4th Class

Macro –Economic reforms & Structural adjustments 

 C.

Government brought a series of Macro economic correction and reforms of economic institutions and structural adjustments. They are as follows under macroeconomic reforms. Fiscal and monetary reforms:

1)reduction of fiscal deficits 2) reduction of tax systems 3) interest rate reforms 4) inflation control.

B. Banking Reforms 1.

2. 3.

4.

5.

Banks to operate as commercial institution Phasing out priority sector lending Deregulation of deposit interest rates Operational freedom in lending rates Adherence to norms on capital adequacy

C. Capital market reforms 1.

2. 3.

4.

5.

Abolition of CCI (controller of capital issues) and introduction of free pricing Strengthening of SEBI Opening up of India capital market to FII’s Allowing foreign brokers in Indian capital markets Allowing private sector on mutual funds

Structural adjustment  B. 3. 4. 5. 6. 7. 8. 9.

Under structural adjustment we have: Market driven price environment. Phasing out subsidies Dismantling of price control Axe on fertilizer subsidy Abolition of sugar subsidy Axe on product subsidy Partial decontrol and marketing of kerosene and LPG Steel price decontrol

B. Public sector restructuring 1.

2.

3.

4.

5.

No new PSU’s & no expansion of PSU’s with government equity Budgetary support for PSU’s to be Phased out. Preference to PSU’s in government tenders abolished Disinvestment of government equity in PSU’s Sick PSU’s to be referred to BIFR (Board of industrial and financial

C. Exit policy  

Support to VRS Creation of NRF (National renewal fund)

Result of New industrial policy A.

3. 4. 5.

A sea change in The Business environment Entrepreneurial freedom releases the growth impulses and alters the industrial scene: Rush of Entrepreneurs spate of merger and acquisition The Diversification Rush

B. Multinational consolidated their position 1.

2.

3.

MNCs acquire majority equity in their India enterprises and JVs( GE group) Many MNCs enter India afresh through new JVs MNC entry and investment alters even core sector ( Power sector, Oil and Telecom.)

1.

2.

C. Imports go out of government domain and become entrepreneurial activity Companies import materials free of

licensing protocol, and bypassing the canalizing agencies. Import trade emerges as a separate business opportunity

D. Capital market undergo radical change    

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Capital markets gain a new buoyancy FIIs enter India capital market in a big way Foreign brokers follow FIIs NBFCs (new banking financial corporation) registered rapid growth and strike alliance with global finance companies. Entry and growth of private mutual funds.

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E. Banking sector comes under a competitive environment

Deregulation of interest rates leads to competition in deposits Disinvestments of government equity in nationalized banks. New private banks with new technology, New products and aggressive marketing call for a new competition. Banks face new competition from capital markets like FIs , MFs and NBFCs. Banking services get marketed as branded consumer products Banks have to now operate as viable ,

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F. Financial services emerges as a major new business

Funding options multiply as capital can be raised in many ways A large basket of financial instruments emerged Emergence of many new financial services Firms not only start utilizing financial services but also recognize the scope of financial services as a separate business and float financial service

G. Pervasiveness of private sectors in Major core areas 

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Private sector enters into all the core industries Oil, Mining and Telecom Road building , Railways , Ports, Civil aviation EPZ (export processing Zone), SEZ