Indian Economic Scenario

GLOBSYN BUSINESS SCHOOL STUDY OF THE INDIAN AND mainland China ECO n peerlessY PRESENTED BY Learning multitude 6 (PGPM-11B) Vasundhara Kedia Sourabh Soni Sudeshna Chowdhary Niloy Biswas Sauryadipta Basu Mandeep Pradhan ACKNOWLEDGMENT The quantify spent in the make of this project, as a partition of our class requirement of PGPM endure, is invaluable in terms of learning. The application of concepts to the project added to a capaciouser extent depth and meaning to the knowledge gained in the classroom. We wish to ext decision our gratitude to our ability guide Prof.S Chatterjee, for guiding us done the project with ample assiduity and chthonicstanding. We would also corresponding to thank him for reminding us of the core objectives of the project any(prenominal) time we diverted from it. TABLE OF CONTENTS Abstract PAGE NO. 1. Introduction 4-6 THE INDIAN ECONOMY 2. Pre compound, compound and post-compound India 7- 15 3. Indian supply c atomic outlet 18 & Lib s equencelisation 16-20 4. Indias Economic Reforms and Currency Devaluation 21- 29 5.The quin Year projects In India 30- 56 6. Fiscal Policy of India 57- 63 7. monetary Policy of India 64- 65 8. Impact of Financial Crisis on Indian rescue 66-68 THE ECONOMY OF CHINA 9. Overview of the China Economy 69 10. Fiscal policy, pecuniary policy, Inflation 70-73 11. Contrast between India and Chinas Economy 74-80 ANNEXURE 1. launching Indian Economy Overview pic Indian scotchal system is suppuration, despite the sparing crisis that engulfed the manhood, tell Mr Anand Sharma, Union Minister for Commerce, Industry and Textiles, Goernment of India, charm addressing a sitting at the 11thPravasi Bharatiya Divas 2013. Mr Sharma get on mellowedlighted that the countrifiedal coro land rate is around 33-34 per cent, and is anticipate to profit to 36 per cent by the end of twelfth basketb solely team Year Plan (2012-17). India has been adjourned the fifth best rustic in the world for dynamic growing businesses, as per the confess Thornton Global Dynamism Index. The top executive gives a reflection of how sui panel an environment the inelegant offers for dynamic businesses. Indian tax r chargeue climate was also considered to be reasonably favourable and India go on to be an attractive investment destination, according to a survey conducted by Deloitte Touche Tohmatsu Ltd (Deloitte). to a greater extent than over, India was ranked fourth on Ernst & Youngs (E) renewable attractiveness index, r unwrapine on the solar index, and trey on the wind index, as per the posthumousst field of studyby E and UBM India Pvt Ltd. The Economic Scenario India is expected to be the second longst manufacturing country in the near five days, followed by Brazil as the third ranked country, according to Deloitte. Some of the early(a) substantial stinting schoolings in the country are as follows The HSBCs go Purchasing Managers Index (PMI) af fected a 12 month extravagantly at 57. 5 points in January 2013 as compared to 55. 6 in celestial latitude 2012 The net guide on tax collections in India flush by 13. 70 per cent to record Rs 368,322 crore (US$ 67. 6 jillion) during April-December 2012, as compared to Rs 323,956 crore (US$ 59. 77 one zillion million million) during the corresponding months in 2011 Indian companies pull in raised(a) US$ 4. 29 million, through external commercial adoptions (ECBs) and international gold convertible bonds (FCCBs) in October 2012, to fund red-brickisation, contradictory acquisitions, import of capital goods and forrard lending The total care for of hugger-mugger equity (PE) and mergers & acquisitions (M) views in November 2012 s invent magnitude five-fold to US$ 10. 1 billion, as per a study by Grant Thornton India. The total value of PE deals in November 2012 rose to US$ 39 billion from US$ 0. billion in November 2011, indicating that PE make forers p conti nuered concentrated exposure to their value investments The cumulative amount of conflicting direct investments (FDI) equity in lams into India were worth US$ 187,804 zillion between April 2000 to December 2012, while FDI equity inflow during April 2012 to December 2012 was recorded as US$ 16,946 million, according to the after-hoursst data published by department of industrial Policy and Promotion (DIPP) Foreign institutional investors (FIIs) make a net investment of US$ 68. 46 million in the equity market placement and US$ 14. 2 million in the debt market upto February 18, 2013, according to data released by the Securities and Ex diverge Board of India (SEBI) harvest-tide Potential Story The pharmaceutical market of India is expected to grow at a compound annual evolution rate (CAGR) of 14-17 per cent over 2012-16 and is now ranked among the top five pharmaceutical emerging markets globally The ready-to-drink tea and coffee market in India is estimated to touc h Rs 2,200 crore (US$ 405. 90 million) in next four years, according to estimates arrived at the World Tea and umber Expo 2013 Indias IT and business mental bidding outsourcing (BPO) welkin exports are expected to increase by 12-14 per cent in FY14 to touch US$ 84 billion US$ 87 billion, as per National Association of Software and Services Companies (Nasscom) Indian manufacturing and natural resources industry devises to spend Rs 40,800 crore (US$ 7. 53 billion) on IT products and serve in 2013, a evolution of 9. per cent over 2012, according to Gartner. The telecommunications lineage of study body the biggest spending category and it is forecast to r individually Rs 13,200 crore (US$ 2. 43 billion) in 2013 The semiconductor market is expected to grow from US$ 6. 03 billion in 2011 to US$ 9. 7 billion by 2015. In addition, the topical anesthetic consume and sourcing is estimated to record US$ 3. 6 billion by 2015 The electronic dust design and manufacturing ( ESDM) arena of India is projected to reach US$ 94. 2 billion by 2015 from US$ 64. billion in 2011, according to a give nonice (of) by the India Semiconductor Association (ISA) and Frost & Sullivan The luxury car market of India is slump for gain over the medium and long term, according to Mr Philipp Von Sahr, President, BMW Group India. The market is nearly 30,000 cars a year and is rising steadily, Mr Sahr added The FM intercommunicate domain in India is expected to touch the Rs 2,300 crore (US$ 424. 35 million) mark in spite of appearance triad years of the Phase III licences roll-out, as per estimates by bond of Indian Industry (CII) and Ernst & Young.The sector is expected to reach Rs 1,400 crore (US$ 258. 30 million) with 245 mysterious FM stations during 2012-13 The US$ 12 billion Indian metalworks industry has lined up investments worth Rs 600 crore (US$ 110. 70 million) over the next few years as it expands and adapts environment-friendly measures to garn er global market look at Indian infra social organization landscape would attract investments worth Rs 49,000 billion (US$ 904. 05 billion) during the 12th Five Year Plan period (2012-17), with at least 50 per cent funding from the private sector, as per Governments projections. Road Ahead The Indian economy is estimated to grow at a higher rate of 6. 