Liberalisation

and Impact
on various
Sectors
Economic Liberalisation
Initiated in 1991 with the goal
of making the economy more
market- and service-oriented,
and expanding the role of
private and foreign investment
Specific changes include a
reduction in import tariffs,
deregulation of markets,
reduction of taxes, and greater
foreign investment.

PRE LIBERALISATION
• India adhered to socialist policies. The extensive regulation was sarcastically
dubbed as the “License Raj”. The slow growth rate was named the “Hindu rate
of growth”.
• The rupee, was inconvertible and high tariffs and import licensing prevented
foreign goods reaching the market.
• The central pillar of the policy was import substitution, the belief that India
needed to rely on internal markets for development, not international trade.
• NEED FOR LIBERALISATION
• A Balance of Payments crisis in 1991 which pushed the country to near bankruptcy,
IMF bailout was secured for which gold was transferred to London as collateral.
• Indian central bank refused new credit and foreign exchange reserves reduced to the
point that India could barely finance three weeks’ worth of imports.

• POST LIBERALISATION
• The major effect of Liberalization is in the opening of the economy, getting the
government out of the huge morass of regulation, empowering the states to take
more responsibility for economic management
• The policy now allows 100% foreign ownership in a large number of industries and
majority ownership in all except banks, insurance, telecommunications and airlines
 Changing sectoral composition of India’s GDP (%), 1990–2010

Share of employment per sector in India (%), 1993–94, 2004–05 and 2007–08
• The share of employment in the
tertiary sector (predominantly
services) increased over the year
• India’s share in the world exports of
services more than tripled from 1998
to 2009
Liberalisation and growth linkages in India’s service sector (%), 1990s
• The highest growth segments
were business and
communication services.
• This was followed by banking
and life insurance services.
• Storage, postal and railways
services registered the lowest
growth rates, and were
classified as non-liberalised or
more-restricted sectors.
 Liberalization in Telecommunication
Opened basic services
to private telecom
The DOT retained its
companies and setup
The introduction of the monopoly over national
an independent
National Telecom Policy long-distance
regulatory body, the
(NTP) of 1994 telephony until the year
Telecom Regulatory
2000.
Authority of India
(TRAI), in 1997.
The market was divided
into separate zones, In August 2000 national
called The DOT and TRAI long-distance
‘telecommunication experienced conflicts of telephony was opened
circles’, private interests on several to private operators, as
participants could only occasions was intended under the
provide intra-circle NTP of 1999.
long-distance services
In 2001 unlimited entry
was permitted in each
policy circle for the
provision of basic and
mobile services.
 Outcome

NETWORK PRODUCTIVITY INCREASED REDUCTIONS IN INCREASED INCREASED TELE

EXPANSION IMPROVEMENTS NUMBER OF PRICES AND DEMAND FOR DENSITY IN
LINES IN WAITING LISTS BASIC AND RURAL AND
OPERATION VALUE-ADDED URBAN AREAS
SERVICES

THE PRIVATE
SECTOR
OUTNUMBERS
PUBLIC SECTOR
PROVIDERS
 • State owned telecommunication
companies like - VSNL, BSNL and MTNL
The main service • Private Indian telecommunication
providers in the Indian companies like - Tata Teleservices and
telecommunication Reliance Infocomm
sector are as follows – • Foreign telecommunication companies
like - Idea Cellular, BPL Mobile, Spice
Communications, Hutchison - Essar,
Bharti Tele-Ventures, Escotel, etc
 Banking services
Since 1993 the Reserve Bank
The Narsimhan Committee of India (RBI) – the Central
was first set up in 1991 Bank, which is the regulator
under the chairmanship of of the banking system – has
Mr. M. Narasimhan who was allowed entry of private
13th governor of RBI sector banks to increase
competition
The entry of private banks
FDI limits in the banking has resulted in greater
system have been raised competition for public sector
slowly banks for the loaning of
funds
In 1996 guidelines were
issued for setting up new
private local area banks to
increase competition in rural
banking
There have been reductions
in overhead expenses and
interest margins for domestic
banks, and greater pressure
on the public sector banks to
improve the quality of their
services
 • Nationalized Banks - Allahabad
Bank, Bank of India, Bank of
Baroda , Vijaya Bank
• Foreign Banks - DBS Bank,
The list of banks Citibank, HSBC
• Regional Rural Banks - Allahabad
in India are UP Gramin Bank, Bihar Gramin
further Bank, Assam Gramin Vikash Bank
• State Bank of India and its
categorized into – associates- State Bank of Mysore,
State Bank of Hyderabad
• Private Sector Banks- ICICI, HDFC,
Axis
Education sector
Presence of foreign education
providers’ study centers,
program collaboration,
franchising and twinning
Entry of foreign education
Partial Liberalisation arrangements, in which
providers
foreign providers have a
minimum stake while the
Indian counterparts provide
the infrastructure.

Foreign Educational Regulatory conditions – entity Many entities are now

Institutions Regulation of establishing the school, establishing schools in joint
Entry and Operations Bill, college or university should be ventures with real estate
2010 a non-profit one. developers.
 Concerns
• Inadequacy and uneven distribution of public funding. Nearly one-third of the
institutions receive no government funds at all.
• The sector remains plagued by deficiencies in infrastructure, resources, quality
and regulatory frameworks
• The regulatory system has been unable to protect students and prevent private
providers from charging exorbitant fees.
 Service providers in
education sector of India-
• Ed Tech- BYJUs, Toppr, SimpliLearn
• Offline- Resonance, Vedanta, FiitJee, Narayana