UNIT 8 NEW ECONOMIC POLICY

Objectives

After reading this unit you should be able to:

• understand the history of economic reforms introduced in 1991;

• discuss the meaning and measures related to Liberalisation. Privatisation and
Globalisation; and
• discuss the latest economic policies of the Government like Pradhan Mantri Jan Dhan
Yojana, Mudra Scheme, Swach Bharat Mission, Atmanirbhar Bharat and others.

Structure

8.1 Introduction
8.2 New Economic Policy 1991
8.3 New Economic Policy 2014
8.4 New Economic Policy 2020
8.5 Other Initiatives
8.6 Summary
8.7 Key Words
8.8 Self-Assessment Questions
8.9 References/ Further Readings

8.1 INTRODUCTION

The year 1991 is one of the landmark years in India’s economic history as Economic
Reforms or New Economic Policy (NEP) or policy of Liberalisation, Privatisation and
Globalisation (LPG) were initiated in this year. Indian economy witnessed a paradigm shift
from the policy of licence raj to liberalisation and nationalisation to privatisation.

The introduction of economic reforms was not merely a coincidence but the consequence of a
multitude of problems that were brewing in the system for many years. Factors that lead to
the introduction of these policy changes can be classified into two factors namely i)
international, ii) domestic. International factors like the disintegration of the Union of Soviet
Socialist Republics (USSR) and the Gulf wars. These factors led to a decline in Indian
exports on one hand and a rise in crude oil prices along with a fall in international remittances
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on the other. This was translated into the Balance of Payments (BoP) crisis, fall in foreign
exchange earnings and widening of the trade deficit. Domestic factors like burgeoning fiscal
deficit and inflation further fuelled the problem. The fiscal deficit reached a height of 8.4 %
in 1990-91and the inflation rate was in double digits. India’s foreign exchange reserves were
fast depleting and they were sufficient for only three weeks of imports. India was in a
precarious situation of default and debt.

To overcome these crises, India approached International Monetary Fund (IMF) for grants
and assistance. IMF provided assistance with certain terms and conditions which necessitated
certain changes in the economic system. Further, the policymakers also thought that it was a
ripe time to learn from the growth experiences of other countries like East Asian Economies
and to bring about a reorientation in the working of the economic system. This led to the
introduction of economic reforms in India. These reforms have two main aspects namely
macroeconomic stabilization measures and structural adjustment measures. Macroeconomic
stabilization measures included tax reforms, the balance of payment reforms, monetary policy
reforms and inflation control. Structural adjustment reforms included new industrial policy,
banking sector reforms, phasing out subsidies, disinvestment and others. Both these policies
change lead to liberalisation processes in the form of de-licencing, de-reservation and de-
regulation. Increasing the role of private sectors in the functioning of the economy and
disinvestment connotes privatisation. Further, changes in trade policies like reducing the rates
of duties and tariffs made trade attractive, the flow of FDI and integration with world
economy or globalisation. Our orientation shifted from ‘Inward looking policy’ to ‘Outward
looking policy’.

The combination of liberalisation, privatisation and globalisation ushered a new era in the
economic history of India, GDP numbers increased, industrial activities gained momentum,
services sector bloomed and the presence of India on the global platform was being
recognised. However, the story of economic reforms is not without criticism like jobless
growth, neglect of the agriculture sector and unskilled labour, the rise in income and wealth
inequalities and many others.

8.2 NEW ECONOMIC POLICY 1991

Liberalisation, Privatisation and Globalisation (LPG) form the main component of New
Economic Policy, 1991. In the following section, you shall read about the meaning of

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liberalisation, privatisation and globalisation and the various measures undertaken to achieve
the objectives of these policy measures.
Liberalisation

Liberalisation refers to curtailing or lessening of the excessive state/ government regulations

and restrictions as to enhance the participation of private entities/ sectors in the functioning of
the economy. Prior to the policy of LPG, the Indian economy was entangled in Babudom,
excessive state control, red-tapism and licence raj. These factors not only inhibited the
efficiency of the public sector but the overall competitiveness of the economy was hampered.
Post-1991, Liberalisation measures include new industrial policy, financial sector reforms,
tax reforms, FOREX reforms and others. In the Industrial policy of 1991, several measures
were undertaken to liberalise the economy.

Firstly, the list of projects requiring industrial licensing was pruned and only 18 industries
related to security concerns, environment, hazardous chemicals, white or luxury goods, etc
were kept under the purview of compulsory licencing. Secondly, Industries reserved for the
public sector were reduced to only two industries i.e. one related to atomic energy and
second, railways. Thirdly, the requirement of licensing for setting up of industries within 25
Kms of the periphery of cities having a population of more than 10 lakh for a certain class of
industries was removed. Fourth, to boost and invite Foreign Direct Investment (FDI) in high
priority industries which requires heavy, lumpsum investment and advanced technology, it
was decided to provide approval for FDI up to 51% foreign equity in 33 industries like
electrical equipment, metallurgical industries, etc. Similarly, to inject technological
dynamism in Indian industries, the government provided automatic approval for technology
agreements related to high priority industries with specific parameters. Fifth, the Monopolies
and Restrictive Trade Practices Act (MRTP) 1969 was repealed. Sixth, the sick industries
were referred to Board for Industrial and Financial Reconstruction (BIFR) for the formulation
of revival/ rehabilitation schemes.

Privatisation

Privatisation in a broader sense means a change of ownership from the public sector to the
private sector and the induction of private management and control in the public sector. Three
sets of measures namely i) ownership ii) organisation and iii) operational are broad measures
of privatisation.