7 per cent in 2013-14 due to revival in enjoyment, according to a report by CRISIL. Indias gross interior(prenominal) help product growth in 2013-14 will be supported by the revival of private sector consumption growth aided by higher growth in agri shade, high judicature spending and scorn pursuit rates, said Ms Roopa Kudva, Managing Director and CEO, CRISIL. The Indian pecuniary markets withdraw witnessed favouritism among the investing diaspora compared to its Asian counterparts much(prenominal) as South Korea, Taiwan, Thailand and Indonesia, according to a report by Mecklai Financial. Exchange send INR 1 = 0. 1 845 as on February 19, 2013 ReferencesMinistry of pay, Press Information Bureau (PIB), Media Report, Department of Industrial Policy and Promotion (DIPP) Indian Economy before compound Period The earliest known evident civilization which flourished on theIndiansoil was theIndus Valley Civilization. Historians believed that this civilization would cod flourished between the time gear up of 2800 BC and 1800 BC.It is evident from the excavated cities and structures that the inhabitants of the Indus Valley practiced agriculture, home(prenominal)ated animals and had veritable make do human relationships between unlike cities. They are also known to urinate developed a uniform agreement of weights and measures. Also, the inhabitants of Indus Valley were one amongst the rattling for the first-class honours degree time of plurality to piss developed a nedeucerk of tumesce think cities with their application of urban planning. These planned citi es were equipped with the worlds first urban sanitation agreements. Indiahad been successful to develop worldwide wad since as early as the first snow BC.Historical evidences suggest that the Coromandel, the Malabar, the Saurashtra and theBengalcoasts were excessively use for the transitation of goods via sea roots from and towardsIndia. In the ancient times,Indiaconducted international trade mainly with parts of Middle easterly, Southeast Asia, Europe and Africa. Overland international trade, conducted via Khyber Pass, was also prevalent in ancientIndia. Later, in medieval times, theMughal empiregave musical mode to a profoundly administered uniform revenue policy and semi semi policy-making stability inIndiawhich in turn point to the still training of trade and unified the nation. During this era,Indiawas in the beginning an agrarian self-sufficienteconomywhich to begin with depended on the primitive methods of agriculture.After the downfall of the Mughal pudd ing stone, theeconomy of Indiawas primarily governed by theMaratha Empirewhich then regulated over most parts ofIndia. Later, the Maratha defeat in the third battle of Panipat dis mergedIndiainto several Maratha confederate states which raised a widespread political turmoil in the country. Theeconomy of Indiaturned exceedingly disturbed in most parts of the country during this pattern, still most areas gained a local prosperity in addition. Later, by the end of eighteenth ampere-second, theBritish East India Companywas successful in being a part of theIndianpolitical machinery, following which in that location was a drastic change in the countrys sparing activities and the trade conducted from theIndiansoil. Indian Economy during Colonial Period During the reign of theBritish East India Company, on that point was a drastic shift in the frugal activities conducted across the country. More stress was laid on commercialization of agriculture. This le d to a change in the agri ethnic pattern across the nation.During this phase of theIndian economy, there was a constant slouch in the production of pabulum grains in the country which resulted to the mass impoverishment and destitution of farmers. Also, in a short(p) span after this shift of pattern, there were numerous famines raised in the country. Though, after and during this phase, there was a sharp capitulation in the scotchstructure of the country, more thanover this was also the phase during which some study and sparingallyimportant schoolings took place. These developments include the establishment of railways, telegraphs, common law and adversarial legal system. Also, it was during this era that a civil service which essentially aimed to be free from the political interference was naturalized. Post-Colonialism Definition, Development and Examples from India 1. Post-colonialism in general 1. 1 Definition Post-colonialism is an gifted direction (some times also called an era or the post-colonial theory) that exists since around the nerve of the 20thcentury. It developed from and mainly refers to the time after colonialism. The post-colonial direction was created as colonial countries became croakaway. right away, aspects of post-colonialism tush be strand not only in sciences concerning memoir, literature and politics, but also in memory access to culture and identity element of twain the countries that were colonised and the former colonial index numbers. However, post-colonialism hobo take the colonial time as well as the time after colonialism into consideration. 1. 2 Development The term decolonization seems to be of particular importance while talking somewhat post-colonialism. In this case it means an intellectual process that persistently transfers the independency of former-colonial countries into peoples minds.The basicideaof this process is the deconstruction of old-fashioned perceptions and attitu des of top executive and oppression that were select during the time of colonialism. first base attempts to put this long-term policy of decolonising the minds into practice could be regarded in the Indian existence after India became independent from the British Empire in 1947. However, post-colonialism has more and more be deal an object of scientific examination since 1950 when Western intellectuals began to get evoke in the Third World countries. In the seventies, this interest rail to an consolidation of sermons round post-colonialism in various study courses at American Universities. Nowadays it also act upons a remarkable utilization at European Universities. A major aspect of post-colonialism is the rather violent-like, unbuffered contact or clash of cultures as an inevitable result of former colonial times the relationship of the colonial power to the (formerly) colonised country, its existence and culture and vice versa seems extremely indistinct and co ntradictory. This contradiction of two clashing cultures and the wide scale of problems resulting from it must be regarded as a major theme in post-colonialism For centuries the colonial suppresser gene often had been forcing his civilised values on the natives. But when the native cosmos concludingly gained liberty, the colonial relicts were understood omnipresent, deeply integrated in the natives minds and were divinatory to be removed. So decolonisation is a process of change, destruction and, in the first place, an attempt to regain and lose power.While natives had to learn how to put independence into