Evolution of India in the world economy

1. EVOLUTION OF INDIA
IN THE WORLD
ECONOMY
Presented by
Rudroj Bhattacharjee
Debopriya Kar
Ganggin Thang Kuki
Bidyut Bikash Das
Rajesh Deka

2. Introduction
 Five-Year Plans (FYPs) are centralized and integrated national economic
programs.
 Joseph Stalin implemented the first FYP in the Soviet Union in the late
1920s.
 Most communist states and several capitalist countries subsequently have
adopted them.
 China and India also started to followed.
 India launched its First FYP in 1951, immediately after independence
 First five plan plays an important role in economic development of the
country.
 It built a particular system of mixed economy, with a great role for the
public sector as well as a growing private sector.

3. First five year plan (1951-56)
The first Indian prime minister Jawaharlal Nehru presented the first five year
plan to the parliament of india on 8 Dec 1951.
With a OBJECTIVE:
 Improved the living standard of the people in india.
The total planned budget of Rs.2069 crore was allocated to seven broad
areas:
I. Irrigation And Energy (27.2%).
II. Agriculture And Community Development (17.4%).
III. Transport And Communications (24%).
IV. Industry (8.4%),.
V. Social Services (16.64%),.
VI. Land Rehabilitation (4.1%).
VII. Other Sectors And Services (2.5%).
The target growth rate was 2.9% annual GDP growth
And the achieved growth rate was 3.6%


4.  During the first five year plan, the net domestic product went up by 15%.
 In India, the contribution of agricultural sector to GDP was 59% in 1950-
1951 and it declined to nearly 35% in 1990.
 The share of industrial sector rose from 13% in 1951-51 to 24.6 % in
1990-1991.
 On the other hand , the share of service sector rose from 28% in 1950-51 to
40.5 % in 1990-1991which was higher than that of agriculture or industry.
 Many irrigations projects were initiated during this period including the
bhakra dam and hirakud dam.
 At the end of the first five year plan in 1956, five IITS were started as
major technical institutions.
 UGC was set up to take care of funding and take measures to strengthen
the higher education in the country.

5. Second five year plan (1956-61)
 The second five year plan focused on industry, especially heavy industry.
 Target growth rate was 4.5 % every year and actual growth rate was
4.27%.
 The total amount allocated under the second five year plan in india was
rs.4,800 crores. This amount were allocated among various sectors:

7. Monopolies and Restrictive Trade Practice(MRTP)
Act,1969
MRTP Act, 1969 was enacted with the basic aim of
comprehensive control over direction, pattern and quantum of
investment to ensure that wealth is not concentrated in the hands
of the few.
WHY IT WAS ENACTED
To stop the concentration of wealth in the hands of few
industries.
EMERGENCE OF MRTP
In order to stop the big firms from monopolising the market and
to ensure the welfare of the consumer by removing barriers to
competition in the Indian economy. MRTP Act was introduced.

8. PRIMARY AREA OF FOCUS
 Regulate the concentration of economic power to the common detriment,
 Control monopolies and monopolistic trade practices,
 Prohibit restrictive trade practices, and
 Regulate unfair trade practices.
HOW THESE ARE CONTROLLED
Article 39[(b) and (c)] of the Constitution lay down that the State shall direct
its policy towards ensuring:
 Ownership and control of material resources of the community are
distributed as to best serve the common good.
 Operation of the economic system does not result in the concentration of
wealth and means of production to the common detriment.

9. SHORTCOMINGS OF MRTP
 Anti-Welfaristic Results.
The heightened governmental control, where new undertakings and ventures were severely restrained by
complex procedures, created conditions wherein the firms, existing and new, found it difficult to survive
and thus, could not give back any benefits to the consumer.
 Stringent Provisions.
The Act, over the years became very active in taking on firms head-on to make them stand in line with the
provisions of the Act. The provisions, though aimed at benefitting the consumers and the industrial
growth, often played out tough- and the stringent provisions did not benefit anyone.
e.g: Predator Pricing Policy.
 Ambiguity in Law.
Complaints relating to anti-competition practices could be tried under the definition of restrictive trade
practice, the absence of specific identifiable anti-competition practices gave room to different
interpretations by different Courts of Law which resulted in the true meaning getting lost.
 International Norms.
The MRTP Act lack the resources to handle the incoming international investments or to meet the trade
requirements of the WTO.

10. Economic reforms in india : liberalisation, privatisation and globalisation
(lpg)
 Pre- liberalisation period :
• Since independence India had only been able to maintain a
growth rate of 3-3.5 % with capital growth even less , at
around 1.3% and the natural outcome of this was extensive
bureaucracy, unnecessary regulations and trade barriers to
open up our markets to foreign investments, all contributed to
our economy stagnating at dismal growth rates.
• By 1985, India had started having balance of payments. By
1990, it was in a serious economic crisis. Government was
closed to default. It’s central bank had refused new credit.