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Under ownership measures, the ownership of public enterprises, fully or partially, is
transferred to the private sector. Ownership measures include total denationalisation, joint
venture, liquidation and worker’s cooperative. Total denationalisation means 100% transfer
of ownership of public enterprise to the private sector. A joint venture implies partial transfer
( 25%, 51% and 74%) of public enterprise to a private entity. Liquidation is the sale of assets
to a person who may use them for the same purpose or some other purpose. Worker’s
cooperative is a special form of decentralisation whereby the ownership of the enterprise is
transferred to workers who may form a cooperative to run the enterprise.

Organisational measures are imposed to limit state control. These measures include the
formation of a holding company structure in which the government provided a sufficient
degree of autonomy in the decision making of the company. Big companies are split into
smaller units without loss of economies of scale. The smaller units become independent in
certain product lines or regional operations. Leasing is another measure whereby government
agrees to transfer the use of assets of a public enterprise to a private bidder for a specified
period for example 5 years. The tenderers have to give an undertaking of the profit that would
be passed over to the government. The government enjoys the right of obtaining profits as per
agreement. In case, the bidder fails to meet the expectations of the government, the latter has
the right to replace the bidder with a more promising bidder. Further, restructuring intends to
bring public sector enterprise under market discipline. Restructuring is of two types namely
financial and basic. Accumulated losses are written off and capital composition is rationalised
in respect of debt-equity ratio in financial restructuring. In basic restructuring, the public
sector shed some of its activities which are taken up by ancillaries or small scale units.

Operational measures aim to improve the overall functioning of the economy, even if fully
denationalisation has not been undertaken. Operational measures include granting autonomy
to public enterprises, provision of incentives to the employees, freedom to buy inputs from
the market, development of proper investment criteria, permission to raise resources from
capital markets for expansion or diversification.

Various measures in the Industrial policy like dereservation of industries under the public
sector, increasing the limit of the FDI in industries, disinvestment policy, the opening of
private sector banks, restructuring of nationalised banks are some of the steps undertaken
towards privatisation. In the 1991 Budget, the government announced the intention of partial
disinvestment in selected PSUs in order to raise resources, encourage wider public

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participation and promote greater accountability. Up to 20 of the Government equity in 31
selected enterprises were offered to Mutual Funds, Financial Investment Institutions, workers
and the general public. From 1991 to 1999 through the disinvestment method of market sale
of shares Rs 18,638 crore were realised.

Globalisation

It refers to the integration of the domestic economy with the rest of the world. Globalisation
connotes the reduction of the trade barriers to permit free trade, free flow of capital,
technology and labour. The important measures undertaken to pursue the objectives of
globalisation are:

I. Reduction of Import Duties: Reduction in import duties have been important

measures for improvement of the tax system. During 1990, import duties were 300 %
or more for several items and above 200 for many items. Peak rates were trimmed
progressively during the 1990s to reach 35% in 2001-02. The median tariff rate was
brought down to 25% in 2003-04. Besides reducing import duties, the government
attempted to dismantle the quantitative restrictions on imports and exports. In the
Import -Export policy of 1990, the list of Open General Licence (OGL) was expanded
to facilitate easy access to the import of items. The number of capital goods was
expanded from 1261 to 1343 under OGL. A scheme of Star Trading Houses was
introduced for exporters with an average annual net foreign exchange earning of Rs.
75 crores in the preceding three licensing years.
II. Encouragement of Foreign Investment: As we have seen in the industrial policy of
1991, automatic approval would be given for FDI up to 51% in high priority
industries. Further, in 1996, a new list of industries was approved whereby joint
ventures with up to 74% foreign equity would be cleared automatically. As present in
2021, 100% FDI through automatic route is permitted in major subsectors of Mining,
Broadcasting, Airports, Industrial Parks, Telecom Services, Pharmaceuticals, Single
Brand Retail Trading, Textiles & Garments, Thermal Power, Tourism & Hospitality,
White Label ATM Operations and Insurance & Insurance Intermediaries, etc.

Now having a glimpse about the NEP of 1991, we understand that nearly three decades have
passed since the introduction of economic reforms and over time the results of these reforms
have faded. So the need is felt for looking at recent policies and changes introduced in the
economy and try to see how these policies and programmes are shaping the economic

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landscape of the country. In the following section, we shall study the major changes and new
policies which have been introduced over the past decades.

8.3 NEW ECONOMIC POLICY 2014

Foreign Trade Policy (FTP) 2015-2020

One of the important policy which affects the external sector is the foreign trade policy in
India and each FTP brings new changes in the economic policy of the country. FTP is
formulated every five years and currently, Foreign Trade Policy for the year 2015-2020 is in
force. The major features and highlights of the FTP 2015-2020 are as follows:
Export from India Scheme
• Merchandise Export from India Scheme (MEIS)
Under this scheme, the scrips which will be issued will have no conditionality attached to
them. The notified goods which are exported to notified markets would be rewarded on
realised Free on Board (FOB) value of exports. Under this scheme, countries of exports have
been grouped into three categories namely country A, B and C. Country A or traditional
market includes, USA, Canada, EU and others. Country B or emerging and focus markets
include Africa, Latin America and Mexico, Turkey and West Asian countries, ASEAN
countries, Japan, China and others. Country C contains the list of 70 countries like
Bangladesh, Bhutan, Nepal, etc. Further different types of supports like global support are
extended under MEIS. Global support has been granted to fruits, flowers, vegetables, tea,
coffee, spices, processed foods, marine products, handicrafts, furniture, etc. New 852 Tariff
lines that fit in the product criteria but were not receiving support in earlier Foreign Trade
Policy have been extended this support and these include lines from fruits, vegetables, Ayush
and herbal products, paper products, etc.

