25/07/2020 - Indian Economy

KEY POINTS

With the aim of accelerating economic growth and eradicating poverty the Reform Process in India was initiated and three generations of Economic Reforms as a way forward to 1991 reform have been announced till date, although some experts have suggested the fourth generation too.

The important features of the first generation of Reform were

Financial Sector Reforms

• Narasimham committee suggested reform in financial Sector and various reforms were taken in the Banking, Insurance, Capital Market, Mutual Funds.

Tax Reforms

• Chelliah Committee suggested for broadening the tax base and Govt Policy initiative focussed upon checking Tax Evasion, Simplifying, Modernising the Tax Structure.

Industrial Policy Reform

• Govt announced a new Industrial Policy that sought to deregulate the industry, Abolished Industrial Licensing, MRTP Act was repealed, Encouraged Disinvestment.

Second Generation Reforms (2000 - 01 onwards)

• These reforms which included Labour Law Flexibility, Pension Reforms based on employee contribution, Liberalised FDI (i.e. FDI in Retail) were not only deeper and delicate but required higher political willpower from the governments.
• The 2^nd generation of reform was difficult to implement in the sense that they were directly affected with the life of people like Manpower rationalization in banks and PSUs through VRS faced resistance, interest cut in a small saving scheme meant less return for the middle-class population.

The features of 2^nd Generation reforms are:

Public Sector Reforms

• Focussed on areas like Greater functional autonomy, freer leverage to the capital market, international tie-ups and greenfield ventures, disinvestment etc.

Factor Market Reforms

• It consists of dismantling of the Administered Price Mechanism (APM) (Under this govt predetermined prices on the basis of a derived formula).

Legal Sector Reforms

• Reforms in the Indian Penal Code (IPC) and Code of Criminal Procedure (CrPC), Labour Laws, Company Laws and enacting suitable legal provisions for new areas like Cyber Law, etc.

Third Generation Reforms

• This Generation of Reform focusses on creating World Class Infrastructure and creating, encouraging and nurturing the spirit of entrepreneurship.

Fourth Generation Reforms

• The 4^th generation of reform is not an official proclamation.
• In early 2002, some experts coined this generation of reforms which aims for a full information technology-enabled India.

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Please review.Do we need to explain the features of NEP in detail.Kindly comment.Thank you