Directed By: Presented By:

MR. RAJIV KUMAR LOKESH

( PROF. IN GJU ) ROLL NO-12105004


DEFINITION

Liberalization means to free economy from
direct or physical controls imposed by the
government.

1980s suggests that the root cause of the crisis was the large
and growing fiscal imbalance.

Large fiscal deficits emerged as a result of mounting
government expenditures, particularly during the second half
of the 80s.

These fiscal deficits led to high levels of borrowing by the
government from the Reserve Bank of India (RBI), IMF,
World Bank.

Over the 1980s, government expenditure in India grew at a
phenomenal rate, faster than what government earns as a
revenues.








The subsidies grew at a rate faster than government
expenditures.

The Indian economy was indeed in deep trouble.

Lack of foreign reserves .

Gold reserve was empty.

Before 1991, India was a closed economy.



Abolition of Industrial Licensing and
Registration
Concession from Monopolies Act
Freedom for Expansion and Production to
Industries
Increase in Investment Limit of the Small
Industries
Freedom to Import Technology
Free Determination of Interest Rates

Opening up of the Indian Economy
Before 1991 there was closed economy and import of certain goods
was restricted.
After 1991 competition increased tremendously after the
liberalisation.
Competitors from all over the world enter the Indian market



Competition from Low Income Countries
Low range products are floating into the market
Low price, low quality

1. Governance
o Need for elimination of large number of Rules & Regulations in
the books

o
2. Infrastructure: A Challenge and an opportunity
Investments required up to 2012 US$ 334 billion
Power Generation - US$ 143 billion
Power Transmission & Distribution US$ 116 billion
Roads US$ 40 billion
Ports US$ 20 billion
Railways US$ 15 billion
BRIC Study of Goldman Sachs (2003) predicts that:
INDIA WILL EXCEED
Frances GDP in 2020
Germanys in 2025
Japans in 2035

TO BECOME THE 3
RD
LARGEST ECONOMY IN THE
WORLD BY 2050










GDP growth at constant prices
6.1
8.2
8
0
1
2
3
4
5
6
7
8
9
Average for 1993-2003 2003-04 10th Plan Projection (2002-07)
i
n

p
e
r

c
e
n
t
Indian Foreign Exchange Reserves: a steady rise after
liberalization
Foreign exchange reserves (US$ billion)
2.2
17.0
54.1
75.4
118.3
0
50
100
150
1990-91 1995-96 2001-02 2002-03 2003-04
Foreign Investments after liberalization
103
5,138
5,385
6,789
8,152
5,639
15,872
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1990-91 1994-95 1997-98 2000-01 2001-02 2002-03 2003-04
Total Foreign Investment (US$ million)
US$ million
Import duty Reductions after liberalization
Reduction in Peak Customs Duties on Manufactured items
150
110
50
38.5
30 25 20
42
0
20
40
60
80
100
120
140
160
1991 Mar-92 Mar-95 Mar-97 Mar-00 Mar-02 Mar-03 w.e.f March
2004
i
n

p
e
r

c
e
n
t
Rising share of Indias external trade after liberalization
Total Exports in 2003-04 - US$ 61.8 Bn; Imports US$ 75.2 Bn.
Assume target for exports for 2009 - US$150 Bn
Share of external trade in GDP
18.1
23.1
25.5
26.9
30.3
28.9
31.6
32
0
5
10
15
20
25
30
35
1991- 92 1994- 95 1997- 98 1999-
2000
2000- 01 2001- 02 2002- 03 2003- 04
i
n

p
e
r

c
e
n
t
Less importance to agriculture
More dependence on Foreign Debt
Missing of social motive
Problem of employment
Dependence on foreign technology
Thus in the end it can be concluded that
removal of or reduction in the trade practices
that was free flow of goods & services from
one nation to another can lead to mass
production, increases GDP, Import and
Export. More steps should be initiated to
enhance the performance of economy.