Service Exports from India Scheme (SEIS)

Service exports from the India scheme have replaced the old Served From India Scheme
(SFIS). This scheme aims at promoting exports of services from India, to make services more
competitive in the global market and to provide incentives to exports. Under this scheme
incentives ranging from 3 percent to 5 percent are provided to the exporters of services who
are providing services from India to the various organisations situated outside India, The rate
of incentive under SEIS is computed on the net foreign exchange earned. Business services,

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communication services, construction and related engineering services, educational services,
environmental, health-related services, recreational services are covered under a 5 percent
rate. Services like hotels, restaurants and other services attract 3 percent rate. The rewards
earned in this scheme in the form of duty credit scrips are freely transferable and can be used
for all typed of goods and service tax debits on procurement of services or goods.
 The benefits of MEIS and SEIS are also extended to Special Economic Zones (SEZ).
 All duty scrips issued under MEIS and SEIS scheme and the goods imported against
these scrips are fully transferable and scrips issued under Exports from India can be
used for payment of customs duty, excise duty and payment of service tax.
 A new concept of Status Holders has been introduced in Foreign Trade Policy 2015-
2020. Business leaders who are prominent in the arena of foreign trade and have
successfully contributed to the country’s foreign trade would be termed/ recognized as
Status Holders. These holders would be given special treatment and privileges to
facilitate their trade transactions.
 Boost to “Make in India”: In view of encouraging domestic manufacturing and
promoting brand India several measures has been introduced under FTP. Under MEIS
schemes higher rewards will be provided for those export items which has high
domestic content and value addition.
 Under the Export Promotion Capital Goods (EPCG) scheme, the specific export
obligation has been reduced to 75 percent in case capital goods are procured from
indigenous manufacturers.
 Ease of Doing Business: For trade facilitation and Ease of Doing Business provision
for online filling of documents or applications has been made whereby various
applications by exporters/importers can be filled online. Further, there is no need for
hard copies of applications and specified documents. Landing documents of export
consignment as proofs for the notified market can be digitally uploaded.
Goods and Service Tax (GST)
• One of the major initiatives/reforms in the Indian tax sector was the introduction of
GST. GST Act was passed in 2017 by the parliament and came into effect from 1st
July 2017. It is a comprehensive, multi-stage, destination-based tax that is levied on
every value addition. Prior to the introduction of GST, there were a plethora of taxes
levied by the Central and State Governments which lead to cascading effects of the
taxes. GST has subsumed a large number of taxes and intended to simplify the
structure of the indirect taxes. At present, there are four GST types namely Integrated
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 Goods and Service Tax (IGST), State Goods and Services Tax (SGST), Central
Goods and Services Tax (CGST) and Union Territory Goods and Services Tax
(UTGST).
• The major benefits accruing from GST are the creation of a unified common national
market for India, giving a boost to foreign investment and the Make in India
programme. Mitigation of cascading of taxes, harmonization of tax laws and
procedures, simpler tax regime, increase in ease of doing business, reduction in
compliance costs. For consumers, benefits are in the form of reduction of prices of
goods and transparency in the fixation of final prices of the goods. More detailed
information about GST is given in Unit 9.

Pradhan Mantri Jan Dhan Yojana

To widen the scope of financial inclusion in the country is the ultimate goal of inclusive
growth. To bring the backward and marginalised citizens of the country under the umbrella of
institutional sources of finance is the goal of the financial inclusion programme. The
Government of India launched one of the biggest initiatives for financial inclusion on 15th
August 2014 namely “Pradhan Mantri Jan Dhan Yojana”. The mission was launched with the
objective of making financial products and services approachable to the common citizens of
the country at the least cost possible with the extensive use of technology to expand the
coverage of financial inclusion.

The basic tenets of the scheme are to provide basic banking services to unbanked citizens in
the form of opening a basic bank saving account in any bank branch or business
correspondent with zero balance and zero charges. Providing debit cards with free accident
insurance coverage of Rs 2 Lakh. The six main pillars of this scheme are universal access to
banking services, overdraft facility of Rs.10,000 with every basic saving bank account.
Expediting the programme of financial literacy in the form of spreading information about
the usage of ATMs, promotions of savings, use of banking services for insurance and
pension. Creation of credit guarantee fund to save the banks from defaults. To provide
insurance cover with both accident insurance upto Rs 1,00,000 ((enhanced to Rs. 2 lakh to
new PMJDY accounts opened after 28.8.2018) and life insurance of Rs 30,000 and to provide
a safety net to the workers working in the unorganised sector through a pension scheme.

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PMJDY account can be used for Direct Benefit Transfers (DBT) for the social security
schemes namely Pradhan Mantri Mudra Yojana (PMMY), Atal Pension Yojana (APY),
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima
Yojana (PMSBY). Post-2018, the focus of PMJDY has shifted from “ Every Household” to
“Every Unbanked Adult”. The overdraft facility has increased to Rs 10,000 from Rs 5000 and
the age limit for the overdraft facility has been increased to 65 years. As of April 2021, the
total number of PMJDY account stood 42.25 Crore and in these accounts, Rs 145408.07
crore was deposited and 30.93 crore Rupay cards were issued. Further, Jan Dhan Darshak
App was also launched to provide necessary information related to banking services like
locating ATMs, Bank Branches etc.

