Explain the requirement of economic reforms adopted in 1991
Dear Student
The root causes / reasons for the emergence of the Indian economic crisis for which economic reforms were needed were:
The root causes / reasons for the emergence of the Indian economic crisis for which economic reforms were needed were:
- Controls and subsidies – the various controls on production, licensing restrictions, etc. gave rise to monopolistic trends in the market. Also, the increased use of subsidies increased the cost and burden on the economy.
- Inward-looking policy – the excessive protection to industries through licensing and import tariffs discouraged the competition and efficiency in the economy.
- Burden of foreign debts – accumulation of a huge foreign debt and consequent rise in interest payment obligations further weakened our balance of payments situation.
- Financial excesses – a philosophy that money did not matter was being observed with the large increase in defence expenditures, unrestricted growth of subsidies, and a substantial increase in public salaries.
- Neglect of efficiency and individual initiative – in the zeal of distributing justice, the efficient use of existing resources was overlooked.
Regards