Development Experiences in India Online Test 11th Economics Lesson 3 Questions in English

The triple pillars of New Economic Policy are Liberalization, Privatization and Globalization (LPG)

Liberalization refers to removal of relaxation of governmental restrictions in all stages in industry. Delicensing, decontrol, deregulation, subsidies (incentives) and greater role for financial institutions are the various facets of liberalization.

The year 1991 the country went through a severe economic crisis in the form of serious Balance of Payments problem. Indian economy responded to the crisis by introducing a set of policies known as Structural Reforms. These policies were aimed at correcting the weaknesses and rigidities in the various sectors of the economy such as Industry, Trade, Fiscal and Agriculture.

Privatization means transfer of ownership and management of enterprises from public sector to private sector. Denationalization, disinvestment and opening exclusive public sector enterprises to private sector are the gateways to privatization.

Globalization was necessitated because today a developed country can grow without the help of the under developed countries. Natural and human resources of the developing countries are exploited by the developed countries and the developing economies are used as market for the finished goods of the developed countries.

Liberalization was necessitated because various licensing policies were said to be deterring the growth of the economy. Privatization was necessitated because of the belief that the private sector was not given enough opportunities to earn more money.

Agriculture in India is highly prone to risks like droughts and floods. It is necessary to protect the farmers from natural calamities and ensure their credit eligibility for the next season. The Pradhan Mantri Fasal Bima Yojana (Prime Minister’s Crop Insurance Scheme) was launched on 18 February 2016.

India is the largest producer of fruits and second largest producer of vegetables in the world. In spite of that per capita availability of fruits and vegetables is quite low because of post-harvest losses which account for about 25% to 30% of production. Besides, quality of a sizable quantity of produce also deteriorates by the time it reaches the consumer.

Most of the problems relating to the marketing of fruits and vegetables can be traced to their perishability. Perishability is responsible for high marketing costs, market gluts, price fluctuations and other similar problems.

The Pradhan Mantri Fasal Bima Yojana envisages a uniform premium of only 2 percent to be paid by farmers for Kharif crops and 1.5 percent for Rabi crops. The premium for (annual) commercial and horticultural crops will be 5 percent.

The annual value of harvest and postharvest losses of major agricultural produce at national level was of the order of Rs.92,651 crores, calculated using production data of 2012-13 at 2014 and wholesale prices, estimated by the Indian Council of Agricultural Research (ICAR).

A Kisan Credit Card (KCC) is a credit delivery mechanism that is aimed at enabling farmers to have quick and timely access to affordable credit. It was launched in 1998 by the Reserve Bank of India and NABARD.

Kisan Credit Card Scheme aims to reduce farmer dependence on the informal banking sector for credit – which can be very expensive and suck them into a debt spiral. The card is offered by cooperative banks, regional rural banks and public sector banks. Based on a review of the working of the KCC, the government has advised banks to convert the KCC into a smart card cum debit card.

Privatization measures favour the continuance of the monopoly power. Only the powerful people can sustain in business markets. Social justice cannot be easily established and maintained. As a result, the disparities tend to widen among people and among regions.

Only the already well-developed countries are favoured in globalization process and the welfare of the less developed countries will be neglected. The economic crisis of the developed countries is easily spread to the developing economies through trade.

The following are the major changes after 1991: 1. Foreign exchange reserves started rising. 2. There was a rapid industrialization. 3. The pattern of consumption started improving (or deteriorating). 4. Infrastructure facilities such as express highways, metro rails, flyovers and airports started expanding (but the local people were thrown away).

The benefits of LPG growth in some sectors have not reached the marginalized sections of the community. Moreover, the process of development has generated serious social, economic, political, demographic and ecological issues and challenges.

Disinvestment means selling of government securities of Public Sector Undertakings (PSUs) to other PSUs or private sectors or banks. This process has not been fully implemented.

According to International Monetary Fund, World Economic Outlook (Ocoter-2016), GDP (nominal) of India in 2016 at current prices was $2,251 billion. India contributed 2.99% of total world’s GDP in exchange rate basis. India shared 17.5 percent of the total world population and 2.4 percent of the world surface area.

India was at 3rd position after China and Japan among Asian countries. India shared 8.50% of total Asia’s GDP (nominal) in 2016.

Under the new industrial policy, only three sectors viz., atomic energy, mining and railways will continue as reserved for public sector. All other sectors have been opened for private sector participation.

The most important objective of the new industrial policy of 1991 was the end of the industrial licensing or the license raj or red tapism. Under the industrial licensing policies, private sector firms had to secure licenses to start an industry.

The New Industrial Policy of 1991 has abolished the Monopoly and Restrictive Trade Practices Act 1969. In 2010, the Competition Commission has emerged as the watchdog in monitoring competitive practices in the economy.

Foreign investment including FDI and FPI were allowed. In 1991, the government announced a specified list of high-technology and high investment priority industries wherein automatic permission was granted for foreign direct investment (FDI) up to 51 percent foreign equity.