Mudra Scheme for MSME

To revitalise and meet the credit need of non-corporate, non-farm micro and small enterprises
Prime Minister Mudra Yojana (PMMY) was launched in 2015. These micro-enterprises plays
an important role in labour surplus country like India. These enterprises are labour intensive,
need less credit, caters to local economy needs and plays a supplementary role to the medium
and large Industries. However, they reel under the problem of deficiency of finance and
depend upon non-institutional sources of finance like money lenders. So to expand the ambit
of the institutional sources of finance to this sector PMMY was launched. MUDRA stands for
Micro Units Development and Refinance Agency and provided loans upto Rs 10 Lakhs to
eligible enterprises.

MUDRA is a wholly-owned subsidiary of Small Industries Development Bank of India

(SIDBI) with an authorised capital of Rs 1000 crores and 750 crores of paid-up capital. Micro
enterprises can borrow term loans or overdraft facility without any need for collateral,
processing fee and this scheme does not prescribe any minimum amount of loan, small to
small loans can be taken. MUDRA schemes have three categories namely Sishu, Kishor and
Tarun.

Under the Sishu scheme, a maximum loan of Rs 50000 is sanctioned for start-up micro-
enterprises. Kishor categories cater to the need of entrepreneurs who are looking for a fresh
fund for the expansion of business and they can avail of the loan ranging between Rs 500001-
Rs 5 Lakh. If the entrepreneurs are looking for diversification of their operation then they
avail the loan facility in the Kishor category. Under this category, the loan amount is
sanctioned Rs 5,00,000 to Rs 10,00,000. Entrepreneurs can take a loan for the commercial

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vehicle, plant and machinery, business loans and working capital. In the financial year 2020-
21, Rs. 43370003 PMMY loans were sanctioned.

Swachh Bharat Mission (SBM)

On 2nd October 2014, Prime Minister Sh. Narendra Modi launched a multi-pronged
programme to augment the sanitation drive in the country namely Swachh Bharat Mission
(SBM) or Clean India. This programme was launched at the backdrop that in 2014 more than
half of the population (55 crore people) practised open defecation. The situation was not only
grim in a country like India alone nearly 2.3 billion people globally lacked basic sanitation
services. Under SBM, beneficiaries were provided with an incentive of Rs 12000 for the
construction of Individual household latrines. The financial burden was shared in the 60:40
ratio between the central government and state government. However, in the case of special
categories states ( like J&K, HP, North Eastern states) this participatory role increased to
90:10. Further, permission was also granted to create avenues for additional contributions
from other sources also. SBM is not about providing financial incentives also rather it is
about capacity building and aims at instilling behavioural change among communities and
individuals. Since its inception, the percentage of fund utilization under this scheme has been
more than 95 percent. Nearly 10 crore toilets have been built since 2014 and 711 districts
declared as free from open defecation.

Make in India

With the idea and desire of transforming India into a global design and manufacturing hub
and to boost domestic manufacturing PM in September 2014 launched a much-hyped
initiative of ‘Make in India’. The intuition was to create a conducive environment that
encourages investment not only domestic but foreign also and built a network of modern and
efficient infrastructure. This programme has three objectives. First, to boost the
manufacturing sector and increase the growth rate of this sector to 12-14 percent per annum.
Second, to make the manufacturing sector one of the largest employment provider sectors and
to create 100 million additional manufacturing jobs by 2022. Third, to increase the share of
manufacturing upto 25 percent by 2025. This scheme focuses on 25 sectors namely
automobiles, aviation, chemicals, construction, defence manufacturing, electronic system,
food processing, leather, mining, pharma, railways, tourism, renewable energy, etc.

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Major Initiatives under Make in India

• Ministry of defence reserved 26 items that will be only procured from local suppliers.
• NLC India announced to set up a 500 MW Solar Power Plant in Odisha with the cost
of Rs 3,000 crore.
• FDI in the defence sector increased to 74 percent under the automatic route.
• 100 percent FDI under automatic route for construction and specified rail
infrastructure projects.

Stand Up India

To promote entrepreneurial skills among women and to bring the marginalised section of the
society i.e Schedule Caste (SC) and Scheduled Tribe (ST) individuals into the net of financial
inclusion a scheme called Stan-Up India for financing SC/ST and/or Women Entrepreneurs
was launched in 2016. Under this scheme, a composite bank loan of Rs 10 lakh and Rs 100
lakh (1 crore) is provided for setting up greenfield enterprises to be advanced to at least one
SC/ST borrower and at at least one women borrower per bank branch. The enterprise may be
in the manufacturing, services, trading sector or activities allied to agriculture like
pisciculture, beekeeping, poultry, etc. To provide collateral-free coverage, GoI has set up the
Credit Guarantee Fund for Stand-Up India (CGFSI). The loan needs to paid back in 7 years
with 18 months of the maximum moratorium period. Nearly Rs 26000 crore has been
sanctioned till 2021.

PM Ujjwala Yojana

To provide clean and efficient Liquified Petroleum Gas (LPG) to rural India, PM Modi
launched PM Ujjwala Yojana in 2016. This scheme aimed at providing 5 crore LPG
connections to women below the poverty line across India. The scheme provides financial
support of Rs 1600 for each LPG connection which includes cylinder, stove, pressure
regulator and the financial burden is borne by the government.

