CHAPTER I
Given
in
order
the global scenario, countries trade w i t h each
t o export the products which are produced
in
over and above the domestic consumption and imports the
other
excess,
products
This
which are consumed over and above the domestic production.
i
so
because,
a l l the f a c t o r resources
evenly throughout the world.
are
not
distributed
Some are better endowed w i t h labour
and some others are b e t t e r endowed w i t h c a p i t a l etc.,
circumstanaces,
specialisation
i n the products i n
abundant resources are used more intensively
a dividend through trade.
Under euch
which
their
c e r t a i n l y pay
them
Moreover, such a speacialisation
pave
the way f o r the production o f larger quantity and greater v a r i e t y
of goods and services cheaply the world as a whole.
I t i s clear that,
international economics has f o r i t s
field
o f study and practice deals w i t h the t r a f f i c o f goods,
service8,
capital,
of
precious
metals and g i f t s as the
items changes from one country
national
as
the
t o those o f the another.
I t draws inferancee,
condition
1
these
Inter-
trade also describes and analyses t h i s t r a f f i c as
laws, i n s t i t u t i o n s and practices under
place.
place.
ownerahjp
the
it
takes
develops tendencies and laws
which
manner i n which i n t e r n a t i o n a l
which
well
transactions
take
The r o l e o f f o r e i g n trade i n economic developmont
erably a very o l d concept indeed.
the
urge
Such an understandlng provides
t o develop the knowledge and
development through trade a possibility.
izes and produces
experience8
that
make
When a country special-
goode and services on the bast8 o f comparative
i t export8 these commodities and services
advantage,
conaid-
48
which
are
produced cheaper i n the home countrty I n exchange f o r what others
Such a
can produce a t a lower cost i n t h e i r countrles.
develop-
ment u l t i m a t e l y r e e u l t s i n increase i n the national income which,
i n turn, r a i s e s the standard o f l i v i n g o f the paople concerned.
I n t e r n a t i o n a l trade n o t only widens the market f o r goods and
services
but a l s o provide a d d i t i o n a l inducement
for
Investment
throughout the world and pave the way f o r more e f f i c i e n t resource
allocation.
By
specialization,
enlarging the s i z e o f market and t h e
international
trade makes greater
scope
uee
of
technical know how, encourages inventions and innovations,
g e r i a l t a l a n t etc.,
of
new
mana-
which acqualnta people w i t h new product8
and
makes them t o work harder t o save and accumulate more c a p i t a l f o r
further
investment and s p e c i a l i s a t i o n .
The idea o f minimum governmental i n t e r v e n t i o n and f r e e t r a d a
were o r i g i n a t e d by the classical economirts.
tance o f
governmental i n t e r v e n t i o n was recognlsed by the
mists only a f t e r
in
4
However, t h e impor-
totality
witnessing the f a i l u r e of t h e market
during
the great depression o f
19308.
econo-
mechanism
The
later
writers,
thus,
intervention
demonstrated the
in
importance
a l l the phases of economic
of
governmental
activities.
As
r e s u l t o f t h e said controversy, one could f i n d a large volume
literature
on the r o l e o f government i n the procers o f
development
through i n t e r n a t i o n a l trade.
a
of
economic
The r o l e o f
govern-
ment i n ensuring macroeconomic s t a b i l i t y , e f f i c i e n t a l l o c a t i o n o f
resources
and
equitable d i s t r i b u t i o n o f b e n e f i t s o f
almost a s e t t l e d issue.
growth
I n the context o f a closed economy, the
two major instruments t h a t were being practiced t o achieve
oeconomic
in
the
s t a b i l i t y are f i s c a l and monetary p o l i c i e s .
case o f the modern globalised system, i n
living,
macr-
However,
which
we
are
w i t h a l l interdependenciee the f o r e i g n p o l i c i e s
of
the
country concerned also play a c r u c i a l r o l e , i n additon.
fore,
ie
a case f o r government i n t e r v e n t i o n
the natural r i g h t
i s Justified
Thereboth
and an o b l i g a t i o n t o c o r r e c t the market
on
fail-
ure.
Hence,
the s t r u c t u r a l adjustment programmes
the Government o f I n d i a , no doubt involve8 t h e
vention, but, of a d i f f e r e n t kind.
are
very
introduced
government i n t e r -
Here, t h e p o l i c y
c l e a r and cost attached t o them
are
by
Instruments
widely
diffured
making chances of i t ' s f a i l u r e s comparatively lese.
