Generations of Economic Reforms in India
Generations of economic reforms-
1st Generation Reforms (1991-2000):
1) Promotion of private sector
De-reservation
De-licensing
Abolition of MRTP limit
Abolition of the compulsion of the phased-production and conversion of loans into shares
Simplifying environmental laws
2) Public Sector Reforms
Disinvestment
Corporatisation
3) External Sector reforms
Abolition of quantitative restrictions on imports
Floating currency regime of exchange rate
Full current account convertibility
Reforms in the capital account
Foreign Investment
Liberal foreign exchange management (FEMA instead of FERA)
4) Financial Sector reforms
5) Tax Reforms
Simplifying
Broader Tax net
Modernising
Checking evasion
Result: Change from Command economy to Market driven economy. Didn’t produce the desired results, hence need for 2nd round of reforms were felt.
2nd Generation Reforms (2000-01 onwards):
1) Factor Market Reforms (FMRs)
Background: Before this, under Administered Pricing Mechanism (APM): Petroleum, Sugar, fertilizers, Drugs, etc. A major section of these products were produced by the private sector------hindered profitability.
Considered as the “backbone” for the success of reforms in India.
Dismantling of the “Administered Pricing Mechanism (APM)”
Petroleum segment: Only Kerosene oil and LPG remained under APM while petrol, diesel, lubricants were deregulated.
Income tax paying families won’t get sugar under TPDS.
Fertilizers: Only urea under APM. Many drugs were also phased out.
Petroleum sector opened to private investment.
FMRs still continuing.
2) Public Sector Reforms
Greater functional autonomy.
Free leverage to the capital market.
International tie-ups and Greenfield ventures.
Disinvestment (strategic).
3) Reforms in the Government and Public institutions
Also known as Administrative Reforms.
Change in the role of Govt. From ‘Controller’ to ‘facilitator’.
4) Legal sector reforms
Abolishing outdated and
1st Generation Reforms (1991-2000):
1) Promotion of private sector
De-reservation
De-licensing
Abolition of MRTP limit
Abolition of the compulsion of the phased-production and conversion of loans into shares
Simplifying environmental laws
2) Public Sector Reforms
Disinvestment
Corporatisation
3) External Sector reforms
Abolition of quantitative restrictions on imports
Floating currency regime of exchange rate
Full current account convertibility
Reforms in the capital account
Foreign Investment
Liberal foreign exchange management (FEMA instead of FERA)
4) Financial Sector reforms
5) Tax Reforms
Simplifying
Broader Tax net
Modernising
Checking evasion
Result: Change from Command economy to Market driven economy. Didn’t produce the desired results, hence need for 2nd round of reforms were felt.
2nd Generation Reforms (2000-01 onwards):
1) Factor Market Reforms (FMRs)
Background: Before this, under Administered Pricing Mechanism (APM): Petroleum, Sugar, fertilizers, Drugs, etc. A major section of these products were produced by the private sector------hindered profitability.
Considered as the “backbone” for the success of reforms in India.
Dismantling of the “Administered Pricing Mechanism (APM)”
Petroleum segment: Only Kerosene oil and LPG remained under APM while petrol, diesel, lubricants were deregulated.
Income tax paying families won’t get sugar under TPDS.
Fertilizers: Only urea under APM. Many drugs were also phased out.
Petroleum sector opened to private investment.
FMRs still continuing.
2) Public Sector Reforms
Greater functional autonomy.
Free leverage to the capital market.
International tie-ups and Greenfield ventures.
Disinvestment (strategic).
3) Reforms in the Government and Public institutions
Also known as Administrative Reforms.
Change in the role of Govt. From ‘Controller’ to ‘facilitator’.
4) Legal sector reforms
Abolishing outdated and