GS Paper 3
Syllabus: Indian Economy, Government policies after Liberalization
Source: Indian Express
Direction:
This is an opinion piece. Can note down a few unique suggestions
Context: Pandemic recovered economy need further reforms, but this reform has to be beyond liberalization.
Liberalization means the loosening of government controls.
Issue with Liberalization:
No doubt we need more capital and better integration with world markets. But IMF-WB holy trinity of structural land, labour and other market-opening reforms harms many domestic citizens and, beyond a point, runs into severe resistance that imposes large political costs.
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- Liberalisation has reached a point of diminishing returns.
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Recent Liberalization suggestions and issues with it:
Some experts suggest:
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- Privatisation of banks:
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- However, with improvements in PSB governance and risk-based lending profiles, NPA ratios have fallen and therefore no need for privatization.
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- Rupee should be completely market-determined:
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- However, the fall in the exchange rate of the rupee from about Rs 8 in the 1990s to about Rs 80 currently has not brought about a sustained rise in exports. And therefore the argument that ‘Rupee should be completely market-determined’ is not fully justified.
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- Privatisation of banks:
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What is needed?
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- Focus on digital aspects, where India has a comparative advantage
- Supply chain diversification away from China
- Moving to a net zero economy and harnessing green initiatives as a source of investment and innovation.
- Developing skills and capabilities
- Improving employability
- Augmenting infrastructure
- Reducing logistics and other business costs through better Centre-state coordination
- Enhancing the quality of governance
- Improve data use and privacy, functioning of courts and police.
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Insta Links
Mains Links
Q. Assess India’s 1991 liberalisation reforms and the lessons it offers in contemporary times. (10M)
Prelims Links
Link it with basics of liberalization policy, Narsimhan Committee report.
With the reference to the Indian economy after the 1991 economic liberalization, consider the following statements: (UPSC2020)
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- Worker productivity (` per worker at 2004-05 prices) increased in urban areas while it decreased in rural areas
- The percentage share of rural areas in the workforce steadily increased
- In rural areas, the growth in the non-farm economy increased
- The growth rate in rural employment decreased.
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Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 3 and 4 only
(c) 3 only
(d) 1, 2, and 4 only
Answer: B
After the LPG reforms of 1991, it is inevitable that the rural/agriculture workforce would start shifting towards urban/non-Agri sectors. So 2 is wrong and 3 is correct. The steady transition to urbanization over the years is leading to the decline in the rural share of the population, workforce and GDP of the country. 4 is correct.
Which of the following has/have occurred in India after its liberalization of economic policies in 1991? (UPSC 2017)
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- Share of agriculture in GDP increased enormously.
- Share of India’s exports in world trade increased.
- FDI inflows increased.
- India’s foreign exchange reserves increased enormously.
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Select the correct answer using the codes given below:
(a) 1 and 4 only
(b) 2, 3 and 4 only
(c) 2 and 3 only
(d) 1, 2, 3
Answer: B
India’s agriculture sector has shown a gradual decline in contribution to the Indian economy post-reform. So, option 1 is wrong.