The
concept o f "market f r i e n d l y " approach was
i n recent years by the World Bank.
t i o n of t h i s approach.
proliferated
But there i s no c l e a r d e f i n i -
A l l t h a t matters i s how t o keep
'govern-
The approach which w i l l
~ n t away
'
from the business a c t i v i t i e s .
avoid
high coat o f government i n t e r v e n t i o n i s c a l l e d the
friendly
approach..
advocated
The World Bank
Development
market
Report,
market f r i e n d l y approach t o development based
1991,
on
tha
following three factors; the f o l l o w i n g t a b l e 1.1 shows the structure
of
the market-friendly approach and i t ' s
implications
i t ' s summary form.
in
,181
TABLE 1.1
Market-friendly Approach and It'.
inrplicationo
----------C--*--LI-----------------------------------*-
Market-friendly approach
Implication
1. Intervene r e l u c t a n t l y
Promote e f f i c i e n t
functioning o f the
market and avoid
distortion.
2. Applies checks and
Interventions be
subjected t o domemtic
and global market
disciplines.
bal ancas
3 . Intervene openly
Market
envisages
friendly
More transperant,
simple and nonspeculative r o l e o f
the government.
approach o f S t r u c t u r a l Reforms
8
minimization OP the r o l e o f t h e s t a t e i n the
thu6,
economy.
This does not mean there would not be any c o n t r o l on t h e economic
a c t i v i t y of p r i v a t e agents.
Instead, these economies f u n c t i o n on
the basis o f strong regulatory i n 8 t i t u t i o n s t h a t implement compet i t i o n p o l i c y , minimization o f negative e x t e r n a l i t i e s i n
produc-
tion
and consumption, and the public organizations t h a t
public
goods through contracts w i t h p r i v a t e producers.
context
o f the market reforms, the p o l i c y r o l e
provide
In
the
important
I6
in
s e t t i n g up necessary conditions not only towards minimizing these
costs
but also towards evolution o f i n s t i t u t i o n a l conditions
In
the r i g h t d i r e c t i o n .
1LL IHE CONCEPl QE 'STRUC~URALA
was
D
J
9 .
U
~
~
Structural
Adjurtment Programme (SAP), aa a
introduced
by
the World Bank i n 1980, and
loan
the
package,
began
IMF
o f f e r i n g s t r u c t u r a l adjustment loans from 1986. "Adjustment"
expected
was
t o bring lees developed country's import8 i n l i n e
t h e i r dwindling foreign exchange earnings from exports and
with
what-
ever l i t t l e they could get from the outeide world i n the form
of
assistance.
as
Exports and imports were sought t o be equalized,
also domestic revenue and expenditure, by constraining demand
the
" s t a b i l i z a t i o n " stage and l a t e r , through
the
complementary
package by way o f p r i v a t i s a t i o n and inflow o f
Fund-Bank
in
foreign
investment.
I n i t i a l l y , the idea o f ' s t r u c t u r a l adjustment' was not meant
for
the less developed countries
was
t o restructure the economy o f the OECO countriee,
developed
(LDCs) a t a l l .
The
objective
the
met
countries o f the world, following o i l c r i s i s ( i n
1973
and i n 1979-80) and the emergence o f huge d e f i c i t e i n the balance
of
payments of United States.
changed,
Only afterword, the emphasis
and the burden o f adjustment t o the new world
5
was
economic
situation, a r i s i n g from a v a r i e t y o f developments i n the 708, was
1'
i
shifted t o the
shoulders o f the less developed countries (LDCs).
Fd
'~djustment' got p r i o r i t y over other p o l i c y objectivar
:
poverty a l l e v i a t i o n and r e d i s t r i b u t i o n o f income.
\
Structural
international
adjustment accompanied debt
such
rescheduling
agreements, by waiving a p a r t and
a6
under
etretchlng
the
r e s t over a longer period, which f u r t h e r guaranteed repayment.
Thus, as the name 'Structural Adjustment' suggests the term,
the 'structure' r e f e r s ' t o discrete p o l i c i e s ' and 'adjurtment'
defined
as 'adaptation o f consumption patterns, r e a l l o c a t i o n o f
resources
the
is
and changes i n f a c t o r accumulation'.
