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Group members

Savin Shetty Bharat Shetty Prajna Pujari Ankita Shetty Ashwin Shetty Sachin Shetty Lalit Pandey

INTRODUCTION

Introduction

There was a serious fiscal crisis in which fiscal deficit reached the level of 6.6% of GDP.
Internal debts rose to about 50% of GDP with interest payments draining about 39% of total revenue collections of the central government.

GNP growth rate fell to 1.4% from the peak level of 10.5% in 1988-89.

Negative growth rates


i.
ii.

Agriculture promotion: -2.8%.


Food grain production:-5.3%.

iii. Industrial production:-0.1%.

Inflation rate based both on WPI & CPI soared high at 13-14%.

Foreign trade shrunk imports falling by 19.4% & exports by

1.5%.
Rupee depreciated by 26.7% vis--vis US dollars. Fall in foreign exchange reserves. Confidence of the international financial institutions was

badly shaken.
In may 1991, the government had to lease 20 tons of gold

out of its stock to the SBI to enable it to sell the gold with repurchase option after 6 months. In addition RBI was allowed to pledge 47 tons of gold to the BOE to raise a loan of $600mn.

MAJOR STEPS TAKEN TO MANAGE THE CRISIS

Major steps taken to manage the crisis


Fiscal correction aimed at reducing fiscal deficit by about Rs 7700 core in 1991-92 compared to 1990-91. Announcement of new industrial policy in June 1991.
Abolition of industrial licensing for industrial projects except 18 industries of high strategic & environmental importance. About 80% of the industries were delicensed.

9 areas in basic & core industries earlier reserved for public

sector opened to private sector


Limit of foreign equity holding raised from 40% to 51% in

a wide range of priority industries.


Foreign investment promotion board (FIPB) established to

negotiate proposals from international firms & expedite clearances of the investment proposals.
Bringing back of gold earlier pledged to the BOE & BOJ.

Continuance of the measures of import control & credit

squeeze.

Import licensing was eliminated in many goods &

advance licensing system was simplified.


Foreign investment promotion board established to

negotiate proposals from large international firms


Rupee devaluation by 18 percent Negotiation of $500 million structural adjustment

LIBERALIZATION, PRIVATIZATION, GLOBALIZATION

LIBERALIZATION

Liberalization
DELICENSING FREEDOM FROM LOCATIONAL REQUIREMENTS AND

GOVERNMENT CLEARANCE
PERMISSION TO CORPORATES FOR BUYBACK OF

SHARES
CORPORATISATION OF DEPARTMENTAL

UNDERTAKINGS AND PUBLIC UNDERTAKING


INCREASE IN THE INVESTMENT CEILING OF SMALL

SCALE ENTERPRISES

LIBERALIZATION OF TAX PROVISION FOR SELECTED SECTOR FREEDOM TO BANKS TO ENTER THE

INSURANCE SECTOR
FREEDOM TO TRANSFER LICNSES AND

ASSETS
REMOVAL OF RESTRICTION ON MOVEMENT

OF PRODUCTS AND SALE PURCHASE OF ASSETS

Privatization
DIVESTITURE

DENATIONALIZATION
FRANCHISING OF PUBLIC SECTOR SERVICES TO DESIGNATED PRIVATE

SECTOR UNITS
LICENSING OF TECHNOLOGY OF PUBLIC SECTOR UNITS TO PRIVATE ENTERPRISE]

GOVERNMENT WITHDRAWAL
PRIVATIZATION OF MANAGEMENT OPENINING UP OF A NUMBER OF CORE

SECTORS EARLIER RESERVED FOR PUBLIC SECTOR TO PRIVATE INVESTMENT


FREEDOM TO BANKS TO DETERMINE

THEIR OWN LENDING RATES

GLOBALIZATION

Globalization
REDUCTION IN THE SCOPE OF RESTRICTIVE CANALIZED TRADE
INCREASE IN THE LIMIT OF FOREIGN DIRECT INVESTMENT IN A NUMBER OF AREAS PERMISSION TO EXPORTERS TO KEEP

FOREIGN EXCHANGE ACCOUNTS


CREATION OF FOREIGN PROMOTION BOARD

SUSTAINED REDUCTION IN THE CUSTOM DUTY RATES ON NUMBER OF IMPORT ITEMS

REDUCTION OR ELIMINATION OF QUANTITATIVE RESTICTIONS ON A NUMBER OF IMPORT ITEMS


REPLACEMENT OF FERA MORE FEMA(1999)

REFORM STRATEGY

Fiscal Strategy
Reduction in fiscal deficit. Reduction in inflation rate. Improve fiscal balance.

Supplementary efforts.
Elimination of losses. Improvement in quality of taxation.

Monetary Strategy
Macro-economic management.
Not be frequently used as a tool. Interest rates reduced.

Repurchase operations.

Industry & Labour Strategy


Removing regulatory obstacles. Disinvestment in public sector. Increase in foreign share. Competitive market structure.

Growth in productivity.
Withdrawal of power.

AGRICULTURE TRADE
INFRASTRU C-TURE

STRATEGY

TRADE
Liberalize foreign trade.
Minimization of imports. Fixation of tariff. Removal of restrictions. Reduction in import tariff.

AGRICULTURE
Growth rate Agriculture products within the country. CRP(credit relief package)
Increase in import duty. Quality improvement.

Investment & capital Credit structure Pricing policy -

INFRASTRUCTURE
TRAI ( telecom regulatory authority of India).
Private sector BOT Golden Quadrilateral project.

BIBLIOGRAPHY
www.google.com
www.wikipedia.com http://business.rediff.com/slide-show/2009/may/25/slide-

show-5-lord-desai-on-recession-and-indian-politics.htm

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