Indian Economy For UPSC CSE Exam Chapter-6 – Free PDF Download

Contents of Chapter

• Introduction
• Economic Reforms
• Economic Reforms in India
• Liberalisation
• Privatisation
• Globalisation
• Generations of Economic Reforms
• The Reform Approach

India

• Obligatory Reforms by IMF
• Extended Fund Facility (EFF) programme
• External currency support for mitigation of their BoP crisis

IMF Conditions

• Devaluation of the rupee by 22 per cent
• Drastic reduction in the peak import tariff from the prevailing level of 130 per cent to 10 per cent
• Modernize Tax structure
• Government expenditure to be cut down by 10 per cent
• Consolidate the fiscal deficit

Measures

• Macroeconomic Stabilization
• Structural Reforms
  • LPG

Generations of Reforms

• 4 Generations of Reforms

1^st Generations of Reforms

• Promotion of private sector
• Public Sector Reforms
• External Sector Reforms
• Financial Sector Reforms
• Tax Reforms

2^nd Generations of Reforms

• Factor Market Reforms (Administered Price Mechanism)
• Public Sector Reforms
• Reforms in Government and Public Institutions
• Legal Sector Reforms
• Reforms in Critical Areas

Generations of Reforms

• Other Reforms
• State’s Role in the Reform
• Fiscal Consolidation
• Greater Tax Devolution to the States
• Focusing on the Social Sector

3^rd Generations of Reforms

• Tenth Plan (2002–07)
• Functionality of PRIs

4^th  Generations of Reforms

• Information technology-enabled

Approaches of Reform

• IMF/WB, classification, viz.,
• ‘Gradualist Approach’ (Incremental)
• ‘Stop-and-Go Approach’.

Incremental Approach (Survey 2017-18)

• Also known as transformational Reforms
• Inflation targeting
• Monetary Policy Committee
• strategic disinvestment’ of the PSUs
• Checking corruption, black money, tax evasion, fake currency and terrorism
• Benami property Law
• IBC

Q1. Consider the following statements regarding Twenty Point Programme (TPP)

1. The scheme was launched for coordinated and intensive monitoring of a of schemes implemented by the Central and the state governments
2. The basic objective was of providing funds to the new and young entrepreneurs

Select the CORRECT statement(s) using the codes given below

1. 1 Only
2. 2 Only
3. Both 1 and 2
4. None of the above

Ans: 1
Explanation:

• The Twenty Point Programme (TPP) is the second Central Plan which was launched in July 1975.
• A thrust was given to schemes relating to poverty alleviation, employment generation in rural areas, housing, education, family welfare and health, protection of environment
• Statement 2: The basic objective was of improving the quality of life of the people, especially of those living below the poverty line.

Q2. With regard to the economic reforms, consider the following statements
 

1. Economic reforms denote the process in which a government prescribes declining role for the state and expanding role for the private sector in an economy
2. In India, the economic reforms of 1991 was launched in response to a fiscal and balance-of-payment (BoP) crisis
3. Macroeconomic Stabilisation Measures in India focus on how to boost the aggregate demand in the economy

Mark correct statements?

1. 1 Only
2. 1 and 2
3. 2 and 3
4. 1, 2 and 3

Ans: 4

• All statements are correct.
• On July 23, 1991, India launched a process of economic reforms in response to a fiscal and balance-of-payment (BoP) crisis.
• The economic reform programme, that India launched, consisted of two categories of measures: Macroeconomic Stabilisation Measures and Structural Reform Measures.
• First focuses on aggregate demand in the economy and second includes all the policy reforms which have been initiated by the government to boost the aggregate supply of goods and services in the economy.

Q3. Which of the following is/are not the feature(s) of LPG Policy of India?

1. Abolition of Industrial licensing/ Permit Raj
2. Dilution of Public sector role
3. Increasing tariffs for foreign investment
4. Introduction of mandatory convertibility clause

Select the answer using the codes given below

1. 1 and 2
2. 3 and 4
3. 1 and 3
4. 2 and 4

Ans: 2
Statement 3 and 4 are incorrect.

• Salient features of LPG Policy:
  • Abolition of Industrial licensing/ Permit Raj 
  • Public sector role diluted
  • MRTP limit goes
  • Beginning of privatisation
  • Free entry to foreign investment and technology
  • Industrial location policy liberalized
  • Abolition of phased manufacturing programmes for new projects
  • Removal of mandatory convertibility cause
  • Reduction in import tariffs
  • Deregulation of markets
  • Reduction of taxes

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