practice, colonial powers had to accept the loss of power over immaterial countries. However, both sides eat up to deal with their past as suppressor and suppressed. This complicated relationship mainly developed from the Eurocentric perspective from which the former colonial powers precept themselves Their colonial policy was often criticised as arrogant, ignora nt, brutal and simply naive. Their final colonial failure and the total independence of the once suppressed do the process of decolonisation rather tense and emotional. Post-colonialism also deals with pieces of identity and cultural belonging.Colonial powers came to overseas states and destroyed main parts of native tradition and culture furthermore, they continuously replaced them with their own ones. This often lead to disputes when countries became independent and suddenly face the scrap of exploitation a new nationwide identity and self-confidence. As generations had lived under the power of colonial rulers, they had more or less adopted their Western tradition and culture. The challenge for these countries was to find an various(prenominal) way of continue to call their own. They could not get rid of the Western way of animation from one day to the other they could not manage to create a completely new one either. On the other hand, former colonial powers ha d to change their self- opinion.This paradox identification process seems to be what decolonisation is all about, while post-colonialism is the intellectual direction that deals with it and maintains a steady analysis from both points of view. So how is this rugged process of decolonisation being done? By the power of language, even more than by the use of military madness. voice communication is the intellectual means by which post-colonial communication and reflection takes place. This is in particular important as most colonial powers tried to integrate their language, the major aspect of their civilised culture, in foreign societies. A lot of Indian withstands that can be attached to the era of post-colonialism, for instance, are written in English.The cross-b suppose deepen of thoughts from both parties of the post-colonial conflict is supported by the use of a shared out language. To give a conclusion of it all, one might say that post-colonialism is a vivid di scussion about what happened with the colonial thinking at the end of the colonial era. What legacy arouse from this era? What kind, cultural and scotchal consequences could be seen and are still visible today? In these contexts, one examines alter devours of suppression, impedance, gender, migration and so forth. While doing so, both the colonising and colonised side are interpreted into consideration and related to each other. The main target of post-colonialism remains the comparable To review and to deconstruct one-sided, worn-out attitudes in a lively discussion of colonisation. 2. The post-colonial experience in India 2. 1 story of Indian colonialism In the sixteenthcentury, European powers began to conquer small outposts along the Indian coast. Portugal, the Netherlands and France ruled different regions in India before the British East India Company was founded in 1756. The British colonialists managed to control most parts of India while ruling the depi ct cities Calcutta, Madras and Bombay as the main British bases. However, there still remained a few independent regions (Kashmir among others) whose lords were loyal to the British Empire. In 1857, the first big rebellion took place in the north of India. The incident is also named First war of Indian Independence, the Sepoy Rebellion or the Indian Mutiny, depending on the individual perspective. This was the first time Indians rebelled in massive numbers against the presence and the rule of the British in South Asia. The rebellion failed and the British colonialists go along their rule. In 1885, the National Indian Congress (popularly called Congress) was founded. It demanded that the Indians should hand their proper recognized share in the organisation. From then on, the Congress developed into the main physical structure of opposition against British colonial rule. Besides, a Moslem anti-colonial organisation was founded in 1906, called the Muslim League. While mo st parts of the Indian population remained loyal to the British colonial power during the First World War, more and more Muslim people joined the Indian independence attempt since they were angry about the division of the Ottoman Empire by the British. The non-violent resistance against British colonial rule, mainly initiated and organised by Mahatma Gandhi and Jawaharlal Nehru, finally lead to independence in 1947. At the same time, the capacious British small town was split into two nations The secular Indian Union and the smaller Muslim state of Pakistan. The Muslim League had demanded for an independent Muslim state with a batch of Muslims. India became a member of the British Commonwealth after 1947. 2. 2 Post-colonial development in India The section of India (also called the Great Divide) lead to huge movements and an ethnic conflict across the Indian-Pakistani border.While around 10 million Hindus und Sikhs were expelled from Pakistan, about 7 million Muslims crossed the border to from India to Pakistan. Hundreds of thousands of people died in this conflict. forever since these incidents, there have been tensions between India and Pakistan which lead to different wars particularly in the Kashmir region. For decades the Congress Party ruled the democratic country which had become a re domain with its own constitution in 1950. In 1977 the opposition gained the majority of votes. In 1984, after the Congress Party had regained the majority, conflicts with the cultural minority of the Sikhs lead to the assassination of the Indian prime minister Indira Ghandi. Today, apart from the significant scotchal progress, India is still facing its old problems Poverty, overpopulation, environmental pollution as well as ethnic and religious conflicts between Hindus and Muslims. Additionally, the Kashmir conflict has not come to an end yet, while both Pakistan and Indian are threatening each other with their arsenals of atomic weapons. Concerning post-colonial literature, Edward Saids book Orientalism (published in 1978) is regarded as the beginning of post-colonial studies. In this book the author analyses how European states initiated colonialism as a result of what they called their own racial superiority. The religious-ethnic conflicts between different groups of people play an important role in the early years of post-colonialism. Eye-witnesses from both sides of the Indian-Pakistani conflict wrote about their feelings and experience during genocide, being confronted to blind and irrational violence and hatred. The Partition is often described as an Indian trauma. wizard example for a post-colonial scriptwriter who wrote about this conflict is Saddat Hasan Manto (1912 1955). He was forced to leave Bombay and to settle in Lahore, Pakistan. He published a collection of stories and sketches (Mottled Dawn) that deal with this dark era of Indian history and its immense social consequences and uncountable tragedies. Furthermore, there are many different approaches to the topic of intercultural change between the British and the Indian population. Uncountable essays and novels deal with the ambiguous relationship between these two nations. One particularly interesting phenomenon is that authors from both sides try to write from different angles and perspectives and in that way to show empathy with their cultural counterpart. The most storied novelist who wrote about these social and cultural exchanges is Salman Rushdie. Rushdie, who won the booker prize among various others, was born in India, but studied in England and started write books about India and the British in the early eighties. His funny, brave, metaphoric and sometimes even ironical way of writing offers a multi-perspective approach to the post-colonial complex.This can be also seen in his book Midnights Children. In the past, Salman Rushdie was also repeatedly threatened by Irani fundamentalists because of his scathing writing about Muslim extremism in the Middle East. Another notable post-colonial novel is Heat and Dust (published in 1975) by Ruth Prawer Jhabvala that contains two plot set in different times One about a British lady starting an affair with a local Indian prince in the 1920s, the other one set in the 1970s, featuring childlike Europeans on a hippie trail who claim they have leave behind Western civilisation and are trying to some spiritual home among Indian gurus. Bollywood has become a notorious synonym for the uprise Indian film industry in recent years. Young Indian scriptwriters have dis get byed post-colonial issues as themes for their movies and as a way of dealings with the changeful past of their country. Concerning the integration of Western values in the Indian population and culture, one can say that the British influence is still omnipresent in the Asian subcontinent. The reason for this can be also found in the persistence of the English language. many In dians are informed with the English language, because the British colonialists intended to export their values and culture by teaching the Indian population their language.This was regarded as the basic fundament for further education. What about the relationship between India and the United Kingdom today? It is a special one, and of course still not without tensions between these two nations that refer to the time of colonialism which from our retro perspective is not at all so far away. India has managed to become an independent state with its own political system and is still working to find its own identity. The longer the process of decolonisation lasts, the more we get the impression that only a midpoint course between the acceptance of British legacies and the creation of a new fantastic Indian self-confidence will be the right way to go for India. Indian Economy before Liberalization After independence, till 1991, the scotch policies of Indiawe re primarily inspired by the Soviet economical planningunder which a strong emphasis was laid on increasing the domestic self-sufficiency and reducing the faith on imports. Theeconomic policies of Indiaduring this phase were primarily protectionist and marked by excessiveeconomicinterventions and business regulations. Also, during this era the major concern of the regimen was to develop large and heavy normal sector industries. Theeconomic planning processduring this phase was mainly conducted centrally through theFive Year Planning processof thePlanning commission. This structure ofeconomic planning, throughFive Year Plans, was analogous to theplanning processof the Soviet Union. Industries like mining, steel, machine tools, insurance, telecommunications and power plants were effectively nationalized during this era. The Government ofIndia, under the leaders ofIndias first Prime Minister, Jawaharlal Nehru, along with statistician Prasanta Chandra Mahalanobis formulated a neconomic policywhich laid a prime focus on the development of heavy industry in country by both the public and the private sector.However, despite all its efforts, theeconomy of Indiawas unsuccessful to grow at pace with other Asian countries for the first three decades after independence. Later, in 1965, the advent of Green Revolution in country, triggered by the improved irrigation facilities, increase use of fertilizers and the introduction of high-yielding varieties of seeds improved the economic conditions of the country and enabled a erupt link between industry and agriculture inIndia. The economic policies of the colonial rulers were at the centre of a controversy in the late nineteenth century India.Whereas the colonial administration sought to project its policies as ripe to the country, the nationalist writers and sympathetic British commentators attacked these policies as exploitative and oppressive. Dadabhai Naoroji, R. C. Dutt and William Digby were some of the famous critics of regime policies. The economic history of India, as we know it, whitethorn be said to have begun during this period. D. R. Gadgil, Vera Anstey and D. H. Buchanan followed in their footsteps in taking up the economic history of the colonial period. Jaduanth Sarkar and W. H. Moreland wrote about the Mughal economy. In the post-independence period, economic history became an realised field of study and several studies were undertaken on various periods of Indian history covering several aspects of economy.The growth of economics as a tick in the eighteenth century led in due course to the development of a new branch in history called economic history. The progenitors of economics were pass Smith and other unpolluted economists. India was very oft in the vision of the classical economists, a group of thinkers in England during the Industrial Revolution. They advocated lays faire and minimizing of state intervention in the economy. Adam Smith, the fore most classical economist, condemned the East India Company in its new role as the ruling power in India. In his view, the Companys trading monopoly ran counter to the principle of the freedom of the market. economic science underwent a theoretical transformation in the early twentieth century under the influence of John Maynard Keynes, who advocated strategic economic intervention by the government for promoting welfare and business. Keynes, too, thought deeply about India while development his new economic theories, and his earliest majorwork. Indian Currency and Finance (London 1913), illustrated his notions of good monetary management of the economy. It is also noteworthy that the early classical economists, such as Ricardo, influenced the thinking of a group of Utilitarian administrators who set about disentangleing the administration of India in the nineteenth century. Above all, the influence of Adam Smith is noticeable in the end of the Companys monopoly by the Ch arter Acts of 1813 and 1833.Not surprisingly, therefore, historians have paid close attention to the connection between