The govt at this severe crisis managed the situation along classical lines In

The govt at this severe crisis managed the situation

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The govt. at this severe crisis managed the situation along classical lines. In the short term, the Govt. pledged a part of gold reserves to meet foreign exchange liabilities. In the medium term, the govt. arranged a loan from IMF and in the long run, the govt. initiated far-reaching reforms programme which included changes in trade policy and economic policy. There were structural reforms in the entire economic system. The central theme of structural reforms was restoration of fiscal balance to contain inflation and giving relief.
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Thus, a number of economic and structural reforms were undertaken to bring about a radical change in business environment of the country. The changes which were brought about are as follows: a) Abolition of licensing b) Abolition of FERA and liberalizing MRTP c) Higher percentage of foreign holding d) Privatization of oil sector, telecom, aviation, banking, mining e) Giving more autonomy to public sector f) Lowering corporate taxes, excise duties, import duties g) Low excise duties h) Taxing services i) Decanalisation of imports j) No export subsidies k) Offering global patent protection l) Convertibility of rupee in stages m) Opportunity for Indian companies to become global n) Financial sector with interest deregulation, and capital market reforms o) Subsidy cut p) More liberalization FII norms q) Privatization of various infrastructure r) Setting up various regulatory bodies like TRAI, SEBI, IDRA s) New sea port policies, export-import policies t) More financial sector reforms We indicate feature and realities of the changes in various sectors but in the course of discussion we will analyze the basic framework, perspectives in the latest changes. However and meanwhile, we may indicate the types of changes that have been brought in the model of Economic Management. Pre Reform Stages Post Economic Reform Stages Closed economy Public sector in commanding height Import substitution License dominated State intervention Administered price Deficit has no peril Natural monopoly Restriction on FDI and MNCs High tax regime Credit market, state controlled Open economy Market determined growth Export promotion Delicensed, deregulated Selective intervention Market determined price Contained deficit Competitive deficit FDI and MNCs welcomed Low tax regimes and tax reforms Deregulated credit reforms
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Govt. abolishes the practices of multiplicity of agency network which give permission to new projects. Companies Act has been changed to create room for merger and amalgamation. Banks and other PSUs have been given more freedom. More attempts have been made to create vibrant capital market. There has been more easy access to ADR/GDR market of the Indian companies at present. The govt. has set up a number of regulatory bodies to control unfair competition in trade and pricing. Private agencies have been invited for infrastructure building. MACROECONOMIC STABILISATION Often called as just stabilisation, it involves returning to low and stable inflation and a sustainable fiscal and balance of payments position. In the short run, trade liberalization may increase deficits in the BoPs and financial sector reforms may worsen fiscal position by raising cost of public borrowing. Therefore, stabilisation must accompany structural reforms and
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