India Before and After liberalization
Before 1991 in India, rules, and laws which were aimed at regulating the economic activities becomes major hindrances in growth and development and became a reason to occur economic crises. So Liberalization was introduced by PM P.V. Narasimha Rao and finance minister Dr. Manmohan Singh to put an end to these restrictions and open up various sectors of Indian economy in 1991.
Liberalization Led to significant impact on various sectors like,
Industrial sector: Earlier price, production, distribution of a product etc. were fully controlled by government. People of India have to take permission for start new enterprise and before shut it down forever. Now private industries are liberal they are free to make decisions regarding price, productions and distribution. Only public sectors like Defense equipment, Nuclear energy and Railway are run by government. Now a days government of India is highly focusing on industrial sector by providing encouragement, training, awards and rewards or platforms through ATAL Innovation Mission, Start-up India, Make in India etc. schemes.
We can see the growth in the GDP after 1991 because of change of policies of government.
Financial sector: Financial sector of India is control by The Reserve Bank of India. Financial sector includes Commercial Bank, Investment Banks, Stock Exchange Operation and Foreign Exchange Market. RBI decides the amount of money that every bank can keep with themselves, fixed interest rate, Nature of leading to various sectors etc. After financial sector reformation financial sectors may be allowed to take decisions on many matters without consulting RBI. Now RBI is stronger than ever before.
Tax Sector: There are mainly two type of Tax, Direct Tax and Indirect Tax. After Liberalization, There has been a continuous reduction in taxes on individual income to encourage enterprise and industries. GST bill can be said as great change towards liberalization, it can increase economic growth India. It is said that, this law represents the biggest reform to India's economy since it was massively deregulated in 1991, leading the country away from decades of socialist policies.
Foreign Exchange Sector: In 1991 during crisis situation Indian Rupee was devalued against foreign currencies. This Led to the inflow of foreign exchange. Before 1991 Government used to decides exchange rate. Now Market determines exchange rate based on demand and supply of foreign exchange.
Trade and investment policy reforms: Liberalization of trades and investment regime was initiated to increase international competitiveness of industrial production and also foreign investment and technology into the economy. Now India is the most open economy in the world for FDI said by PM Modi. Because of favorable environment and profitable policies of government foreign investment is going to increase in India.
There are some disadvantages of liberalization like,
· It increases unemployment,
· Pressure by World Bank and IMF,
· Loss to domestic units,
· Increase reliability of foreign technology and foreign debts.,· It is not focusing towards agricultural sector.