the evolution of economic thought in England and the question of reform of the colonial administration in India. Classical political economy in England laid the foundations for the laissez faire economics of the Raj in the nineteenth century. Keynesian economics, on the other hand, contained the germs of the development economics of the mid-twentieth century both types of economics affected the state and the economy in India, and affect debates in the economic history of India. For the colonial period, R. C. Dutts Economic History was followed by a series of works D. R.Gadgil, The Industrial Evolution of India in new Times (1924) Vera Anstey, The Economic Development of India (1929) and D. H. Buchanan, and The Development of Capitalistic Enterprise in India (New York 1934). More recently, there has been a collective two-volume survey Tapan Raychaudhuri an d Irfan Habib (eds. ). The Cambridge Economic History of India, Vol 1, C. 1200 C. 1750 (Cambridge 1982) and Dharma Kumar, The Cambridge Economic History of India, vol. 2 C. 1757 C. 1970 (Cambridge, 1983). Daniel Houston Buchanan, an American author, was of the opinion that other materialistic values and the caste system inhibited economic development in India. D. R.Gadgil, who updated his near classic work several times, evince, on the contrary, more purely economic factors the difficulties of capital militarisation on account of the absolute slightness of capital resources in respect to the size of the population, the late development of organized banking, and the seasonal fluctuations of a monsoon economy. A dispassionate economist, he did not denounce either foreign rule or the Indian social structure for the absence of an industrial revolution in India some of the Western contributors to the second volume of The Cambridge Economic History, on the other hand, sho wed a disposition to challenge R. C.Dutts vision of the ban collision of colonialism, and they dwelt instead on the technological modesty of the Indian economy. This, in their view, inhibited industrial development and capitalist endeavour during the colonial period. THE INDIAN PLANNING COMMISSION HISTORY The Planning Commission was set up by a Resolution of the Government of India in March 1950 in pursuance of declared objectives of the Government to promote a rapid rise in the standard of living of the people by cost-efficient exploitation of the resources of the country, increasing production and offering opportunities to all foremploymentin the service of the community.The Planning Commission was charged with the responsibility of making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and equilibrate exercise of resources and determining priorities. Jawaharlal Nehru was the first Chairman of the Pla nning Commission. The first Five-year Plan was launched in 1951 and two subsequent five-year plans were formulated till 1965, when there was a break because of the Indo-Pakistan Conflict. Two serial years of drought, devaluation of the funds, a general rise in values and erosion of resources disrupted the planning process and after three yearbook Plans between 1966 and 1969, the fourth Five-year plan was started in 1969.The Eighth Plan could not take off in 1990 due to the fast changing political situation at the Centre and the years 1990-91 and 1991-92 were treated as annual Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural adjustment policies. For the first eight Plans the emphasis was on a growing public sector with massive investments in basic and heavy industries, but since the launch of the Ninth Plan in 1997, the emphasis on the public sector has become less pronounced and the current thinking on planning in the country, in general, is that it should increasingly be of an indicative nature. FUNCTIONS The 1950 effect setting up the PlanningCommissionoutlined its functions as to a.Make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of these resources as are found to be deficient in relation to the nations requirement b. Formulate a Plan for the most effective and balanced utilisation of countrys resources c. On a determination of priorities, define the stages in which the Plan should be carried out and propose the allocation of resources for the due completion of each stage d. Indicate the factors which are tending to retard economic development, and act upon the conditions which, in view of the current social and political situation, should be established for the successful execution of the Plan e.Determine the nature of the machinery which will be incumbent for securing the successful implementatio n of each stage of the Plan in all its aspects f. Appraise from time to time the progress achieved in the execution of each stage of the Plan and recommend the adjustments of policy and measures that such appraisal may show to be necessary and g. Make such interim or ancillary recommendations as appear to it to be appropriate either for facilitating the go off of the duties assigned to it, or on a consideration of prevailing economic conditions, current policies, measures and development programmes or on an examination of such precise problems as may be referred to it for advice by Central or subject Governments. EVOLVING FUNCTIONSFrom a highly centralised planning system, the Indian economy is stepwise moving towards indicative planning where Planning Commission concerns itself with the building of a long term strategic vision of the future and decide on priorities ofnation. It works out sectoral targets and provides promotional stimulus to the economy to grow in the desired di rection. Planning Commission plays an integrative role in the development of a holistic approach to the policy formulation in decisive areas of human and economic development. In the social sector, schemes which require coordination and synthesis like countryfied health, drinking water, folksy energy needs, literacy and environment protection have yet to be subjected to coordinated policy formulation. It has led to multiplicity of agencies. An integrated approach can lead to better results at much lower costs.The emphasis of the Commission is on maximising the output by development our limited resources optimally. Instead of looking for mere increase in the plan outlays, the effort is to look for increases in the efficiency of utilisation of the allocations being made. With the emergence of severe constraints on available budgetary resources, the resource allocation system between the States and Ministries of the Central Government is under strain. This requires the Planning Com mission to play a mediatory and facilitating role, solemnizeing in view the best interest of all concerned. It has to ensure smooth management of the change and help in creating a culture of high productivity and efficiency in the Government.The key to efficient utilisation of resources lies in the creation of appropriate self-managed organisations at all levels. In this area, Planning Commission attempts to play a systems change role and provide consultancy within the Government for developing better