The economic liberalisation in India refers to the economic liberalisation, initiated in 1991, of the country's economic policies, with the goal of making the economy more market and service-oriented and expanding the role of private and foreign investment. Specific changes include a reduction in import tariffs, deregulation of markets, reduction of taxes, and greater foreign investment. Liberalisation has been credited by its proponents for the high economic growth recorded by the country in the 1990s and 2000s.
The Government when introduced the Partial convertibility of Rupee in 1992, had announced its intention to introduce the full convertibility on the current account in 3-5 years. The full convertibility means unified market determined exchange rate regime. Encouraged with the success of the LERMS, the government introduced the full convertibility of Rupee in Trade account from March 1993 onwards. With this the dual exchange rate system was abolished and LERMS was now based upon the open market exchange. The full convertibility of Rupee was followed by stability in the Rupee Rate in the next many months coming up.
Before the process of reform began in 1991, the government attempted to close the Indian economy to the outside world. The Indian currency, the rupee, was inconvertible and high tariffs and import licensing prevented foreign goods reaching the market. India also operated a system of central planning for the economy, in which firms required licences to invest and develop. The labyrinthine bureaucracy often led to absurd restrictions—up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used. The government also prevented firms from laying off workers or closing factories. The central pillar of the policy was import substitution, the belief that India needed to rely on internal markets for development, not international trade—a belief generated by a mixture of socialism and the experience of colonial exploitation. Planning and the state, rather than markets, would determine how much investment was needed in which sectors.
2417. The economic liberalisation in India refers to the economic liberalisation, initiated in
2418. The Government introduced the Partial convertibility of Rupee in
2419. The government introduced the full convertibility of Rupee in Trade account from March
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