7/27/2019 1991 crisis.pptx

1/29

The crisis ofJune1991

7/27/2019 1991 crisis.pptx

2/29

Major characteristics

of the crisis situationin 1991-92

7/27/2019 1991 crisis.pptx

3/29

There was a serious fiscal crisis in whichfiscal deficit reached the level of 6.6% ofGDP.

Internal debts rose to about 50% ofGDP with interest payments drainingabout 39% of total revenue collections of

the central government.

GNP growth rate fell to 1.4% from the

peak level of 10.5% in 1988-89.

7/27/2019 1991 crisis.pptx

4/29

Negative growth rates

i. Agriculture promotion: -2.8%.ii. Food grain production:-5.3%.iii. Industrial production:-0.1%. Inflation rate based both on

WPI & CPI soared high at 13-14%.

7/27/2019 1991 crisis.pptx

5/29

Foreign trade shrunk imports falling by 19.4%& exports by 1.5%.

Rupee depreciated by 26.7% vis--vis USdollars.

Fall in foreign exchange reserves.

Confidence of the international financialinstitutions was badly shaken.

In may 1991, the government had to lease 20tons of gold out of its stock to the SBI to

enable it to sell the gold with repurchase optionafter 6 months. In addition RBI was allowed topledge 47 tons of gold to the BOE to raise a

loan of $600mn.

7/27/2019 1991 crisis.pptx

6/29

Major steps

taken to manage

the crisis

7/27/2019 1991 crisis.pptx

7/29

Fiscal correction aimed at reducing fiscal deficit by

about Rs 7700 core in 1991-92 compared to 1990-91.

Announcement of new industrial policy in June 1991.

Abolition of industrial licensing for industrial projects

except 18 industries of high strategic & environmental

importance. About 80% of the industries were

delicensed. MRTP act amended to eliminate the need for prior

approval by large companies for capacity expansion

& diversification. 9 areas in basic & core industries earlier reserved for

public sector opened to private sector

7/27/2019 1991 crisis.pptx

8/29

Limit of foreign equity holding raised from 40% to

51% in a wide range of priority industries.

Foreign investment promotion board (FIPB)

established to negotiate proposals from international

firms & expedite clearances of the investment

proposals.

Bringing back of gold earlier pledged to the BOE &BOJ.

Continuance of the measures of import control &

credit squeeze. Introduction to liberalized exchange rate management

system (LERMS).

7/27/2019 1991 crisis.pptx

9/29

Import licensing was eliminated in many goods& advance licensing system was simplified.

Foreign investment promotion boardestablished to negotiate proposals from largeinternational firms

Rupee devaluation by 18 percent

Negotiation of $500 million structuraladjustment

7/27/2019 1991 crisis.pptx

10/29

LIBERALIZATION

PRIVATIZATION

GLOBALIZATION

7/27/2019 1991 crisis.pptx

11/29

LIBERALIZATION

7/27/2019 1991 crisis.pptx

12/29

DELICENSING

FREEDOM FROM LOCATIONAL REQUIREMENTS AND

GOVERNMENT CLEARANCE

PERMISSION TO CORPORATES FOR BUYBACK OF

SHARES

CORPORATISATION OF DEPARTMENTALUNDERTAKINGS AND PUBLIC UNDERTAKING

INCREASE IN THE INVESTMENT CEILING OF SMALL

SCALE ENTERPRISES

LIBERALIZATION OF TAX PROVISION FOR SELECTED

SECTOR

7/27/2019 1991 crisis.pptx

13/29

7/27/2019 1991 crisis.pptx

14/29

DIVESTITURE

7/27/2019 1991 crisis.pptx

15/29

DIVESTITURE

DENATIONALIZATION

FRANCHISING OF PUBLIC SECTOR SERVICES TODESIGNATED PRIVATE SECTOR UNITS

LICENSING OF TECHNOLOGY OF PUBLIC SECTOR UNITSTO PRIVATE ENTERPRISE]

GOVERNMENT WITHDRAWAL

PRIVATIZATION OF MANAGEMENT

OPENINING UP OF A NUMBER OF CORE SECTORSEARLIER RESERVED FOR PUBLIC SECTOR TO PRIVATEINVESTMENT

FREEDOM TO BANKS TO DETERMINE THEIR OWN

LENDING RATES

7/27/2019 1991 crisis.pptx

16/29

GLOBALIZATION

REDUCTION IN THE SCOPE OF RESTRICTIVE

7/27/2019 1991 crisis.pptx

17/29

REDUCTION IN THE SCOPE OF RESTRICTIVECANALIZED TRADE

INCREASE IN THE LIMIT OF FOREIGN DIRECT

INVESTMENT IN A NUMBER OF AREAS

PERMISSION TO EXPORTERS TO KEEP FOREIGNEXCHANGE ACCOUNTS

CREATION OF FOREIGN PROMOTION BOARD

SUSTAINED REDUCTION IN THE CUSTOM DUTYRATES ON NUMBER OF IMPORT ITEMS

REDUCTION OR ELIMINATION OF QUANTITATIVERESTICTIONS ON A NUMBER OF IMPORT ITEMS

REPLACEMENT OF FERA

MORE FEMA(1999)

7/27/2019 1991 crisis.pptx

18/29

REFORM

STRATEGY

7/27/2019 1991 crisis.pptx

19/29

7/27/2019 1991 crisis.pptx

20/29

Fiscal Strategy

Reduction in fiscal deficit.

Reduction in inflation rate.

Improve fiscal balance.

Supplementary efforts.

Elimination of losses.Improvement in quality of

taxation.

7/27/2019 1991 crisis.pptx

21/29

Monetary Strategy

Macro-economic MNGT.

Not be frequently used as a tool.

SLR to be reduced.

Interest rates reduced.

Repurchase operations.

7/27/2019 1991 crisis.pptx

22/29

Industry & Labour Strategy.

Removing regulatory obstacles. Deregulation of industry.

Disinvestment in public sector.

Increase in foreign share. Permission to float equity abroad.

Competitive market structure.

Growth in productivity.

Withdrawal of power.

7/27/2019 1991 crisis.pptx

23/29

STRATEGY

TRADE

AGRICUL-TURE

INFRASTRU

C-TURE

7/27/2019 1991 crisis.pptx

24/29

Trade

Liberalize foreign trade.

Minimization of imports.

Fixation of tariff.

Removal of restrictions.

Reduction in import tariff.

7/27/2019 1991 crisis.pptx

25/29

AGRICULTURE

Growth rate.

Investment &

capital.

Credit structure.

Pricing policy.

Agriculture productswithin the country.

CRP(credit reliefpackage)

Increase in import

duty.

Quality improvement.

7/27/2019 1991 crisis.pptx

26/29

INFRASTRUCTURE

TRAI ( telecom regulatoryauthority of India).

Private sector BOT

Golden Quadrilateral project.

7/27/2019 1991 crisis.pptx

27/29

7/27/2019 1991 crisis.pptx

28/29

ACKNOWLEDGEMENT

We are thankful to the peoplewho have helped in the making

of this presentation, Thesepeople include our parents, our

ownRakhi maam

and our latefriends.

7/27/2019 1991 crisis.pptx

29/29

SAAJAN JAIN(5633)

ANIKET PADE(5602)

ANANT AGARWAL(5631)

ALTAF KAROVALIA(5630)

RAHUL BHAGAT(5635)