systems. In order to spread the gains of experience more widely, Planning Commission also plays an discipline dissemination role. India-Liberalization in the Early 1990s Growth since 1980 Increased borrowing from foreign sources in the late 1980s, which helped fuel economic growth, led to storm on the balance of payments. The problem came to a head in idealistic 1990 when Iraq invaded Kuwait, and the price of oil soon doubled.In addition, many Indian workers resident in Persian Gu lf states either lost their jobs or returned home out of cultism for their safety, thus reducing the flow of remittances (see Size and Composition of the ca-ca Force, this ch. ). The direct economic impact of the Persian Gulf conflict was exacerbated by domestic social and political developments. In the early 1990s, there was violence over two domestic issues the reservation of a likeness of public-sector jobs for members of schedule Castes (see Glossary) and the Hindu-Muslim conflict at Ayodhya (see Public Worship, ch. 3 Political Issues, ch. 8). The central government set down in November 1990 and was succeeded by a minority government. The cumulative impact of these events agitate international confidence in Indias economic viability, and the country found it increasingly difficult to borrow internationally.As a result, India made various agreements with the world(prenominal) monetary Fund (IMFsee Glossary) and other organizations that included commitments to speed up rel axation (see United Nations, ch. 9). In the early 1990s, right smart progress was made in loosening government regulations, especially in the area of foreign trade. Many restrictions on private companies were lifted, and new areas were opened to private capital. However, India remains one of the worlds most tightly regulated major economies. Many fibrous vested interests, including private firms that have benefited from protectionism, labor unions, and much of the bureaucracy, oppose liberalization.There is also long concern that liberalization will reinforce class and regional economic disparities. The balance of payments crisis of 1990 and subsequent policy changes led to a temporary decline in the GDP growth rate, which fell from 6. 9 percent in FY 1989 to 4. 9 percent in FY 1990 to 1. 1 percent in FY 1991. In March 1995, the estimated growth rate for FY 1994 was 5. 3 percent. Inflation peaked at 17 percent in FY 1991, fell to 9. 5 percent in FY 1993, and then accelerated aga in, reaching 11 percent in late FY 1994. This increase was attributed to a sharp increase in prices and a famine in such critical sectors as sugar, cotton, and oilseeds.Many analysts agree that the short hurt most from the increase inflation rate and reduced growth rate. entropy as of September 1995 The rate of growth improved in the 1980s. From FY 1980 to FY 1989, the economy grew at an annual rate of 5. 5 percent, or 3. 3 percent on a per capita basis. Industry grew at an annual rate of 6. 6 percent and agriculture at a rate of 3. 6 percent. A high rate of investment was a major factor in improved economic growth. Investment went from about 19 percent of GDP in the early 1970s to nearly 25 percent in the early 1980s. India, however, required a higher rate of investment to master comparable economic growth than did most other low-income developing countries, indicating a lower rate of return on investments.Part of the adverse Indian experience was explained by investment in la rge, long-gestating, capital-intensive projects, such as electric power, irrigation, and infrastructure. However, slow completions, cost overruns, and under-use of capacity were contributing factors. Private savings financed most of Indias investment, but by the mid-1980s further growth in private savings was difficult because they were already at quite a high level. As a result, during the late 1980s India relied increasingly on borrowing from foreign sources (see Aid, this ch. ). This contract led to a balance of payments crisis in 1990 in order to incur new loans, the government had no choice but to agree to further measures of economic liberalization.This commitment to economic reform was reaffirmed by the government that came to power in June 1991. Indias primary sector, including agriculture, forestry, fishing, mining, and quarrying, accounted for 32. 8 percent of GDP in FY 1991 (see table 17, Appendix). The size of the outlandish sector and its vulnerability to the vagari es of the monsoon cause comparatively large fluctuations in the sectors contribution to GDP from one year to another (see straddle Output, ch. 7). In FY 1991, the contribution to GDP of industry, including manufacturing, construction, and utilities, was 27. 4 percent services, including trade, transportation, communications, real estate of the realm and finance, and public- and private-sector services, contributed 39. 8 percent.The steady increase in the proportion of services in the national economy reflects increased market-determined processes, such as the spread of inelegant banking, and government activities, such as defense spending (see Agricultural Credit, ch. 7 Defense Spending, ch. 10). Despite a sometimes disappointing rate of growth, the Indian economy was transformed between 1947 and the early 1990s. The number of kilowatt-hours of electricity generated, for example, increased more than fiftyfold. Steel production rose from 1. 5 million wads a year to 14. 7 million tons a year. The country produced spot satellites and nuclear-power plants, and its scientists and engineers produced an atomic explosive device (see Major Research Organizations, this ch. blank shell and Nuclear Programs, ch. 10).Life expectancy increased from twenty-seven years to fifty-nine years. Although the population increased by 485 million between 1951 and 1991, the availability of food grains per capita rose from 395 grams per day in FY 1950 to 466 grams in FY 1992 (see Structure and Dynamics, ch. 2). However, considerable dualism remains in the Indian economy. Officials and economists make an important distinction between the formal and open sectors of the economy. The informal, or unorganized, economy is largely rural and encompasses farming, fishing, forestry, and cottage industries. It also includes short vendors and some small-scale mechanized industry in both rural and urban areas.The bulk of the population is employed in the informal economy, which contributes more than 50 percent of GDP. The formal economy consists of large units in the modern sector for which statistical data are relatively good. The modern sector includes large-scale manufacturing and mining, major financial and commercial businesses, and such public-sector enterprises as railroads, telecommunications, utilities, and government itself. The greatest disappointment of economic development is the failure to reduce more substantially Indias widespread poverty. Studies have suggested that income distribution changed little between independence and the early 1990s, although it is possible that the poorer half of the population improved its position slightly.Official