11. Economic policy of 1991
The process of economic reforms was started by the Government of India in
1991 for taking the country out of the economic difficulty and speeding up the
development of the country. The centre of economic reforms has been
Liberalisation , Privatisation and Globalisation.
The main characteristics of the new Economic policy were:
• Delicensing.
• Entry to private sector.
• Disinvestment.
• Liberalisation of foreign policy.
• Liberalisation in technical area.
• Setting up of Foreign Investment Promotion Board (FIPB)

12. Liberalisation and its impact
Liberalisation meant to unshackle the economy from the
bureaucratic cobweb to make it more competitive by
relaxing many restrictions and controls.
 It helped to do away with having a license for most of the
industries.
 Removing restrictions from movement of goods and
services
 Freedom to fix prices of goods and services.
 Reduction in rate of taxes.
 Simplifying import-export procedure
 Simplifying the process of attracting foreign capital and
technology.

13. Privatisation and its impact
Privatisation means such an economic process through
which some public sector undertaking is brought either
partially or completely under private ownership.
 Reduced the role of public sector and increasing role of
private sector
 Reduced fiscal burden of the government.
 Reducing the size of government machinery
 Speeding up economic development
 Increase in government treasury
 Increasing competition by opening industries reserved
for the public sector to the private sector.

14. Globalisation and its impact
Globalisation means integrating the economy with
rest of the world.
 Import liberalisation.
 Foreign Exchange Regulation Act (FERA) was
replaced by Foreign Exchange Management act
(FEMA).
 Abolition of Export duty.
 Reduction of Import duty.
 Rationalisation of Tarrif structure.

15. Impact of LPG
There was a significant difference in the
Indian economy after economic reforms in
1991.
Following are the changes observed:
 The per capita income(with constant
growth) increased from Rs, 11,535 in
1990s to Rs 41,129 in 2000s .
 Household savings increased by 1156543
(in crores) . Rupee found a realistic level
against Dollar.
 Since 1991 India’s GDP has quadrupled,
its Forex reserves have surged from $5.8
billion to $ 279 billion, and exports from
$18 billion to $178 billion.
 Paycheques got big and expenses got big
as well affecting significantly the economy
and the lives and lifestyle of the people as
well.

16. WTO (World Trade organization)
Formed on 1st Jan ,1995.
It took over GATT(general agreement on tariffs and trade).
Benefits for India
 Increases in foreign trade
 Increase in agriculture exports
 Increase in inflow of foreign investment
 Improvement in services
 Benefits for clothing and textile industry
 Restricts dumping
 Promotion to research on patents

17. Fera (Foreign Exchange Regulation Act), 1973
It was a legislation passed by the Indian Parliament in 1973 and came into force with effect
from January 1, 1974.
Deals with laws which relate to foreign exchange in India.
Objectives
 Prevent the outflow of Indian currency
 To regulate dealings in foreign exchange and securities.
 To regulate transactions, indirectly affecting foreign exchange.
 To regulate the import and export of currency.
 To conserve precious foreign exchange.
 The proper utilization of foreign exchange so as to promote the economic development
of the country.
 To regulate employment of foreign nationals
 To regulate foreign companies

18. Fera to fema
 The main objective of FERA framed against the background
of severe foreign exchange problem and controlled economic
regime , was conservation and proper utilisation of the foreign
exchange resources of the country.
 FERA created flourishing black market in foreign exchange. It
brought into the economic lexicon the word “HAWALA”.
 FERA was not suitable for liberalization policy. Though
certain amendments were made in 1993 but they were not
sufficient.
 After 1993, many important changes took place. Foreign
exchange reserve also increased. The provisions of FERA
were not favorable for these changes.

19. Fema ( Foreign Exchange Management Act), 1999
The FEMA was an act passed in the winter session of Parliament in 1999 which
replaced FERA.
Features of Fema
 FEMA gives the central government the power to impose the restrictions.
 The transactions should be made only through an authorized person.
 Deals in foreign exchange under the current account by an authorized
person can be restricted by the central Government.
 Deals in foreign exchange under the current account by an authorized
person can be restricted by the Central Government, based on public interest.
 The RBI is empowered by this Act to subject the capital
account transactions to a number of restrictions
 The new law is more transparent in its application. it has laid down the areas
where special permission of the reserve bank/Government of India is
required.

20. US Financial Crisis and India
Effects
 Decrease in growth rate.
 Outflow of FII and inflow of FDI.
 Exchange rate depreciation.
 Increase in trade deficit.
 Decrease on Employment.
Measures taken
 Diversifying Exports
 Enhancing Public Spending
 Generating Employment
 Provisioning Credit to Productive Sectors

21. BRICS AND SAARC
BRICS
 Not an Organization or a World Institution.
 Announcement that there is need for a new "Global Reserve
Currency".
 Signing of Memorandum of Cooperation.
 The eThekwini Declaration.
saarc
• Promote trade between the member countries.
• The agreement on South Asian Free Trade Area (SAFTA).
• Help member countries during crisis and natural disasters.
• India accounts for nearly 80% of SAARC's economy.

22. India’s current economic scenario
 India is set to emerge as the world’s fastest-
growing major economy by 2015.
 Increase in investment and production.
 Huge inflow of FDI and FII.
 Reduced inflationary trend.
 Continuous trade deficit.
Sector 1950-51 1990-91 2006-2007 2013-14
1.Agricuture 59.0 34.9 20.5 17.9
2.Industry 13.0 24.6 24.7 24.2
3.Service 28.0 40.5 54.8 57.9

23. THANK YOU
Sources
www.pib.nic.in
www.dipp.nic.in
www.fpi.nsdl.co.in
www.tradingeconomics.com