Taken
togmther,
s t r u c t u r a l adjustment programmes r e f e r s t o the action
taken
by the government i n response t o external and i n t e r n a l rhocks
t h a t on completion o f the SAP, the economy would regain the
so
pre-
shock growth path by removing imbalances, d i s t o r t i o n s and indebtedness.
The
being
s t r u c t u r a l adjustment programme f o r the Indian
initiated
i n mid-1991 under the promised
economy
IMF-World
support, through l i b e r a l i z a t i o n w i t h reopect t o industry,
Bank
trade,
finance, p u b l i c sector, foreign c a p i t a l and f i s c a l adjustment has
the
avoded
resource
long-run objective o f promotion and
improvement o f
use e f f i c i e n c y , p r o d u c t i v i t y and enterprises
mainly by competitive market forces, and the short t o
W
tiobjective o f correction o f macro-economic imbalancee.
propelled
mdium-run
Structural
adjustment imptias the s t r u c t u r a l change o f
the
economy which i n t u r n , r e f e r s t o t h e t r a n e i t i o n from a t r a d i t i o n involving
a l a g r i c u l t u r a l society t o a modern i n d u s t r i a l economy
a
r a d i c a l transformation o f e x i s t i n g i n s t i t u t i o n s , s o c i a l
tudes and motivations.
ing
employment
increased
Such s t r u c t u r a l changes lead t o
o p p o r t u n i t i e s , higher
stock
labour
atti-
increao-
productivity
o f c a p i t a l , e x p l o i t a t i o n o f new
and
resources
and
improvements i n technology.
Structural
the
adjustment programme i s a l s o aimed
t o get
over
balance o f payments c r i s i s . I t includes a programme o f
cor-
r e c t i n g the f i s c a l imbalance t h a t i s apparent from h i g h budgetary
deficit.
The
centerpiece
o f the s t r u c t u r a l
adjustment
is
to
restore the f i s c a l balance t o contain i n f l a t i o n , which i s p a r t i c u l a r l y h u r t i n g t h e poorer sections o f t h e community.
B e r t F.Hoselitz opines, "what
about
the
i8
perhaps most important
s t r u c t u r a l changes t a k i n g place d u r i n g
the
take-off
period i s the adaptation o f previously e x l s t i n g i n s t i t u t i o n s f o r
2
new ends, e s p e c i a l l y f o r c a p i t a l formation".
Thu8 t h e basic
s t r u c t u r a l reforms
aims a t i d e n t i f i n g the mistakee and
suggest-
i n g s u i t a b l e remedies t o overcome them.
I n 1991, t h e then Narasimha Rao's government introduced
the
s t r u c t u r a l rePorms package t o r e v i t a l i z e t h e economy.
The reform
measures
long-term.
The
have two objectives, namely, short-term and
short-term
measures aimed a t stabilization o f
the
economy
adjust-
while the long-term measurer are designed f o r e t r u c t u r a l
ments. The measures of s t a b i l i z a t i o n contemplated a reduction
fiscal
deficit,
reducing
monetary reform, s t a b i l i z i n g
price
level
the r a t e o f money stock expansion. The long-term
in
and
meas-
ures consist o f s t r u c t u r a l adjustment8 i n the economy t o b r i n g i t
in
tune w i t h l i b e r a l i z a t i o n , p r i v a t i s a t i o n and g l o b a l i z a t i o n
the
economy.
Formerly exclusively reserved
to
public
of
sector
u n i t e were opened t o p r i v a t e entrepreneurs.
During
the
s t r u c t u r a l adjustment period the
policies
are
designed t o ensure increase i n global demand f o r the manufactured
goods and services minimize the domestic demand.
Another
aspect
o f the SAP i s t o ensure i n s t a l l a t i o n o f production capacity
the
condition t h a t i t would lead t o contribute increase
ports
at
a r a t e not lees than t h a t a t which
subjected t o growth.
eration
I n short, I n d i a
p r o d u c t i v i t y than
increasing
has
to
is
c u r t a i l the production and
inviable
adopted
The emphasis i s
the
incentives, subsidies, f r e e service6 welfare
through
order
of
ex-
This also e n t a i l s the curtailment i n accel-
i n the growth o f imports.
increase
itrelf
output
the SAP based upon t h i s t h e o r e t i c a l explanation.
on
in
with
conrumption
etc.,
In
investment,
the
f i s c a l p o l i c i e s and c r e d i t p o l i c i e s are framed accordingly.