Skill India

Skill India or Pradhan Mantri Kaushal Vikas Yojana (PMKVY) is the flagship scheme of the
Ministry of Skill Development and Entrepreneurship (MSDE). This scheme was launched in
2015 with the target of providing industry-relevant skill training and financial and placement
assistance to over 10 million youth between 2016-2020. MSDE has et up different agencies

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and institutions to focus on different areas and activities. Three agencies are playing a
prominent role in achieving the target of PMKVY, namely, National Skill Development
Authority (NSDA), National Skill Development Corporation (NSDC) and Directorate
General of Training (DGT). NSDA is tasked with the implementation of the National Skills
Qualification Framework (NSQF) and strengthen State Skill Development Missions
(SSDMs). NSDC is entrusted with the implementation of PMKVY and Pradhan Mantri
Kaushal Vikas Kendra (PMKK) while DGT is tasked with the establishment and monitoring
of Industrial Training Institutes (ITIs).

Activity 1

1. Visit the website of Pradhan Mantri Jan Dhan Yojana and check the progress of this
scheme in your state and district.

2. Visit the website of Make in India and choose any one sector of your choice like
agriculture, health, digital awareness and list out the changes or reforms introduced in
this sector under the ambit of the make in India scheme.

8.4 NEW ECONOMIC POLICY 2020

Atmanirbhar Bharat

COVID pandemic had a devastating effect on all the economies of the world be it either big
or small, developed or underdeveloped. It had a deep impact on the economic growth and the
income and employment nosedived. It made the policymakers rethink the way the economic

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system works. It was at this juncture that Prime Minister of India, Sh Narender Modi while
announcing an economic package related to pandemic echoed the slogan of Atmanirbhar
Bharat in May 2020. This was followed by a clamour that whether India is regressing towards
an old socialist pattern of a closed economy and we are going to fly against the wind of
globalisation. Though the different versions of Atmanirbhar Bharat were already part and
parcel of the Indian planning process since 1976. And even some mention can be found in the
Tenth Five-Year plan also. In 2020, Atmanirbhar Bharat was declared as Oxford Hindi word
of the year.

This should not be only understood as self-reliant only as it is frowned upon by global
economics. It connotes policies that aim towards promoting resilience, efficiency and equity.
PM again in 2021, emphasised that the core of this slogan is about the creations of values,
wealth and ethos not only for India but for the larger humanity. Till now three packages has
been given under this scheme (Appendix-I).

The main constituents of Atmanirbhar Bharat are:

I. Demand
II. Demography
III. Economy
IV. Infrastructure
V. System

The Government of India via this package has tried to extend a helping hand to almost every
sector of the economy i.e. Micro, Small and Medium Enterprises (MSMEs), farmers, rural
labourers, migrants or the empowerment of the poor. We will discuss some of the financial
and policy highlights which were initiated under the various economic packages given under
this scheme.

Micro, Small and Medium Enterprises (MSMEs)

• Revision of Definition: One of the prominent reforms in this sector was to redefine
MSMEs and this done through amending the MSMEs Development Act, 2006. Earlier
there was a different definition of the enterprises in the manufacturing sector and
enterprises engaged in the service sector. But now this distinction is abolished and one
common definition in terms of investment in plant and machinery and annual
turnover. The new definition is given below.

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The new definition of MSMEs
Micro Small Medium
Investment Not more than Rs 1 Not more than Rs 10 Not more than Rs 50
in plant and machinery crore crore crore
Annual Turnover Not more than Rs 5 Not more than Rs 50 Not more than Rs 250
crore crore crore

• Collateral free loan of upto three lakh crore rupees to MSMEs which aims to provide
benefit to nearly 45 Lakh units.
• Rs 10,000 crore fund created to help these enterprises.
• To expand the government procurement from MSMS it was decided not to float
global tenders of up to Rs 200 crore in various procurement undertaken by the
government.
• A subordinate debt of Rs 20,000 crore for equity support for the stressed MSMEs.

The Agriculture and Allied sectors

The following are some of the measures undertaken to strengthen agriculture and allied
sectors.

• To develop infrastructure in the agriculture sector a corpus amounting to One lakh

crore to be set up at aggregation points and farm-gate. Farmgate is the place where
both farmers and buyers can interact directly with one another.
• For crop loan requirements an additional fund of Rs 30,000 crore is allocated and it
will be disbursed via the National Bank of Agriculture and Rural Development
(NABARD) to Rural Cooperative Banks and Regional Rural Banks (RRBs).
• To support the fishermen and fisheries Pradhan Mantri Matsya Sampada Yojana
(PMMSY) was launched. Under this scheme total of Rs 20,000 crores has been
allotted for, Aquaculture inland fisheries and marine along with the development of
Infrastructures like cold chains and fishing harbours.
• To help the dairy industry an Animal Husbandry Infrastructure Development Fund of
Rs 15000 crore was set up.
• To control the foot and mouth disease and Brucellosis a National Animal Disease
Control programme was launched with an outlay of Rs 13,343 crore for achieving
universal vaccination of cattle, buffalo, goat, pigs and sheep.
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 • Rs 500 crore has been extended for beekeeping initiatives.
• The government has decided to amend The Essential Commodities Act, 1955 to
deregulate food items like edible oil, onions, pulses, potatoes and oilseeds to attract
investment in the sector.

Migrant Workers

• One Nation One Card scheme had been launched whereby migrants can access the
Public Distribution System (PDS) from anywhere.
• 5 Kg of grain per person and 1 kg of chana per family per month for two months will
be given to all those migrant workers who are not beneficiaries under the National
Food Security Act ration card or state card. It is estimated it will benefit eight crore
migrants.
• Pradhan Mantri Awas Yojana envisages providing living facilities at an affordable
price to migrant labourers/urban poor.
• Rs 5000 crore credit facility to street vendors which are the most affected segment of
the population due to ongoing pandemic. Under this facility, the bank credit facility
for initial working capital upto Rs 10,000 for each enterprise will be extended.

