Final Dessi
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IHM-AURANGABAD 1 Chapter-1: Introduction Introduction: The Indian financial system, till the early 90`s, was a closed system with its main characteristics - an administered structure of restrictive acts, interest rates, restrictions on all market participants--including banks, FI (Financial Institutions) & corporate – by the way of limits on the amount / volume and nature of the transactions they can undertake. Also they had to get prior approval before taking any actions. Some industries were limited to the control of public sector only. (http://www.article-diary.com/articles/2322/1/Pre-Liberalization-Indian- Economy/Page1.html) Accessed on 14/12/2010 Time: 14:00pm In 1991, after India sold 67 tons of gold to the International Monetary Fund (IMF), the government of P. V. Narasimha Rao and his finance minister Manmohan Singh started breakthrough reforms. The new neo-liberal policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalisation has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies. The main objective of the government was to transform the economic system from socialism to capitalism so as to achieve high economic growth and industrialize the nation for the well-being of Indian citizens. Today India is mainly characterized as a market economy. (scale.http://en.wikipedia.org/wiki/Economic_liberalisation_in_India) Accessed on 15/12/2010 Time: 12:23 pm 1.2 Globalization and Liberalization of the Indian Economy: Globalization and liberation are directly linked with each other. The first wake of globalization started in India when the economic liberalization policies were undertaken in the 1990s by Dr Manmohan Singh, the then Finance Minister of the country. Since then, the economy of India has improved to a great extent and has significantly led to the rise in the standard of living of the citizens. 1.2.1 Pre liberalization period and globalization From independence till the later part of the 1980s, India economic approach was mainly based on government control and a centrally operated market. The country did not have a proper consumer oriented market and foreign investments were also not coming in. Th is didn‟t do good to the economic co ndition of the country and as
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