The f a l l i n demand f o r most o f the items i s the
tion
of r e s u l t s and impact o f several p o l i c i e s
rently.
manifesta-
working
concur-
Ideas about economic development i n t h e developing countries
have undergone r a d i c a l changes.
Today, the l i t e r a t u r e on econom-
i c development concentrate on strengthening t h e domestic currency
i n terms o f other country's currency,
The
present study analyses the c o n t r i b u t i o n s o f
adjustment
and
structural
programmes i n promoting i n t e r n a t i o n a l t r a d e o f
strengthening the external value o f t h e rupee.
literature
India
Hence,
the
reviewed here deals w f t h the f a c t o r s responsible
for
adopting d r a s t i c steps o f s t r u c t u r a l reforms and t h e i r e f f e c t s on
I n d i a n economy.
The
guiding
market
reforms t h a t have been
philosophy
implemented
o f s t r u c t u r a l adjustment
and
under
stabilization
p o l i c i e s o f IMF-World Bank have been simple standardized
on s i m p l i s t i c micro and
macro-economic
deals
(based
which
are applied across developing economies.
put
the
These
package
theories)
packages
a l o t o f emphasis on sweeping reforms i n trade p o l i c y
along
w i t h exchange r a t e changes t o make exports more competitive.
focus
o f 'packages'
i n the trade sector i s on various
trade l i b e r a l i z a t i o n , such as removal of import quotas,
and e q u a l i z i n g o f import t a r i f f s e t c . ,
forms
Such t r a d e l i b e r a l i z a t i o n
be remedied through p r i o r o r simultaneous devaluation.
are
of
lowering
may involve imbalances i n the trade account, these are sought
tions
The
a l s o suggested because of t h e i r
to
Devalua-
presumed e f f e c t
on
domes ti^
savings and investment balances, which would
external adjustment
alao
aid
.
I t i s an u n i v e r s a l l y accepted view t h a t t h e government
a
vital
and p o s i t i v e r o l e i n order t o
eradicate
the
Gunnar Myrdal r i g h t l y says about t h e
a c t as a passive spectator.
o f a government i n the f o l l o w i n g words,
chasms
and
inherent
I t cannot
r i g i d i t i e s e x i s t e d i n developing countries l i k e I n d i a .
duty
c r e a t i n g a psychological,
" Breaking
ideological,
s i t u a t i o n s p r o p i t i o u s t o economic development
3
the paramount duty o f the s t a t e i n euch countries"
grammes
ance
studies o f t h e IMF-World Bank l e d
have shown t h a t w h l l e they had mixed impact on the
bal-
, and
growth rates; they were accompanied by
against
the labour which adversely a f f e c t e d
5
4
conditions o f poor.
structural
against
becomes
pro-
r i s e i n unemployment and i n f l a t i o n rates, s h i f t e d income
the
and
adjustment
o f payments
bution
social
social
political
Various
play
labour
Taylor ,Pastor
dietri-
the
living
6
and Eshag
found t h a t
under
adjustment programme,
and poor class.
income d i s t r i b u t i o n was
7
8
9
Hoeven ,Horten
and Oinneken
found t h a t economic reforme have increased unemployment r a t e s
r u r a l and urban informal sectors.
prises
the
in
P r i v a t i s a t i o n o f p u b l i c enter-
has been associated w i t h sharp retrenchment.
countries, the slowing down o r f a l l i n formal
employment
a
has been accompanied by slowing down o r
I n most
urban
of
sector
revereed
r u r a l urban m i g r a t i o n and i n f u r t h e r crowding i n a g r i c u l t u r e .
in
The
cost-push i n f l a t i o n associated w i t h s t r u c t u r a l
adjust-
ment and the slack employment market leads t o f a l l i n r e a l
w i t h coneequent adverse e f f e c t on l i v i n g standard o f the
wages
worker.