Civil Aviation and Defence

• Airports with world-class infrastructure to be built through Public-Private Partnership

(PPP). The Airport Authority of India has initially awarded three airports of
Ahmedabad, Lucknow and Mangaluru for operation and maintenance on a PPP basis.
• Foreign Direct Investment (FDI) limit in defence manufacturing increased to 74 %
from 49 % under automatic route.
• Reservation for Indian vendors in some categories like production agency in Design
and Development, etc and further FDI of more than 40 percent is not allowed.
• The Ministry of defence will bring out the list of items on which the ban of the import
of certain items shall be announced.
• Mission Raksha Gyan Shakti launched to promote innovation and technology
development.

Energy

• To improve the functioning and efficiency of the power sector it was decided to
privatise power department/utilities in Union Territories.

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 • To ensure a progressive reduction in cross-subsidies in the sector it was decided to
amend the Electricity Act, 2003.
• Rs 118,273 crore worth of loans have been sanctioned to 17 states/UTs for liquidity
injection for DISCOMs.

Social Sector

• MGNREGS has been given an additional allocation of Rs 40,000 crore to provide

impetus to rural demand and employment.
• To further strengthen and enhance technology in the education sector PM eVidya will
be launched for digital/online education.

8.5 OTHER INITIATIVES

Other measures / initiatives include the following:

• Festival advance scheme to government employees under SBI Utsav cards.

• New Leave Travel Concession (LTC) voucher scheme launched.
• A new scheme Atmanirbhar Bharat Rozgar Yojana launched to create new job
avenues during the COVID recovery phase.
• Rs 1.46 lakh crore boost has been given to 10 champion sectors like advanced,
electronic /technology products, pharmaceutical drugs, cell chemistry battery, telecom
and networking products, food products, high-efficiency solar PV modules,
automobiles and auto components, White goods and speciality steel, textile products.
• Rs 18,000 crore additional outlay for PM Awaas Yojana-Urban.
• Rs 900 crore provided for Covid Suraksha Mission for R&D of Indian Covid vaccine.

Further, under this slogan, various sub slogans like Vocal For Local, Local for Global, etc
were echoed.

National Food Security Mission

This mission was launched in 2007 as a centrally sponsored scheme which aimed to increases
the annual production of rice, wheat and pluses by 10 million tonnes, 8 million tonnes and 2
million tonnes respectively by the end of 2011-12. This increase in production was intended
to achieve by restoring soil fertility, improving farm level economy, expanding the area under
cultivation and fostering new employment avenues. Subsequently, from 2014-15, coarse

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cereals and commercial crops like sugarcane, cotton and jute were also included under this
mission. Further, it was decided to extend this mission to 2019-2020 and new targets of
achieving production of 13 million tonnes of additional foodgrain production are fixed. At
present this mission is being implemented in selected districts of 29 states of the country.

National Food Security Act (NFSA) 2013

A paradigm shift in the country food security occurred in 2013 when the government enacted
NFSA, 2013 which made provision to distribute subsidized foodgrains under the Targeted
Public Distribution System (TPDS) to nearly 75 % of the rural population and 50 % of the
urban population. Under this act, identified households are provided 5 Kg foodgrains per
person at the highly subsidised price of Rs 3 for rice, Rs 2 for wheat and Rs 1 for coarse
grains. Households covered under Antyodaya Anna Yojana (AAY) to receive 35 kg per
family per month. This act also includes Mid Day Meal (MDM) and Integrated Child
Development Services (ICDS). Pregnant women and lactating mothers and children in the
age group of 6 months to 14 years are entitled to nutritious meals. Maternity benefits of not
less than Rs 6,000 are given to pregnant women and lactating mothers. The ration cards are in
the name of the eldest woman of the household of age 18 years or above. This act also
provides for a grievance redressal mechanism at the district and state levels apart from social
audits to ensure transparency and accountability. If the states are not able to supply the
entitled foodgrains to the beneficiaries the act makes the provision for food security
allowance. At present this act is being implemented in all States/UTs, covering nearly 80.5
crore persons.

Smart Cities Mission

Smart Cities Mission was launched in 2015 for rejuvenating urban development. It aims to
enhance economic growth along with improving the quality of life of people living in cities
through comprehensive work on physical, economic, social and institutional pillars of the
city. The focus is on inclusive and sustainable development. To promotes and provide the
core infrastructure like adequate water supply, sanitation, assured electricity supply, solid
waste management, affordable housing, digitalization, e-governance, sustainable
environment, the safety of women, children and elderly, health and education. 100 cities were
to be selected based on two-step criteria. This is a centrally sponsored scheme and at the time
of inception, Rs 48,000 crore were sanctioned over five years. Smart Command and Control

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Centres has been completed in 16 cities. Smart water, Smart Roads, Smart Solars have been
completed in 24 cities, 23 cities and 15 cities respectively.

Bharat Net or National Optical Fibre Network (NOFN)

In the mission of connecting rural India with internet services, National Optical Fibre
Network was launched in 2011 and was renamed Bharat Net in 2015. This mission envisages
connecting all 2,50,000 Gram panchayats with the minimum 100 Mbps bandwidth covering
nearly 625,000 villages. Bharat Broadband Network Limited (BBNL) is the special purpose
vehicle created as Public Sector Undertaking (PSU) for the execution of NOFN. The project
aims to provide e-services and e-applications like e-health, e-education, etc.

Activity 2
1. Choose one of the cities from your state that is covered under the Smart Cities
mission and prepare a note about the various facilities, financial resources, etc which
are granted to your city. Try to analyse whether the city has turned smart or not?

8.6 SUMMARY

In this unit, we started with the history of economic reforms and the rationale behind
introducing the same in the country. The year of 1991 is remembered as a year of economic
reforms wherein NEP was introduced which liberalised India from the clutches of licence raj,
excessive government controls, permit raj, red-tapism and state-created monopolies. India
adopted a positive outlook for globalisation and policies were initiated to integrate the Indian
economy with the rest of the world. However, more than 30 years have passed since this
policy so the need was felt to look into recent changes in the economic field. More
specifically to look into some of the economic changes which were undertaken in the last
decade or so.

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To provide basic financial and insurance services to the financially excluded section of the
society and to curb the ongoing leakages in various welfare schemes. The trinity of JAM was
introduced and Jan Dhan Yojana is one of the steps in this right direction.

Similarly, the Mudra scheme is intended to benefit budding entrepreneurs and MSMEs.
Following the proverb of cleanliness is next to godliness, Swachh Bharat Mission was
initiated to clean the neighbourhoods and prevents the spread of infectious disease along with
improving the living conditions of the citizens. Finally, to strengthen domestic manufacturing
and improve the process of industrialisation the ambitious project of Atmanirbhar Bharat is
being implemented. This scheme is impacting every sector of the economy and one of the
visible impacts in the recent pandemic is the manufacturing of homemade vaccine Covaxin.

8.7 KEY WORDS

Cess: It is a tax on tax. It is levied by the government for a specific purpose like health,
education etc.

Financial Inclusion: Initiative by the government to bring the financially excluded sections
like marginalised sections, women, tribals, etc under the umbrella of formal credit facilities.

Fiscal deficit: It is the difference between the total income of the government i.e. total tax
receipts and non-debt capital receipts and total expenditure.

Foreign Direct Investment: It is an investment made by a firm or individual in one country

but its headquarter/control is in another country.

PDS: Public Distribution System is a system of providing subsidised ration including

foodgrains, edible oil, sugar, pulses etc to the targeted proportion of the population.

Tax: Tax is a compulsory payment made by individuals or corporations to the Government

Trade deficit: It is a situation wherein the country’s imports and higher than exports.

8.8 SELF-ASSESSMENT QUESTIONS

1. Discuss the rationale behind economic reforms introduced in India in 1991.

2. What are the eligibility conditions and benefits received by PMJDY beneficiaries?

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 3. What are the facilities offered under Swach Bharat Mission to individuals?
4. Discuss between financial and basic restructuring.

8.9 REFERENCES/ FURTHER READINGS

1. Ahluwalia, I J (Eds.) (1998), India’s Economic Reforms & Development (Essays in

Honour of Manmohan Singh), Oxford University Press, New Delhi
2. Dhingra, I. C. (2001), The Indian Economy: Environment and Policy, Sultan Chand &
Sons, New Delhi.
3. Jalan B (1992), The Indian Economy-Problems and Prospects, Viking, New Delhi
Publication, Calcutta.
4. Ministry of Finance. (2017). Economic Survey 2016-17. Government of India. New
Delhi.
5. Ministry of Finance. (2018). Economic Survey 2017-18. Government of India. New
Delhi.
6. Ministry of Finance. (2019). Economic Survey 2018-19. Government of India. New
Delhi.
7. Ministry of Finance. (2020). Economic Survey 2019-20. Government of India. New
Delhi.
8. Misra S.K. & V.K.Puri.(2020). Indian Economy (38th edition)– Himalaya Publication
House, Mumbai.
9. Dutt, Rudar. & K.P.M. Sundram (2009), Indian Economy, S. Chand, New Delhi.

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 a. Appendix-I
Atmanirbhar Bharat Abhiyan
The Hon’ble Prime Minister, Shri. Narendra Modi announced a special economic package on
12 May 2020 of Rs.20 lakh crore (equivalent to 10% of India’s GDP) under the ‘Atmanirbhar
Bharat Abhiyan’. This special economic package was announced to make India independent
against the tough global supply chain competition and help empower the labourers, poor and
migrants who had been severely affected by the COVID-19 pandemic.
Accordingly, the Finance Minister, Smt. Nirmala Sitharaman announced the details of the
measures provided under the Atmanirbhar Bharat Abhiyan through five press conferences.
These measures are provided to different sectors and areas to cover and help everyone
affected by the pandemic. The measures were announced keeping in mind the five pillars of
Atmanirbhar Bharat Abhiyan. These five pillars are the pillars for making India self-reliant.
Five Pillars of Atmanirbhar Bharat Abhiyan

The five pillars of Atmanirbhar Bharat Abhiyan are:

• Economy – That brings quantum jump rather than incremental change.
• Infrastructure – To become the identity of modern India.
• System – That is driven by technology and a system not based on the past policy.
• Demography – India’s strength is its demography, and it is the source of energy
for self-reliant India.
• Demand – The demand and supply chain in the economy is the strength that must
be harnessed to its rightful potential.
Measures Provided Under Atmanirbhar Bharat Abhiyan
The various measures are undertaken by the government under the Atmanirbhar Bharat
Abhiyan in different sectors are as follows:
Reforms for MSME
• The Emergency Credit Line Guarantee Scheme (ECLGS) to Businesses or
MSMEs from Banks and Non-Banking Financial Companies (NBFCs) up to 20%
of the entire outstanding credit as of 29.2.2020.
• Rs.20,000 crore for Subordinate Debt for Stressed MSMEs.
• Rs.50,000 crore equity infusion for MSMEs through ‘Fund of Funds’, which are
doing viable business but need hand holding due to the pandemic situation.
• Revision of MSME definition by increasing the upper limits of turnover and
investments in plant machinery and equipment for MSME. The new definition
differentiates MSME under the criteria of investment and annual turnover, which is
the same for both the manufacturing and service sector.
• For protecting MSMEs from foreign company competition, global tenders of up to
Rs.200 crore will be disallowed in government procurement tenders.

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Reforms for Agriculture, Fisheries and Food Processing Sectors

• Rs.1 lakh crore for Agri Infrastructure Fund to farmers for farm-gate infrastructure.
• Rs.10,000 crore scheme for Formalisation of Micro Food Enterprises (MFE).
• Rs.20,000 crore for fishermen through Pradhan Mantri Matsya Sampada Yojana
(PMMSY).
• Animal Husbandry Infrastructure Development Fund set up for Rs.15,000 crore to
support private investment in Dairy Processing, cattle feed infrastructure and value
addition.
• Promotion of Herbal Cultivation with an outlay of Rs.4,000 crore.

Reforms for Employment and Ease of Doing Business

• Additional allotment of Rs.40,000 crore for MGNREGS for boosting employment.
• Decriminalisation of the Companies Act, 2013 for ease of doing business.
• Permission for direct listing of securities by Indian public companies in foreign
jurisdictions.
• Private companies that list Non-convertible debentures (NCDs) on stock
exchanges will not be regarded as listed companies.
• Including the provisions of Producer Companies (Part IXA) of Companies Act,
1956 in Companies Act, 2013.
• Power to the National Company Law Appellate Tribunal (NCLAT) for creating
additional or specialised benches.
• Lowering of penalties for all defaults for One-person Companies, Small
Companies, Producer Companies and Startups.
Reforms for Poor, Farmers and Migrant Workers
• Introduction of One Nation One Card. The migrant workers can access the Public
Distribution System, i.e. Ration from the Fair Price Shop situated anywhere in
India under the scheme of One Nation One Card.
• Provided living facilities to the migrant labours and urban poor at affordable rent
under the PMAY (Pradhan Mantri Awas Yojana).
• PM Svanidhi scheme launched to facilitate easy access to credit for urban street
vendors.
• NABARD extended Rs.30,000 crore additional re-finance support for meeting
crop loan requirements of Regional Rural Banks and Rural Cooperative Banks.
• A special drive to give concessional credit to PM-KISAN beneficiaries through the
Kisan Credit Cards. Animal Husbandry Farmers and Fishermen are also included
in this drive.

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Atmanirbhar Bharat Abhiyan 2.0
After the announcement of Atmanirbhar Bharat Abhiyan by the Prime Minister on 12 May
2020, announcements were made on 12 October 2020 under Atmanirbhar Bharat Abhiyan
2.0. Under Atmanirbhar Bharat Abhiyan 2.0:
• SBI Utsav Cards were distributed.
• 11 States were sanctioned Rs.3,621 crore towards the capital expenditure as an
interest-free loan.
• LTC voucher schemes were launched.
• Additional capital expenditure of Rs.25,000 crore was provided to the Ministry of
Road Transport and the Ministry of Defence.

Atmanirbhar Bharat Abhiyan 3.0

On 12 November 2020, the Finance Minister, Smt. Nirmala Sitharaman, along with the
Minister of State for Finance and Corporate Affairs, Shri. Anurag Thakur launched the
Atmanirbhar Bharat 3.0 for boosting the Covid-hit economy.

Twelve announcements were made by Finance Minister Nirmala under the Atmanirbhar
Bharat 3.0, which focused on job creation and tax relief in the housing sector. The twelve
announcements are as follows:

• Launch of Atmanirbhar Bharat Rozgar Yojana for the creation of new employment
opportunities.
• Launch of ECLGS 2.0 for supporting stressed sectors with a tenure of 5 years,
including a moratorium of 1 year.
• Rs.1.46 lakh crore for Atmanirbhar Manufacturing Production Linked Incentives (PLI)
for 10 champion sectors.
• An additional outlay of Rs.18,000 crore provided for the PMAY-Urban.
• The performance security on contracts was reduced to 3% instead of 5-10% to ongoing
contracts free of disputes and Public Sector Enterprises to support infrastructure and
construction.
• Demand booster for the Residential Real Estate Income Tax relief for the Home
Buyers and Developers from 10% to 20% (under section 43CA) for only primary sale
of residential units valuing up to Rs.2 crore.
• Rs.6,000 crore Equity infusion in NIIF Debt Platform and Rs.1.10 lakh crore Platform
for Infra Debt Financing.
• Rs.65,000 crore for subsidised fertilisers for helping 140 million farmers.
• An additional outlay of Rs.10,000 crore provided for Pradhan Mantri Garib Kalyan
Rozgar Yojana.
• Rs.3,000 crore released to EXIM Bank for promoting the export projects through lines
of credit under the IDEAS scheme.

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• An additional outlay of Rs.10,200 crore towards Capital and Industrial expenditure.
• Rs.900 crore provided for the COVID Suraksha Mission for Research and
Development of Indian COVID-19 Vaccine to the Department of Biotechnology.

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