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Supply Side Policies of India:

Supply Side Policies of India Submitted to; Prof . Shweta miglani Submitted by: Amit sharma Durga shankar Guneet kaur Raghupati sharma

Economy of India:

Economy of India India's economy is the eleventh largest in the world by nominal GDP and the fourth largest by purchasing power parity(PPP). Economists predict that by 2020, India will be among the leading economies of the world.

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India was under social democratic-based policies from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, public ownership, pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country toward a market-based economy. In recent years, Indian cities have continued to liberalize business regulations.

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By 2008, India had established itself as the world's second-fastest growing major economy. However, as a result of the financial crisis of 2007–2010, coupled with a poor monsoon, India's gross domestic product (GDP) growth rate significantly slowed to 6.7 percent in 2008-09, but subsequently recovered to 7.2% in 2009-10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period. The country has major stock and commodities exchanges like BSE, NSE, and few other exchanges as well.

Supply Side :

Supply Side

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The “supply side” refers to factors affecting the quantity or quality of goods and services produced by an economy such as the level of productivity or investment in research and development. Supply Side economics is the branch of economics that considers how to improve the productive capacity of the economy.

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Supply Side Policies are government attempts to increase productivity and shift Aggregate Supply (AS) to the right.

Benefits of Supply Side Policies:

Benefits of Supply Side Policies

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Lower inflation. Lower unemployment. Improve economic growth. Improve trade and Balance of Payments.

Liberalization:

Liberalization Liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities.

India before Liberalization:

India before Liberalization 1980s , suggests that the root cause of the crisis was the large and growing fiscal imbalance. Large fiscal deficits emerged as a result of mounting government expenditures, particularly during the second half of the 80s . These fiscal deficits led to high levels of borrowing by the government from the Reserve Bank of India ( RBI ), IMF, World Bank

CONTD...:

CONTD... Over the 1980s, government expenditure in India grew at a phenomenal rate, faster than what government earns as a revenues. The subsidies grew at a rate faster than government expenditures . Expenditure on subsidies rose from Rs.19.1 billion in 1980-81 to Rs. 107.2 billion in 1990-91. •Although , a large part of the problem concerning external imbalances in India could be attributed to extraneous developments, such as two oil-shocks during the last decade.

CONTD...:

CONTD... The Indian economy was indeed in deep trouble. Lack of Foreign Reserves. Gold reserve was empty. Before 1991, India was a closed economy. The government was close to default and its foreign exchange reserves has reduced to the point that India could barely finance three week worth of imports.

CONTD...:

CONTD... The Government of India headed by Chandra Shekhar decided to usher in several reforms that are collectively termed as liberalisation in the Indian media with Man Mohan Singh whom he appointed as a special economical advisor. License Raj was the regulations that were required to set up business in India between 1947-1990. where all aspects of the economy are controlled by the state and licenses were given to a select few. The License Raj is considered to have been dismantled in 1990.

India after liberalization:

India after liberalization Opening up of the Indian Economy -Before 1991 closed economy and import of certain goods was restricted . -After 1991 competition increased tremendously after the liberalisation . -Competitors from all over the world enter the Indian market.

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Competition from Low Wage Countries. -Low range products are floating into the market -Low price, low quality

What is privatization?:

What is privatization? Transfer of ownership from public to private sector Transfer of management of an Enterprise from public to private sector Withdrawal of state from an industry or sector partially or fully. World Bank “ transfer of ownership of SOEs to private sector by sale of going concern or by sale of their assets by following their liquidation

Aim of privatization:

Aim of privatization The aim of privatization is: To achieve higher micro- economic efficiency and foster economic growth, as well as reduce public sector borrowings through the elimination of unnecessary subsidies.

Methods of Privatization adopted by government:

Methods of Privatization adopted by government Strategic sale by auction method Generous pay and benefits At lowers level in particular Overtime Offer of shares through a public offering both domestic and global, which may or may not involve a change in ownership/management

Privatization in India:

Privatization in India The industrial policy statement 1991 stated that the government would divest part of its holdings in selected PSEs Budget 1991-92 reinstated the cap of 20% for disinvestment In 1993 the GOI set a committee in disinvestment under the chairmanship of C. Rangarajan

CONTD...:

CONTD... In 1996, The common minimum Programme was made to examine the public sector non strategic areas and to set up a Disinvestment commission In 1999-2000 Budget Speech it was announced that Government will continue to strengthen the strategic units and “privatizing” the non-strategic ones On Nov 30,2005, the govt set up National Investment fund into which proceeds from sale of PSUs will be credited

Growth of Private Sector in India:

Growth of Private Sector in India Manufacturing registered 11.9% growth The passenger vehicles sector grew by 11.61% during April-May 2007 Electricity, gas & water supply performed well and recorded an impressive growth rate of 8.3% Construction growth rate rose to 10.7% Trade, hotels, transport and communication registered a growth rate of 12% Exports grew by 18.11% during the 1st quarter of 2007-2008 and the imports shoot up by 34.30% during the same period business.mapsofindia.com

Importance of Private sector:

Importance of Private sector Increased quality of life Increased access to essential items Increased production opportunities Lowered prices of essential items Improved social life of the middle class Indian Decreased the percentage of people living below the poverty line in India Effected increased research and development activity and spending Effected better higher education facilities especially in technical fields Ensured fair competition amongst market players business.mapsofindia.com

GLOBLIASION:

GLOBLIASION Globalization refers to the integration of markets in the global economy.  Markets where globalization is particularly common include financial markets , such as capital markets, money and credit markets, and insurance markets, commodity markets, such as markets for oil, coffee, tin, and gold, and product markets, such as markets for motor vehicles and consumer electronics .

Globalization in India:

Globalization in India The Indian economy was in major crisis in 1991 when foreign currency reserves went down to $1 billion and inflation was as high as 17%. Fiscal deficit was also high and NRI's were not interested in investing in India .

GLOBALIZATION OF INDIAN ECONOMY :

GLOBALIZATION OF INDIAN ECONOMY 1. Devaluation: To solve the balance of payment problem Indian currency were devaluated by 18 to 19%. 2. Disinvestment: To make the LPG model smooth many of the public sectors were sold to the private sector. 3. Allowing Foreign Direct Investment (FDI): FDI was allowed in a wide range of sectors such as Insurance (26%), defense industries (26%) etc. 4. NRI Scheme: The facilities which were available to foreign investors were also given to NRI's.

Impact of globalisation on the indian economy:

Impact of globalisation on the indian economy Government has extended some concessions especially for NRIs and overseas corporate bodies having more than 60% stake by NRIs Throwing Open Industries Reserved For The Public Sector to Private Participation. Abolition of the (MRTP) Act, which necessitated prior approval for capacity expa

CONTD…:

CONTD… The removal of quantitative restrictions on imports. The reduction of the peak customs tariff from over 300 per cent prior to the 30 per cent rate that applies now.  Allowing FDI opening up of sectors such as Insurance ( upto 26%); development of integrated townships ( upto 100%); defense industry ( upto 26%); tea plantation ( upto 100% subject to divestment of 26% within five years to FDI); enhancement of FDI limits in private sector banking.

Merits of Globalization :

Merits of Globalization There is an International market for companies and for consumers there is a wider range of products to choose from. Increase in flow of investments from developed countries to developing countries, which can be used for economic reconstruction . Technological development has resulted in reverse brain drain in developing countries.

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THANK YOU

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