Indian economy and Liberalization

India is a country well known for its traditions and diversified cultures. India attained its freedom in the year 1947 and after that it became worlds largest democratic country. India has about 28 states and 7 union territories. The unique characteristic of the country is unity in diversity, although there are many cultures, languages and cultures.

India is a mixed economy, where the government allows the entrepreneurs freely to establish their businesses. After introducing the Industrial policy in the year 1991, India developed as an open market economy, yet tinges of its past autarkic policies and practices remain. This policy reforms provided a free and conducive environment for trade and include different measures and strategies that helped to attain the high export growth rates in some recent years. Economic liberalization, which includes industrial deregulation, privatization of state owned enterprises, and reduced controls on foreign trade and foreign direct investments that helped the country for the tremendous economic growth, which has averaged more than 7% per year since 1997. Since the most of the population in the country depends on agriculture for their livelihood, the scenario is changing day to day. The service sector is providing major output, more than half of significant source for the economic growth with only onethird of its labor source. Indias economy and its growth rate observed ordinary and slow before 1980s. The growth rate of output per worker is square in the middle of the worlds distribution and the values of its proximate determinants of growth are ordinary too. From the late 1980s, India emerged as one of the fastest growing economies in the world, with a doubling time for average GDP per-capita of only sixteen years. The government of India, which was headed by then Prime Minister P.V.Narasimha Rao who introduced the new economic and industrial reforms in the July of 1991 through the industrial policy 1991, changed the scenario of industrial growth, progress and quality of life of the people in the sub-continent. The liberalization policy opened the economy, dismantled the import controls, lowered custom duties and devalued the currency, abolished the strict license controls on private investments to encourage more

investments and reduced the tax rates too. This era of the India economy is considered as the golden era for the growth and existence of new industries. After the year 1991, GDP growth rate has been changed in a progressive manner, which is one of the development indicators in the economy. The several factors or drivers that led to these remarkable and broad-based growth surges in the period 1992-1997 are: 1. Tremendous productivity gains from the deregulation of trade and commerce, industry and finance especially in the industrial and service sectors. 2. The flow in growth of exports rate of 20 per cent per year for three successive years beginning 1993-94, because of substantial devaluation in real effective terms in the early 1990s and a freer policy regime for industry, foreign trade and payments. 3. The liberalization reforms loosen the clutches and virtually waived the regulations on the investments, which leads to the interests of the foreign corporations and providing loans and allowing equity issues. 4. A buoyant world economy, which supported expansion of foreign trade and private capital inflows. Thus the code of modernizing capital market, and an increasingly liberal and competitive environment for investment, trade and commerce, a wealth of entrepreneurial talent and sustained economic growth has facilitated the rise of strong new corporations and supported the expansion of the more agile and aggressive among the established firms. Growing Middle-Class There was a premature exuberance about Indias rising middle class and their acquisitive aspirations after the major economic reforms of 1991-1994. Today there is a much firmer basis for emphasizing the importance of the growing middle class in transforming consumption, production and investment in the Indian economy. Purchases of iconic middle class consumption items have certainly soared in the last 15 years. Annual sales of cars (including multi-utility vehicles) have risen more than six times to 1.3 million in 2005-2006. Two-wheeler sales have increased more than four times to 7.6 million in 2005-2006. Table pending

Industrial sector reforms & Liberalization Economic liberalization in 1990s majorly influenced the industrial sector of the country. The concept of privatization came into existence in the industrial sector; most of government-operated industries in India are privatized except some of the significant sectors like railways, defense manufacturing and some sensitive sectors. From aviation sector to FMCG sector, many private players started their entrepreneurial activities. Many of the foreign players invested in automobile sector. Day to day, Indian roads started welcoming different kind of foreign manufactured cars. India is having the global presence in trade and commerce activities, it was a founding member of General Agreement on Tariffs and Trade (GATT) in 1947 and of the World Trade Organization (WTO) in 1995, and so has actively participated in the different rounds of negotiations. Trade and commerce performance especially in exports mainly depends on an economys openness to competition on the globalized world market. Regarding to this, India has launched important structural reforms to liberalize its market and attract foreign direct investments, which are driving factors for economic growth, especially in developing countries. It was observed that FDI flow increased from time to time, 6.2 Billion US $ to 23 Billion US $ in 2006-2007.