“Indian economic environment has undergone dramatic changes with a shift in development strategy”- In the light of this statement evaluate the series of economic reforms introduced since 1991

The economic environment relates to all the economic determinants that influence commercial and consumer compliance. The term economic environment indicates all the external economic circumstances that affect the purchasing practices of customers and markets. Hence, it influences the production of the business.

As a component of economic reformations, the government of India declared a new industrial system in July 1991. The extensive characteristics of this system were as follows:

The government decreased the number of enterprises below mandatory licensing to six.

Many of the businesses held for the public sector under the initial policy were justified. The purpose of the public sector was defined only to four industries of vital importance.

Disinvestment was conducted in case of many public sector industrial companies.

The policies towards foreign funds were expanded. The percentage of foreign equity partnerships was extended. In many ventures, 100 percent of foreign direct investment (FDI) was allowed.

The automatic approval was now given for technology transactions with foreign firms.

Foreign investment promotion board (FIPB) was established to support and channelise the foreign financing in India.

The strategy of reforms introduced in India in July 1991 presented a mixture of macroeconomic stabilization and structural adjustment. It was guided by short-term and long-term objectives. Stabilization was necessary in the short run to restore balance of payments equilibrium and to control inflation. At the same time changing the structure of institutions themselves through reforms was equally important from long term point of view.

The new government moved urgently to implement a programme of macroeconomic stabilization through fiscal correction. Besides this, structural reforms were initiated in the field of trade, industry and the public sector.

PM PV Narasimna Rao with Finance Minister Manmohan Singh and others

Objective of Reforms

As per the Discussion Paper on Economic Reforms brought out by the Ministry of Finance in July 1993, the objectives of the reforms were:

“…to bring about rapid and sustained improvement in the quality of the people of India. Central to this goal is the rapid growth in incomes and productive employment… The only durable solution to the ______ __________ __________ ____ __________ ______ _________ ___ _______ __________ ________.
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