% to 28.3%
Urban poverty declined from 32.4% to 25.7%
2. GDP growth and Employment Growth Rate Rate of growth of employment during pre-reform- 2.39%
During post reform- 1.0%
Reform process was limited to organized sector
Organised sector- 0.60% against 1.73% during pre-reform period
Public sector decelerated from 1.53% to 0.60%
Rate of growth in privtate organised sector improved
Unorganised sector- 1.1% against 2.41% during pre-reform
Unemployment increased from 2.62% in 1993 to 2.78%in 2000 and further to 3.1%
3. Impact on Labour Improvement in industrial relations
Closure used as a device to reduce permanent workers
Laying off to cut down labour costs
Increased proportion of casual labour
Adverse effect on income of labour
Workers are being pushed from organised sector to unorganised sector
4. Increase in productivity and Real Wage
earnings Productivity and wage earnings increased
Labour treated merely as an instrument, not asset
Unhealthy impact on labour welfare
No safety net to help laid off labours
5. Neglect of Agriculture
Foodgrains production growth rate decreased from 3.1% to 1.6%
Weakness of agricultural sector- investment, yield, seed, unbalanced fertilizer use
Share of investment in agriculture to a level of 2.9% of GDP is too inadequate
Backward states like Bihar, MP and Orissa indicate a very poor growth rate
Reforms did not pay attention to expansion to irrigation
6. Reforms and Industrial Growth
Industrial licensing was abolished
Growth rate of Industrial production increased from 7.8% to 9.3%
Manufacturing sector grew rapidly
Basic goods and capital goods production increased
7. Performance of Public Sector
Gross profit, net profit, value added per unit capital employed showed improvements
Govt. signed MOU was signed with 102 PSEs
44 were rated as excellent, 36 very good, 14as good
Innovating measures to improve performance of PSEs
8. Economic reforms and inflation
Average increase WPI improved to 6.5%
CPI rose at annual rate of 7.1%
Retail inflation > wholesale inflation
9. Growth in infrastructure
Growth rates of steel and cement production increased
Measures taken in pre-reform period like easing of price control by govt.
Electricity, coal and petroleum industries did not perform well in post reform period
In these industries private sector failed to fill the vacuum created by public sector
10. Foreign trade and balance of payment Main implications of reforms intended to boost export
and facilitate developmental imports
Exports as a percentage of imports were only 58% during 1985-86, Highly unsatisfactory situation
Post reform period foreign trade situation was satisfactory
Bop on current account turned positive form 2001-2003 for the first time since past 30 years
But situation turned during 2006-07, became worse during 2008-09 and ultimately in 2010-11 deficit in bop reached record level of $44,281 million.
…contd. Full convertibility on capital account suffered a retreat
Emergence of negative current account balance in 2004-05 to 2006-07
Unprecedented increase in oil price in 2007-08
11. Foreign Investment
Direct investment increased to 27,024 million $ in 2010-11
Portfolio investment fluctuated and became negative in 1998-99 and 2008-09
Volatile and undependable nature
12. Regional Disparities Forward states grew at rate of 5.6% while backward
states grew only at 1.7%
Widening regional disparities
Ratio of max and min per capita NSDP increased from 2.7 to 4.73
More than 2/3rd of investment was concentrated in few forward states only
13. Social Infrastructure and Human Development
Investment in education and health infrastructure should be stepped up.
Kerala and Tamil Nadu achieved higher levels of HD than backward states like UP, Bihar, MP, Rajasthan
Literacy, life expectancy, infant mortality rate, birth rate
Conclusion Not able to achieve its socio-economic objective
because private sector is concerned with profit motive
Three way fast lane of LPG failed to provide safe pedestrian crossing to unempowered in India
We have world’s largest middle class but also largest number of people living BPL
We have to combine the economics of growth with the economics of equity and social justice.