estimates of the proportion of the population that lives below the poverty line tend to vary sharply from year to year because adverse economic conditions, especially rises in food prices, are capable of lowering the standard of living of many families who usually live just above the subsistence level. The Ind ian governments poverty line is establish on an income sufficient to ensure access to minimum nutritional standards, and even most persons above the poverty line have low levels of consumption compared with much of the world. Estimates in the late 1970s put the number of people who lived in poverty at 300 million, or nearly 50 percent of the population at the time. Poverty was reduced during the 1980s, and in FY 1989 it was estimated that about 26 percent of the population, or 220 million people, lived below the poverty line. pokey economic growth and higher inflation in FY 1990 and FY 1991 reversed this trend.In FY 1991, it was estimated that 332 million people, or 38 percent of the population, lived below the poverty line. Farmers and other rural residents make up the large majority of Indias poor. Some own very small amounts of land while others are field hands, seminomadic shepherds, or migrant workers. The urban poor include many construction workers and petty vendors. The bu lk of the poor work, but low productivity and intermittent employment keep incomes low. Poverty is most prevalent in the states of Orissa, Bihar, Uttar Pradesh, and Madhya Pradesh, and least prevalent in Haryana, Punjab, Himachal Pradesh, and Jammu and Kashmir. By the early 1990s, economic changes led to the growth in the number of Indians with significant economic resources.About 10 million Indians are considered upper class, and rough 300 million are part of the rapidly increasing middle class. Typical middle-class occupations include owning a small business or being a corporate executive, lawyer, physician, white-collar worker, or land-owning farmer. In the 1980s, the growth of the middle class was reflected in the increased consumption of consumer durables, such as televisions, refrigerators, motorcycles, and automobiles. In the early 1990s, domestic and foreign businesses hoped to take advantage of Indias economic liberalization to increase the range of consumer products offer ed to this market. Housing and the ancillary utilities of sewer and water systems lag considerably behind the populations needs.Indias cities have large shantytowns built of scrap or readily available natural materials erected on whatever space is available, including sidewalks. Such dwellings lack piped water, sewerage, and electricity. The government has attempted to build admit facilities and utilities for urban development, but the efforts have fallen far short of demand. Administrative controls and other aspects of government policy have discouraged many private investors from constructing housing units. Liberalization in the Early 1990s Increased borrowing from foreign sources in the late 1980s, which helped fuel economic growth, led to pressure on the balance of payments. The problem came to a head in August 1990 when Iraq invaded Kuwait, and the price of oil soon doubled.In addition, many Indian workers resident in Persian Gulf states either lost their jobs or returned home out of fear for their safety, thus reducing the flow of remittances (see Size and Composition of the Work Force, this ch. ). The direct economic impact of the Persian Gulf conflict was exacerbated by domestic social and political developments. In the early 1990s, there was violence over two domestic issues the reservation of a proportion of public-sector jobs for members of Scheduled Castes (see Glossary) and the Hindu-Muslim conflict at Ayodhya (see Public Worship, ch. 3 Political Issues, ch. 8). The central government fell in November 1990 and was succeeded by a minority government. The cumulative impact of these events shook international confidence in Indias economic viability, and the country found it increasingly difficult to borrow internationally.As a result, India made various agreements with the International Monetary Fund (IMFsee Glossary) and other organizations that included commitments to speed up liberalization (see United Nations, ch. 9). In the early 1990s, conside rable progress was made in loosening government regulations, especially in the area of foreign trade. Many restrictions on private companies were lifted, and new areas were opened to private capital. However, India remains one of the worlds most tightly regulated major economies. Many powerful vested interests, including private firms that have benefited from protectionism, labor unions, and much of the bureaucracy, oppose liberalization. There is also considerable concern that liberalization will reinforce class and regional economic disparities.The balance of payments crisis of 1990 and subsequent policy changes led to a temporary decline in the GDP growth rate, which fell from 6. 9 percent in FY 1989 to 4. 9 percent in FY 1990 to 1. 1 percent in FY 1991. In March 1995, the estimated growth rate for FY 1994 was 5. 3 percent. Inflation peaked at 17 percent in FY 1991, fell to 9. 5 percent in FY 1993, and then accelerated again, reaching 11 percent in late FY 1994. This increase was attributed to a sharp increase in prices and a shortage in such critical sectors as sugar, cotton, and oilseeds. Many analysts agree that the poor suffer most from the increased inflation rate and reduced growth rateINDIAS ECONOMIC REFORMS The reform process in India was initiated with the aim of accelerating the pace of economic growth and eradication of poverty. The process of economic liberalization in India can be traced back to the late 1970s. However, the reform process began in vehement only in July 1991. It was only in 1991 that the Government signaled a systemic shift to a more open economy with greater reliance upon market forces, a larger role for the private sector including foreign investment, and a restructuring of the role of Government. The reforms of the last decade and a half have gone a long way in freeing the domestic economy from the control regime.An important feature of Indias reform programme is that it has emphasized gradualism and evolutionary transition rather than rapid restructuring or shock therapy. This approach was adopted since the reforms were introduced in June 1991 in the wake a balance of payments crisis that was surely severe. However, it was not a prolonged crisis with a long period of non-performance. The economic reforms initiated in 1991 introduced far-reaching measures, which changed the working and machinery of the economy. These changes were pertinent to the following Dominance of the public sector in the industrial activity Discretionary controls on industrial investment and capacity expansion Trade and exchange controls Limited access to foreign investment Public ownership and regulation of the financial sector The reforms have unlocked Indias enormous growth potential and unleashed powerful entrepreneurial forces. Since 1991, successive