LiberalizationPost 1991

GROUP 12Ashuman Gupta – 74Karan Madhoghariya – 87 Prakhar Singh – 100Shubhro De - 112

Textile SectorA Disaster

• Inward looking policy till 1980s• Turning point in 1985 and liberalization policy since

1991• Uruguay round negotiations • Expiry of the quotas to EU, USA and Canada• National textile policy 2000• New FDI policy

Indian Textile Exports

Some Facts• The organized sector contribution is about 70%• The organized sector employs about 10 %• Increase in employment has been largely in the

unorganized sector• Introduction of Power loom and then Jet loom

Employment Figures (%)

Organized Unorganized Total

Textiles

M 15.98 84.02 100

W 2.60 97.40 100

T 11.29 88.71 100

Garment

M 7.26 92.74 100

W 6.64 93.36 100

T 7.09 92.91 100

Textile and Garment

M 13.61 86.39 100

W 3.43 96.57 100

T 10.24 89.76 100

Conclusion• Motive of Liberalization• Exports• Technology• Unemployment• Handloom and SSI• No remedial measures• No policy for grassroots level

Banking Sector

Banking Sector• The banking reforms were initiated in the middle of a

“current account” crisis.

• Public deficit of 10 per cent, a current account deficit of 3 per cent, an inflation rate of 10 per cent of GDP.

• It is also triggered by a temporary oil price boom following the Iraqi invasion of Kuwait in 1990.

Major Reforms in the Banking Sector in India, 1992–2002

1. Liberalizing Controls over Commercial Banks• Low interest rates on loans • Reduction in cash reserve requirements • Abolition of the credit authorization scheme

2. Encouraging Competition

• Issue of new licenses to Indian private-sector banks • More liberal licensing of foreign bank branches.

3. Legal Framework

• Securitization and Reconstruction of Financial Assets and Enforcement of SecurityInterest Act of 2002,

Disadvantages of Reforms • NPA of 27 public-sector banks amounted to 24

per cent of total credit.• 15 public-sector banks achieved net profit.• Concentration of power in a few banks.• Lack of innovative decision making.• Public sector banks that perform poorly are

regularly recapitalized rather than weeded out.• Limiting the efficiency of banks is the legal

framework, which makes it very difficult for creditors to enforce their claims.

Performance Analysis – CompetitionSource RBI

• Asset shares of public sector banks have fallen after reforms and those of Indian private sector banks have increased.

• Public sector banks still dominant accounting for three-fourths of industry assets

• In recent years, considerable increase in the share of public sector banks in the industry-wide profit

Share in Assets

9.4 9.1 7.0

82.5 78.4 74.5

8.2 12.618.5

0.0

20.0

40.0

60.0

80.0

100.0

1995-96 2000-01 2002-03

Per c

ent

Foreign Banks Private Sector Banks Public Sector Banks

Performance Analysis – G-Sec – Market Size

• The dependence of government on market borrowings has increased sharply in the 1990s

• Outstanding stocks of both Centre and State Government debt each increased by about 10 times since the initiation of reforms

10.311.6

18.1

27.329.7

2.5 2.6 3.55.4 6.5

0

5

10

15

20

25

30

35

1992 1995 2000 2003 2004(pe

r cent

of GD

P)

Centre States

Source : RBI

• From around 20 per cent in the early 1990s, share of net market borrowing in financing fiscal deficit of the central government has increased to 80 per cent in recent years

• No automatic monetisation of budget deficit

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1991-92 1994-95 1997-98 2000-01 2003-04

(per

cen

t)

Market Borrowing Other Sources

Source RBI

Future Steps• Further improvements in

– Efficiency– NPL position– Corporate governance norms, especially in cooperative banks– Competition

• Consolidation of the banking system• Bridging legal gaps

Power Sector

The first area opened for private investment:• Electricity sector had virtually no surpluses to

make available for investment• To astern the increase in generating capacity • To improve the system efficiency • To reduce power lost in transmission and distribution

from 35% to 15%• To reduce theft of electricity.• Overcome the corruption

Progress hindrances

• Litigation/renegotiation leading to delays

• Financial arrangements

• Obtaining clearances

• Fuel supply agreements.

Problems faced by the SEBs

• High Return on Equity.

• High capital costs of private plants.

• High tariffs.

• Unfavourable financing

Future Steps• Independent statutory regulators have to be

established to set tariffs.• Tariff rationalization and enforcing penalties for non-

payment of dues.• Cost-effective cogeneration and decentralized

generation.

Agriculture Sector

23

Scenario

STRENGTHS• Rich Bio-diversity• Arable land• Climate• Strong and well dispersed

research and extension system

OPPORTUNITIES• Bridgeable yield crops• Exports• Agro-based Industry• Horticulture• Untapped potential in the N.E.

WEAKNESS• Fragmentation of land• Low Technology Inputs• Unsustainable Water

Management• Poor Infrastructure• Low value addition

THREATS• Unsustainable Resource Use• Unsustainable Regional

Development• Imports

24

The First Ever National Agriculture Policy – July 2000The Policy seeks to overcome these constraints and achieve

• A Growth rate in excess of 4 percent per annum in the agriculture sector.

• Growth that is based on efficient use of resources, and conserves our soil, water , and bio diversity.

• Growth with equity, i.e. growth which is widespread across regions, and different classes of farmers.

• Growth that is demand driven and stabilizes domestic markets and maximizes benefits from exports in the face of Global Challenges.

• Growth that is sustainable ,technologically , environmentally, and economically.

India’s Positions in WTO• On 1 January 1995 India joined WTO. Although India

highlighted significance of role of agriculture in their economies and seek to preserve domestic policy flexibility to guard food security concerns but it did not bargain properly in the WTO discussion, while the developed countries secured everything in their favor.

Real Estate SectorThe Absence of Apathy

Policy History• Land Acquisition Act, 1894• Reforms in 1991• Urban Land Ceiling and regulation act• Integrated township policy• Land Acquisition (Amendment) Bill, 2007• Rehabilitation and Resettlement Bill, 2007

Need for More• Growth of IT/ITES• Growth of organized retail sector• Need for more housing

The Growth OF FDI

Shortcomings• Development at the cost human lives• Unclear terms and terminology• Uncertainties in rehabilitation• No scope for legal recourse• Number of people displaced

Shortage of Houses

Conclusion• Lack of proper and clear guidelines for the displaced• Absence of regulatory body• Massive urbanization• Lack of rural housing