Hoeven reports a s i z a b l e decline i n i n d u s t r i a l wages between 1980
and
1984
reported
in
A f r i c a n and L a t i n
an
American
Countries;.
average decline o f 8 . 4 per cent i n
Tokeman
real
wages
manufacturing industry and 19.4 per cent i n construction.
to
Horten
find
a sharp decline ranging from 30 per cent t o 60 per cent
real
wages indices between 1980 and 1987 i n Argentine,
in
Bolivia,
Chile, Costa-Rica, Egypt and Kenya but a steady r i s e i n Korea and
Malaysia and moderate r i s e w i t h f l u c t u a t i o n i n B r a z i l .
sector earnings generally tend t o decline because o f
Informal
over-crowd-
i n g and absence of any i n s t i t u t i o n a l mechanism t o compensate
Inflation.
Agriculture
incomes show a r i s e i n
for
countrieu
some
during adjustment period.
Ginneken says," The need t o reduce f i s c a l d e f i c i t s and t o meet
mounting
expenditure on i n t e r e s t and debt repayment
has
the government i n the countries undergoing s t r u c t u r a l
to
c u t back on c a p i t a l expenditure and expenditure on
forced
adjustment
subaidjes
10
and
s o c i a l expenditure."
The declined i n t h e share o f
social
s e c u r i t y expenditure has been p a r t i c u l a r l y sharp i n L a t i n
Ameri-
can countries and West Asia.
Morrison
the
working
programme
argues t h a t t h e decline i n t h e l i v i n g standard
classes associated w i t h t h e
has
structural
aggravated poverty l e v e l s p a r t i c u l a r l y
of
adjustment
i n urban
areas
as i n Morocco, Ecuador and C h i l a w h i l e i n t h e r u r a l
areas
11
the experience has been mixed.
Ashok
and
V.Desai. has c r i t i c a l l y evaluates
the
implementation
e f f e c t s o f s t r u c t u r a l reforms. He w r i t e s , "basic
reforms
wrong
in
structural
an economy must be based on an a n a l y s i s o f
w i t h t h e economy.
what
No such e x p l i c i t a n a l y s i s has
is
preceded
12
the c u r r e n t s e t o f reforms"
He argues f o r e f f e c t i v e
t i o n o f t h e government i n t h e economy.
government's
efficiency,
interven-
While s t r e s s i n g over
he argues t h a t t h e
government
can
the
be
improved- n o t by exhortation, b u t by a p p l i c a t i o n o f i n t e l l i g e n c e .
He f u r t h e r s t a t e s
effects,resource
instance,
balance
with
"We need t o t h i n k more deeply about
flows,
and
expectations.
That
is
t h a t import l i b e r a l i z a t i o n has a c t u a l l y
how,
improved
o f payments, reduction o f subsidies has been
less
incentive
i n f l a t i o n and removal of c a p i t a l issues
for
the
associated
control
has
13
i n t e n s i f i e d competition."
Explaining t h e d i f f e r e n t aspects o f government f u n c t i o n s
bringing
basically
s t r u c t u r a l reforms, Prof. Khusro says,
"The
in
programme
consist8 o f an e x h o r t a t i o n t o developing c o u n t r i e s
to
reduce governmental I n t e r v e n t i o n i n the economic s t r u c t u r e and t o
l e t p u b l i c e n t e r p r i s e s recede from t h e i r bureaucratic i n e f f i c i e n cy and loss-making p o s i t i o n s ; t o vacate most p u b l i c s e c t o r a c t i v i t y i n favour o f the p r i v a t e sector and e i t h e r t o p r i v a t i s e
l i n e s o f e n t e r p r i s e o r a l l o w new e n t e r p r i s e s t o take r o o t i n
private
sector; t o b r i n g about an atmosphere o f
through
free
many
the
competitiveness
entry o f p r i v a t e enterprises rather
than
a
non-
competitive
environment o f monopolies and oligopolies; t o
with-
draw the huge subeidies i n consumption, production and trade
allow
enterprises * t o be cost-conscious and
and
cost-effective;
to
eliminate the huge budget d e f i c i t s which are d i s t o r t o n i s t as w e l l
as the i n f l a t i o n a r y factors;
; t o abolish a large number o f
price
based on supply and demand; ; t o eliminate the numerous regulatory
and
licensing
into
systems which prevent a f r e e flow
of
channels demanded by market forces; t o allow
freely
investment
imports
or
export-
and t o replace import-subsituting measures w i t h
generating a c t i v i t i e s ; t o devalue the c ~ r r e n c i e swhere
to
adjust t h e i r exchange values i n l i n e w i t h
more
neceseary
market
condi-
tions; and generally, t o introduce a market economy i n place o f a
14
command
system"
He had given balanced an Impartial account
of
s t r u c t u r a l reforms f o r t h e i r p o e i t i v e achievements and c r i t i c i z e d
them f o r f a i l u r e i n some aspects.