governments, across political parties, have successfully carried forward the countrys economic reform agenda. Reforms in Industrial Policy Industrial policy was restructur ed to a great extent and most of the central government industrial controls were dismantled. Massive deregulation of the industrial sector was done in order to bring in the element of competition and increase efficiency. Industrial licensing by the central government was almost abolished except for a few hazardous and environmentally sensitive industries.The list of industries reserved solely for the public sector which used to cover 18 industries, including iron and steel, heavy plant and machinery, telecommunications and telecom equipment, minerals, oil, mining, air transport services and electricity generation and distribution was drastically reduced to three defense aircrafts and warships, atomic energy generation, and railway transport. Further, restrictions that existed on the import of foreign technology were withdrawn. Reforms in Trade Policy It was realized that the import alter inward looking development policy was no longer fitted in the modern globalising world. Befo re the reforms, trade policy was characterized by high tariffs and pervasive import restrictions. Imports of manufactured consumer goods were completely banned. For capital goods, raw materials and intermediates, veritable lists of goods were freely importable, but for most items where domestic substitutes were being produced, imports were only possible with import licenses.The criteria for issue of licenses were non-transparent, delays were endemic and corruption unavoidable. The economic reforms sought to phase out import licensing and also to reduce import duties. Import licensing was abolished relatively early for capital goods and intermediates which became freely importable in 1993, simultaneously with the switch to a flexible exchange rate regime. Quantitative restrictions on imports of manufactured consumer goods and agricultural products were finally removed on April 1, 2001, almost exactly ten years after the reforms began, and that in part because of a ruling by a World Trade Organization dispute panel on a complaint brought by the United States. Financial sector reformsFinancial sector reforms have long been regarded as an integral part of the overall policy reforms in India. India has recognized that these reforms are imperative for increasing the efficiency of resource mobilization and allocation in the real economy and for the overall macroeconomic stability. The reforms have been driven by a thrust towards liberalization and several initiatives such as liberalization in the interest rate and reserve requirements have been taken on this front. At the same time, the government has emphasized on stronger regulation aimed at strengthening prudential norms, transparency and supervision to moderate the prospects of systemic risks.Today the Indian financial structure is inherently strong, functionally diverse, efficient and globally competitive. During the last fifteen years, the Indian financial system has been incrementally deregulated and undefe nded to international financial markets along with the introduction of new instruments and products. Devaluation of the Rupee tosh of Two Years, 1966 and 1991 Since its Independence in 1947, India has face two major financial crises and two consequent devaluations of the rupee. These crises were in 1966 and 1991 and, as we plan to show in this paper, they had similar causes. Foreign exchange reserves are an extremely critical aspect of any countrys ability to engage in commerce with other countries.A large stock of foreign coin reserves facilitates trade with other nations and lowers transaction costs associated with international commerce. If a nation depletes its foreign currency reserves and finds that its own currency is not accepted abroad, the only option left to the country is to borrow from abroad. However, borrowing in foreign currency is built upon the obligation of the borrowing nation to pay back the loan in the lenders own currency or in some other hard currency. If the debtor nation is not credit-worthy enough to borrow from a private bank or from an institution such as the IMF, then the nation has no way of paying for imports and a financial crisis accompany by devaluation and capital pip results.The destabilising effects of a financial crisis are such that any country feels strong pressure from internal political forces to avoid the risk of such a crisis, even if the policies adopted come at large economic cost. To avert a financial crisis, a nation will typically adopt policies to maintain a stable exchange rate to diminish exchange rate risk and increase international confidence and to bulwark its foreign currency (or gold) reserves. The restrictions that a country will put in place come in two forms trade barriers and financial restrictions. Protectionist policies, particularly restrictions on imports of goods and services, belong to the former category and restrictions on the flow of financial assets or money across international bo rders are in the last mentioned category.Furthermore, these restrictions on international economic activity are often accompanied by a policy of fixed or managed exchange rates. When the flow of goods, services, and financial capital is regulated tightly enough, the government or central bank becomes strong enough, at least in theory, to dictate the exchange rate. However, despite these policies, if the market for a nations currency is too weak to justify the given exchange rate, that nation will be forced to devalue its currency. That is, the price the market is willing to pay for the currency is less than the price dictated by the government. The 1966 Devaluation As a developing economy, it is to be expected that India would import more than it exports.Despite government attempts to obtain a positive trade balance, India has had consistent balance of payments deficits since the 1950s. The 1966 devaluation was the result of the first major financial crisis the government faced. As in 1991, there was significant downward pressure on the value of the rupee from the international market and India was faced with depleting foreign reserves that necessitated devaluation. There is a general agreement among economists that by 1966, inflation had caused Indian prices to become much higher than world prices at the pre-devaluation exchange rate. When the exchange rate is fixed and a country experiences high inflation relative to other countries, that countrys goods become more expensive and foreign goods become cheaper.Therefore, inflation tends to increase imports and decrease exports. Since 1950, India ran continued trade deficits that increased in magnitude in the 1960s. Furthermore, the Government of India had a budget deficit problem and could not borrow money from abroad or from the private corporate sector, due to that sectors negative savings rate. As a result, the government issued bonds to the RBI, which increased the money supply. In the long run,