100 Days Commerce Masterclass: Indian Economy Chapter 3

Introduction

• This masterclass is covering chapters of the Indian economy under a 100-day plan.
• This week, chapters 1, 2, and 3 are being covered in one shot.
• The plan for next week includes chapters 4, 5, 6, and finally chapters 7, 8.
• This lecture focuses on chapter 3.

Perspective on Indian Economy

• The story of the Indian economy, especially the post-colonization status.
• Significant changes in 1991 that altered the structure of the Indian economy.

Economic Reforms of 1991

• Problem: Despite 40 years of efforts, poor performance of the public sector, deficit in BOP, and rising inflation.
• Solution: Reviving the economy by taking loans from the IMF and opening the economic system.
  • Liberalization: Removing licenses, giving people the freedom to work.
  • Privatization: Reducing the role of the public sector and promoting the private sector.
  • Globalization: Opening the country, removing barriers for trade.

New Economic Policy 1991

• Policies of LPG (Liberalization, Privatization, Globalization).
• Objective: To make the economy more competitive and remove barriers to growth.

Reasons for Reforms

• Poor performance of the public sector.
• BOP deficit and lack of foreign reserves.
• Rising inflation and debt rates.
• Inefficient management status.

Types of Reforms

• Stabilization Measures: Correcting the weaknesses of the BOP and controlling inflation.
• Structural Reform Measures: Increasing the long-term growth and efficiency of the economy.

Key Reforms

1. Industrial Sector Reforms

• Reduction in licensing.
• Declining role of the public sector.
• Deregulation of Small Scale Industries.
• Changes in the MRTP Act.

2. Financial Sector Reforms

• Changing RBI's role from regulator to facilitator.
• Increase in the prevalence of private banks.
• Raising the limit on foreign investment.

3. Tax Reforms

• Rationalizing direct and indirect taxes.
• Process simplification and the introduction of GST.

4. Foreign Exchange Reforms

• Devaluation of the rupee.
• Market-oriented exchange rate.

5. Trade and Investment Policy Reforms

• Removal of import-export restrictions.
• Encouragement of foreign investment.

Privatization

• Transfer of ownership from the public sector to the private sector.
• Meaning and benefits of disinvestment.
• Concepts of Maharatna, Navratna, and Miniratna.

Globalization

• Connecting the national economy to the global economy.
• Benefits and drawbacks of globalization.

Demonetization & GST

Demonetization

• Demonetization of 500 and 1000 notes on November 8, 2016.
• Steps towards tax administration and a cashless economy.

Goods and Services Tax (GST)

• Concept of One Nation, One Tax.
• Meaning and division of CGST, SGST, IGST.
• Benefits and rates of GST.

Conclusion

• Widespread reforms in the Indian economy under the New Economic Policy.
• Future plans and preparations.

Plan for next week: Start of Unit 2.

Thank you and see you in the next session!