An Example Of Transition Economy Economics Essay

An Example Of Transition Economy Economics Essay Around 1.21 billion people currently living in India, which is about 17.4% of the global population or one, can say 2.4 per cent of world GDP in US dollar terms and 5.5 % in PPP terms. The universal wellbeing too is linked to progress in India as reflected in the eager global interest in India. But, India seems to instigate and disappoint at the same time. Where some countries raced ahead in the development process, India lagged behind. It took 40 long years for India’s real per capita GDP to double from 1950-1951 to 1990-91. But, for India 1991-92 was a significant moment in modern economic history because of a severe balance of payments catastrophe prompted far accomplishment economic reforms, unlocking its growth potential, and the result was that in only 15 years, India’s per capita income doubled again by 2006-07. If India will maintain its current growth rate then, India’s per capita income could definitely double by 2017-18 in next some years. The key pol icy reforms since 1991-92, reviewing the economic progress made so far Policy Reforms before 1991 Macroeconomic crisis of 1991 discernible a turning point in India’s economic history for two reasons. First, fiscal arrears driven external payment mishap with a dip in foreign exchange reserves to below US$ 1 billion in 1991. Second, concurrently efforts were made towards wide ranging structural reforms surrounding areas of trade, management of exchange rates and industry, public finance as well as financial sector. The main objective was to create a competitive environment to improve output and efficiency. New industrial policy fostered competition by Abolishing monopoly restrictions Terminating the phased manufacturing programmers 100% foreign direct investment Import of foreign technology De-reservation of sectors till then reserved for the public sector. Only five industries are under licensing presently, mainly on account of environmental, health, safety and strategic consi deration and two industries are reserved for the public sector and those industries are: ATOMIC ENERGY RAILWAY TRANSPORT Reservation of industrial products for the small scale sector is still an enduring issue. FDI i.e. Foreign Direct Investment up to 100% is allowed under the automatic route in most sectors, but with a few exceptions. The infrastructure sector is being in the hands of private sector. Because of the large requirements of funds for infrastructure, 100% FDI has been allowed in all infrastructure sectors. There are unmitigated tax holidays to encourage the business of development, operation, and maintenance of infrastructure facilities. The monetary policy framework and its operating procedures in India have evolved over time with the changes in the macroeconomic structure and financial markets development. After the deregulation of the financial sector, the stability of money demand became deduce. Because of that, Reserve Banks switched from monetary targeting framewo rk, to a multiple indicator approach. In this approach, many indicators available on a high frequency basis. The various indicators are: Rates of return in different markets Movements in currency, credit, fiscal position, inflation rate, exchange rate etc Refinancing and transactions in foreign exchange The objective for the financial sector was to provide operational litheness and functional self-sufficiency to all the financial institutions so that they could allocate resources more efficiently. Some of the important initiatives in the financial sector were: