The important areas where liberalisation measures were introduced in and after 1991 are given below:
a. Deregulation of Industrial Sector:
Industrial Sector was the first to attract the attention of the reforms. The reforms introduced in and after 1991 removed restrictions which were prevailing in this sector. Industrial licensing was abolished for all industries except for few industries related to
- security
- strategy
- environmental concerns.
The number of industries reserved for the public sector have been reduced from 17 to 2. The only two industry which are now reserved for the public sector are
- atomic energy generation aid
- railway transport.
The Government left all other industries to private sector.
b. Financial Sector Reforms:
Financial Sector includes financial institutions such as commercial banks, investment bank, stock exchange operations and foreign exchange market. This sector is controlled by the RBI, through various norms and regulations. One of the major aims of the financial sector reforms is to reduce the role of RBI from regulator to take their own decisions on several matters. Banks are given freedom to their own interest rates.
c. Tax Reforms :
Tax reforms relate to reforms in Government’s taxation and public expenditure policy (fiscal policy). Taxes are of two types, namely,
- Direct taxes
- Indirect taxes
d. Foreign Exchange Reforms:
The deliberate reduction of the value of rupee against foreign currencies is called devaluation of rupee. This devaluation the prices of exports and at the same time, it increased the prices of imports this increases exports and reduce imports.
In 1991 as an immediate measure to resolve the balance of payments crisis, the rupee was devalued against foreign currencies. This led to increase in exports and in flow of foreign exchange
e. Reforms in Trade and Investment:
Tax on imports is one type of trade barriers. If the Government could place a limit on the number of goods that can be imprisoned, this is know as quotas. It is another type of barrier. Governments can use trade barriers to increase or decrease foreign trade. Since independence, Indian Government has put barriers on foreign trade and foreign investment. This was considered as necessary to protect our producers from foreign competition.