Foreign Investment Promotion Board (FIPB) has been set up to negotiate with international firms and approve foreign direct investment in select areas.

In order to reduce wastage of agricultural produce and minimize post-harvest losses, the Ministry of Food Processing Industries (MoFPI) has implemented various components of Central Sector Schemes, namely: Mega Food Parks; Integrated Cold Chain; Value Addition Preservation Infrastructure; Modernization of Slaughter house.

Agricultural Produce Market Committee (APMC) is a statutory body constituted by state government in order to trade in agricultural or horticultural or livestock products.

To ensure payments to the farmers for the sale of agricultural produce on the same day. To bring transparency in pricing system and transactions taking place in market in a transparent manner.

The biggest input for farmers is seeds. Before liberalisation, farmers across the country had access to seeds from state government institutions. The institutions produced own seeds and were responsible for their quality and price. With liberalization, India’s seed market was opened up to global agribusinesses

Farmers were encouraged to shift from growing a mixture of traditional crops to export oriented ‘cash crops’ like chill, cotton and tobacco

After 1991 the lending pattern of commercial banks, including nationalised bank drastically changed. As a result, loan was not easily adequate. This has forced the farmers to rely on moneylenders who charge exorbitant rate of interest.

With a view to open India’s markets, the liberalization reforms also withdrew tariffs and duties on imports. By 2001, India completely removed restrictions on imports of almost 1,500 items including food. As a result, cheap imports flooded the market, pushing prices of crops like cotton and pepper down.

Prior to 1991, in India imports were regulated. From 1992, imports were regulated by a limited negative list. For instance, the trade policy of 1 April 1992 freed imports of almost all intermediate and capital goods. Only 71 items remained restricted. This would affect the domestic industries.

The Chelliah Committee’s Report had suggested drastic reduction in import duties. It had suggested a peak rate of 50 percent. As a first step towards a gradual reduction in the tariffs, the 1991-92 budget had reduced the peak rate of import duty from more than 300 percent to 150 percent. The process of lowering the customs tariffs was carried further in successive budgets.

The Government of India, Ministry of Commerce and Industry announced New Foreign Trade Policy on 01st April 2015 for the period of 2015-2020.

The new EXIM policy has been formulated focusing on increasing in exports scenario, boosting production and supporting the concepts like Make in India and Digital India.

According to new Export and Import Policy, reduce export obligations by 25% and give boost to domestic manufacturing supporting the “Make in India” concept.

Repeated submission of physical copies of documents available on Exporter Importer Profile is not required. Export obligation period for export items related to defence, military store, aerospace and nuclear energy to be 24 months.

With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances, absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.

As part of the economic reforms, the system of taking over land by the government for commercial and industrial purposes was introduced in the country. As per the Special Economic Zones Act of 2005, the government has so far notified about 400 such zones in the country. Since the SEZ deprives the farmers of their land and livelihood, it is harmful to agriculture.

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla in 1965.

The broad range of Special Economic Zone covers free trade zones, export processing zones, industrial parks, economic and technology development zones, high-tech zones, science and innovation parks, free ports, enterprise zones, and others.

To develop infrastructure facilities. To exchange technology in the global market.

Administrated by single body/ authority. Governed by more liberal economic laws.

A key element in the stabilization effort was to restore fiscal discipline. It means reduction of fiscal deficit to the extent of just 3% of GDP, as suggested by Fund Bank Policies.

Goods and Services Tax (GST) is defined as the tax levied when a consumer buys a good or service. It is proposed to be a comprehensive indirect tax levied on manufacture, sale and consumption of goods as well as services.

GST aims to replace all indirect taxes levied on goods and services by the Indian Central and State governments. GST would eliminate the cascading effect of taxes on the production and distribution of goods and services. It is also a “one-point tax” Unlike VAT which was a multipoint tax.

The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017.

The motto of GST is one nation, one market, one tax.

Higher threshold for registration. Composition scheme for small business.

Monetary reforms aimed at doing away with interest rate distortions and rationalizing the structure of lending rates. The new policy tried in many ways to make the banking system more efficient.

Reduction in statutory liquidity ratio (SLR) and the cash reserve ratio (CRR) were recommended by the Narasimham Committee Report, 1991.

Narasimham Committee was proposed to cut down the SLR from 38.5 percent to 25 percent within a time span of three years. Similarly, it was proposed that the CRR be brought down to 3 to 5% over a period of four years.

If the size of an economy provides the first impression of a country’s political and economic strength, then India has indeed grown since 1991. In dollar terms, India’s GDP crossed the $2-trillion mark in 2015-16. Currently, the country is ranked ninth in the world in terms of nominal GDP.

Once India was rebuked for its “Hindu rate of growth”, a term used by Rajkrishna to refer to low rate of economic growth. The GDP growth rate of India is very much appreciated. This growth is also due to changes in accounting system.

The Chelliah Committee’s Report had suggested drastic reduction in import duties. It had suggested a peak rate on import duties of 50 percent