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© 2014, Harsh Agrawal

An appraisal of economic reforms in India in 1991 period

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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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Page 1: An appraisal of economic reforms in India in 1991 period

© 2014, Harsh Agrawal

Page 2: An appraisal of economic reforms in India in 1991 period

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.

Page 3: An appraisal of economic reforms in India in 1991 period

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

Page 4: An appraisal of economic reforms in India in 1991 period

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%

Page 5: An appraisal of economic reforms in India in 1991 period

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%

Page 6: An appraisal of economic reforms in India in 1991 period

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

Page 7: An appraisal of economic reforms in India in 1991 period

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

Page 8: An appraisal of economic reforms in India in 1991 period

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

Page 9: An appraisal of economic reforms in India in 1991 period

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

Page 10: An appraisal of economic reforms in India in 1991 period

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

Page 11: An appraisal of economic reforms in India in 1991 period

8. Economic reforms and inflation

Average increase WPI improved to 6.5%

CPI rose at annual rate of 7.1%

Retail inflation > wholesale inflation

Page 12: An appraisal of economic reforms in India in 1991 period

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

Page 13: An appraisal of economic reforms in India in 1991 period

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.

Page 14: An appraisal of economic reforms in India in 1991 period

…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

Page 15: An appraisal of economic reforms in India in 1991 period

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

Page 16: An appraisal of economic reforms in India in 1991 period

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

Page 17: An appraisal of economic reforms in India in 1991 period

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

Page 18: An appraisal of economic reforms in India in 1991 period

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.