He
and
decontrol can be undertaken more speedily.
restructuring
has
delicensing
also says t h a t the process o f deregulation,
started
A l l in all,
o f economic p o l i c y seems t o be i n good
well and promises t o more e t e a d i l y t o
hands.
make
for
the
It
a
r e s i l i e n t economy.
On
the process o f s t r u c t u r a l change, Simon Kuznets
writee,
"A sustained increase i n per c a p i t a o r per worker product i s met
o ften
accompanied
by an increase In popul a t i on, and
sweeping s t r u c t u r a l changes.
in
usual 1y
by
I n modern timea, there were changes
the i n d u s t r i a l s t r u c t u r e w i t h i n which product was turned
out
and resources employed away from a g r i c u l t u r e towarde non-agricul15
t u r a l a c t i v i t i e s , the proces8 o f industrialization."
He
nied
f u r t h e r opines t h a t the s t r u c t u r a l changes are
accompa-
by growth i n the scale o f f i r m s and changes i n the type
of
organization w i t h i n sectors such as manufacturing and trade, from
small
incorporated
f i r m s t o the large corporate u n i t
with
the
rapid s h i f t s i n i n d u s t r i a l s t r u c t u r e and r a p i d change i n technology.
Kuznets
Thus,
believed i n the f a c t
that
the
structural
reforms are always based on an analysis o f as t o what i s wrong i n
the economy.
Jagadish
Bhagwati expected good performance
reforms
in
India.
Finance
Minister,
He opines both the Prime
of
structural
Minister
who masterminded the reforms, the
and
the
reward
of
16
successful reform may be a place i n h i s t o r y .
While
ascertain-
i n g the consequences o f s t r u c t u r a l reforms, he says, "the reforms
require t h a t t h e i r r a t i o n a l e i n the context o f I n d i a ' s a f f e c t i o n s
and
aspirations,
legitimacy,
ment
and hence t h e i r
intellectual
land
political
be c l e a r l y and ceaselessly explained by the
.,...The
reforms under way are therefore p a r t o f
17
against poverty, not an agenda f o r growth i n i t s e l f . "
governthe
The s t r u c t u r a l adjustment programme's have praised by
war
Venka-
teswaran,
as i t seeks t o l i b e r a t e the economy from
licenses.
He h i g h l i g h t e d the gains t h a t the economy has
derived
from
reforms,
i n the
the
balance
such as the impressive
improvement
o f payments, r e s t o r a t i o n o f investors
14
control
confidence
and
large
flow
o f f o r e i g n c a p i t a l i n various forms and t h e steps taken
strengthen
produced
the
infrastructure.
encouraging
He w r i t e s ,
"The
r e s u l t s i n many d i r e c t i o n s .
to
reforms
have
In
last
the
f o u r years, t h e government o f I n d i a received about 20,000 proposals
from
He
I n d i a n entrepreneurs envisaging an investment
f u r t h e r favours t h a t , i n d u s t r i a l production
reforms has shown an encouraging trend.
of
Rs.
after
the
Trade l i b e r a l i z a t i o n and
a s h i f t t o a market determined exchange r a t e regime have
brought
about a s u b s t a n t i a l improvement i n the balance o f payments
posi-
tions.
While
a s s e r t i n g I n d i a ' s experience w i t h s t r u c t u r a l
adjust-
ment programme, Prof. Ratnakar dedamm says t h a t the reforms
'mixed
blessings'.
failure
level
in
As
the c e n t r a l i z e d planning
one way, but I n d i a ' s experience
was
with
a
were
total
unprecedented
o f f o r e i g n d i r e c t investment i n f l o w on t h e o t h e r hand
was
19
the
b r i g h t sides o f s t r u c t u r a l reforms.
that
He i s o f t h e
opinion
I n d i a should f o l l o w those contemporary p o l i c i e s which
nomic
super
,powers f o l l o w i f i t has t o break
the
eco-
shackles
of
incrementalism and emerge as developed nation.
