 Since independence, India followed the mixed economy.  India has been able to achieve growth in savings, diversified industrial sector, ensured food security etc.  In 1991, India met with economic crisis and govt. was not able to make repayments on its borrowings from abroad and foreign exchange reserves.  All this led the govt. to introduce a new set of policy measures which changed the direction of our developmental strategies.

The origin of financial crisis can be traced from the inefficient management of the Indian economy in 1980s For implementing various policies, the govt. generates funds such as taxation. When expenditure is more than income, the government borrows to finance the deficit from banks and from people within the country and from international institution. At times,our foreign exchange, borrowed and international financial institutions,was spent on meeting consumption needs. India approached International bank for reconstruction and development (IBRD) India agreed to the conditions of world bank and announced new economic policy. The set of policies were classified into two groups namely stabilization measures and the structural reform measure.

It was introduced in  Industrial licensing,  Export import policy,  Fiscal policy,  Financial sector,  Foreign exchange market etc. to put an end to various restrictions and open up various sectors of economy.

Regulatory mechanism were enforced in various ways:-  Permission from govt. to start and close a firm.  Private sector was not allowed in many industries.  Some goods could be produced only in small scale industries.  Controls on price fixation.  Industrial licensing was abolished for products like alcohol,electronics etc.  The only industries which are now reserved for public sector are railway, defence etc.

 It includes commercial banks, stock exchange etc.  This sector in India is controlled by the reserve bank of India (RBI).  RBI decides the amount of money that the banks can keep with themselves.  Its major aim was to reduce the role of RBI from regulator to facilitator of financial sector.  It led to establishment of private sector banks.  Certain aspects have been retained with the RBI to safeguard the interest of account holders and the nation.

 These were concerned with the reforms in Government’s taxation and public expenditures policies known as fiscal policies.  There are two types of taxes:-  Direct-consist of taxes on incomes of individuals as well as profits of business enterprises.  Indirect-taxes levied on commodities to facilitate common national market for goods and commodities.

 In 1991,as an immediate to resolve the balance of payment crisis, the rupee was devalued against foreign currencies.  It led to increase in the inflow of foreign exchange.  Now,more often markets determined exchange rates based on the demand and supply of foreign exchange.

 Its aim was to promote the efficiency of local industries and the adoption of modern tech.  India was following a regime of quantitative restrictions by imposing high tariffs.  It aimed at :-  Dismantling of quantitative restrictions on imports and exports.  Reduction of tariff rates.  Removal of licensing procedures for imports.  Import licensing was abolished in case of hazardous goods.  Export duties have been removed to increase the competitive positions of goods.

 It implies shedding of the ownership of a govt. owned enterprise.  Govt. companies can be converted into private companies in two ways :-  By withdrawal of govt. from ownership and management of public sector companies.  By outright sale of public sector companies.  Privatization of PSU by selling off part of the equity of PSUS to the public is known as disinvestments.  Its main aim was to improve financial discipline and facilitate modernization.

 In economics, growth of an economy is measured by the gross domestic product(GDP).  GDP has increased from 5.6%during to 6.4% during  The opening up of the economy has led to the increase in foreign direct investment and foreign exchange reserves.  Foreign direct investment has increased from about 100million US$ to 150 billion US$.  India is seen as a successful exporter of auto parts, IT software and textiles in reform period.

 Public investment in agriculture sector especially in infrastructure, which includes irrigation, power, roads, etc has been reduced in the reform period.  Removal of subsidy has led to increase in the cost of production, which has affected small & marginal farmers.  This sector has been experiencing a no. of policy changes such as reduction in import duties on agricultural products, removal of minimum support price, etc.  There has been a shift from production for domestic market towards production for domestic market towards production for the export market focusing on cash crops in lieu of production of food grains.

 Decreased demand of industrial goods due to cheap imports, inadequate investment, etc led to decrease in the industrial growth.  Cheaper imports have replaced the demand for domestic goods.  The infrastructure facilities, including power supply etc, has remained inadequate due to lack of investment.  Moreover, a developing country like India still does not have access to developed countries market because of high non-tariff barriers.

The PSEs made a significant contribution to industrial production, 100 per cent in lignite, over 80 per cent in coal, crude oil and zinc, almost 50 per cent in aluminium and over 30 per cent in finished steel. In terms of profitability, the PSEs showed diverse patterns. In , 122 enterprises made a profit with the top 10 among them - giants such as the Oil and Natural Gas Corporation (ONGC), the National Thermal Power Corporation (NTPC), the Indian Oil Corporation (IOC) and the Videsh Sanchar Nigam Limited (VSNL) - accounting for close to 70 per cent of the total net profit of Rs.19,604 crores.

 Every aspect has a prose and a pon.Similarly, globalization is an opportunity in terms of greater access to global market,higher technology etc.Whereas on the other side it has widened economic disparities among nations and people.  It has increased income and quality and consumptions of only high income groups like real estate,IT,rather than vital sector like agriculture.