ABSTRACT
This chapter portrays an extensive review of the economic reforms in India following the crisis of the 1980s. It is argued that till the early 1990s India could be identified as a classic example of “financial repression” and was characterized by extensive regulations. After the implementation of the financial sector reforms under the Narasimham Committee, a comprehensive set of changes were introduced in both the banking and non-banking financial sector (development financial institutions, capital markets and insurance sector). At the same time RBI’s monetary policy has undergone a sea change, focusing on “inflation targeting”. To control counterfeit notes and to eliminate the “black economy” the episode of “demonetization” followed in 2016. Shifting our focus towards fiscal policy reforms, major recommendations of the Chelliah Committee in the case of both direct and indirect tax provide a remarkable change in the entire tax structure. Later, the Kelkar Committee 2002 came with a fresh set of recommendations with introduction of modernization in the tax administration. Eventually, in order to take care of fiscal sustainability by limiting central government debt and fiscal deficit levels, the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was passed. Then the chapter shifts its focus to the reforms in the third pillar, that is, the external sector reform. It basically includes reforms in the foreign trade policy, foreign investment policy and BOP and exchange rate policy. Again, each of the three is analysed by comparing the pre- with the post-liberalization phase. At the end, the chapter draws our attention to the BOP situation and Foreign Exchange Market. Lastly, the chapter addresses the debate on whether restrictive labour legislation and labour market inflexibility is one of the major reasons for the slow growth of employment and output in the Indian context.
