FINANCIAL SECTOR REFORMS IN INDIA

Financial sector is the most important/crucial part of any economy. It plays a vital role in the
development of any economy & it contributes immensely in the mobilisation and
distribution of resources. In the same manner financial sector reforms are significant part
for reforming the existing policies and channelizing them in a manner that they will
contribute towards the development of a nation.
The elements of the financial sector are Banks, Financial institutions, Instruments and
markets which mobilise the resources from the surplus sector to the different needy sectors
in the economy. This process of reforming financial sector was started in India, in the year of
1991 with the introduction & adoption of LPG i.e., Liberalisation, Privatisation, &
Globalization, policies and this process is still going on with various policies being reformed
& introduced in financial sector every now & then to improve the efficiency of the financial
sector of the country.
GOOS & SERVICES TAX (GST)
An example of one such reforms in recent times is establishment of GST, it is considered to
be as the biggest reforms in the country’s tax structure in decades. GST has played a
revolutionary role in the goods & services market of India replacing many indirect taxes that
previously existed in India.
GST is an indirect tax levied on the supply of goods & services it’s levied on every value
addition stage as it is a value added tax. It eliminates the regime of tax on tax, thus cost of
goods decreases because GST is calculated only on the value addition at each stage of the
transfer of ownership. There are different rates applied on different goods & some goods
are also exempted from this tax list and those are certain foods, books, newspapers under
Rs.1000. It’s a multistage destination based tax system i.e., tax will be paid where the good
is sold irrespective of the fact that where it is manufactured.
There are three components of GST:-
1. CGST: - Collected by the Central Government on an inter-state sale.
2. SGST: - Collected by the state government on an intra-state sale.
3. IGST: - Collected by the central government for interstate sale.
Advantages of GST:-
1. Removed the effect of tax on tax which impacted on cost of goods, & they decreased.
2. GST is technological driven, because all activities related to GST like registration, return
filing, application for refund and response to notice needs to e done online on the GST
Portal, this fastens the process of working,
3. Helped in regulating the unorganised sector as the GST was applied in the whole country
on all type o goods.
4. It has brought transparency in taxation system with uniform taxation policy for the whole
country.
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5. GST also helped in increasing exports of our country because of its more efficient
neutralisation of taxes making our products more competitive in the international market.
Conclusion: - In conclusion we can say that GST will ring in transparent and corruption free
tax administration, removing the current shortcomings in indirect tax structure. GST is
business friendly as well as consumer friendly. GST will also allow India to negotiate its
terms in the international market. GST aimed at increasing the tax payer base by bringing
SMEs and the unorganized sector under its compliance. This will make Indian market more
stable than before and Indian companies can compete with foreign companies.
DEMONETIZATION IN INDIA
On November 8th, 2016 Prime minister Mr. Narendra Modi announced that from that day
12:00 a.m. onwards denominations of Rs.500 & Rs.1000 will not e used as the means of
exchange currency in India. This demonetization was Prime Ministers attempt to combat &
fight lack money, money laundering, & corruption.
Demonetization refers to the act of stripping a currency of its status as legal tender i.e.,
when central bank of a country withdraws a particular currency as a means of exchange or
legal tender for goods & services in all the sectors of an economy or we can say that putting
a stop on complete use of a currency note. In such scenario new currency notes replaces the
old currency units.
Main reasons behind demonetization in India were:-
1. To tackle black money that was prevailing in the economy at that time.
2. To eliminate fake currency notes of ig denominations of Rs.500 & Rs.1000.
3. The move was estimated to bring out more than Rs.5 lakh crore black money from
the economy.
4. To lower the cash circulation in the country which is directly related to corruption in
our country & also related to inflation & thus lowering the inflation in the economy.
5. Another aim of demonetization was to promote more cash less transactions in the
economy.

Impact of demonetization:- Demonetization has impacted each & every individual of India
during that phase as the Indian economy is a cash driven economy & putting a an overnight
on ig currency notes put the whole country on a shock. Due to demonetization nearly 86%
of currency value in