P
r
. Kumar found t h a t t h e h i s t o r i c a l experience of t h e
coun-
t r i e s which have adopted t h e IMF-World Bank package o f s t r u c t u r a l
adjustment
Ecuador,
programme, showed t h a t the c o u n t r i e s
Chile
i.e.,
witness a f a l l , i n many cases q u i t e
Morocco,
significant
af!",
i n the standard o f l i v i n g l a r g e s e c t i o n o f t h e population, mostly
dad:
the
working
classes as a r e s u l t o f slowing down
opportunities,
4
: ment,
employment
increase i n open employment as well as
unemploy-
f a l l i n real,wages, withdrawal o f food subsidies, r i s e
in
of p u b l i c services, contraction o f s o c i a l expenditure
by
prices
the
of
government
and a decline i n c a p i t a l
expenditure.
On
the
whole,the burden of e t r u c t u r a l adjustment has f a l l e n more severely
on the urban as compared t o the r u r a l areas and on the
ganized
sectors
of
the
economy
as
compared
to
unor-
organized
20
sectors.
in
He predicted t h a t the s o c i a l cost o f economic
I n d i a would be going t o be heavy as happened i n
countries
undergoing
stabilization
and
many
structural
reforms
other
adjustment
programmes.
Bajpai argued t h a t s t r u c t u r a l reform programme
accompanying
e t a b i l i z a t i o n measures may n e i t h e r help t o achieve macro-stabilit y nor the r e s t o r a t i o n o f sustainable growth.
assumption
He argued t h a t t h e
reforms are guided by r u l e s o f thumb
and
underlying
general e q u i l i b r i u m model o f the economy f o r which these standard
r u l e s apply i s an u n r e a l i s t i c portrayal o f most o f the developing
countries.
The
model
hold good only
under
very
restrictive
resumptions, perhaps only f o r small economies and n o t l a r g e ones.
Besides
while
discipline,
the
it
i s important t o a t t a i n
and
maintain
fiscal
IMFs approach has prolonged t h e process and
21
tnvariably f a i l t o y i e l d the desired r e s u l t s .
Dr,Patibandla ascertained t h a t a market economy i s v i a b l e o n l y
when
there are c e r t a i n minimum e f f i c i e n t l y f u n c t i o n i n g s o c i a l ,
22
economic and l e g a l i n s t i t u t i o n s ,
Most o f t h e developed counri
,"
t r i e s including I n d i a do n o t s a t i s f y the condition.
Arrow-Debreu
general
equilibrium
under
markets
can
less
be e f f i c i e n t .
developed
market
This
model s p e c i f i e s t h e c o n d i t i o n
economies.
Most conditions are not
With pervasive market
which
applied
failure,
economy i n LDCs tend t o a low l e v e l o f e q u i l i b r i u m
may be exactly one o f the possible outcomes o f t h e
to
few
trap.
present
p o l i c y approach i n I n d i a .
seminar
A
issues
paper by Lucas which extensively
o f economic growth showed t h a t
discusses
economic
the
liberalization,
i n t e r n a l and external i n developing countries might c o n t r i b u t e t o
a
one-shot
gain i n terms o f improvements i n
efficiency i.e.,
the
prevailing
static
allocative
moving o f resources across sectors depending on
23
prices.
But economic l i b e r a l i z a t i o n i s n o t
consistent w i t h economic growth.
Prof.Soban found t h a t Bangladesh's reform programme
remain-
i n g i n deep c r i s i s because i t had over a decade f a i l e d t o
erate
growth,
domestic
process
d i v e r s i f y the economy, stimulate
savings
which
reductlon
and create the basis f o r
l e d t o a greater
i n mass poverty.
a
self-reliance
accel-
investment
sustained
and
What gains have been
and
growth
substantial
registered
the area o f improved foodgrain production, t h e surge i n
in
garments
exports, the r i s e i n remittances from workers overseas and
dyna-
mism and c r e a t i v i t y have been l a r g e l y t h e r e s u l t o f l o c a l i n i t i a 24
t i v e s aided by favorable market conditions.
The crops product i o n has been penalized by t h e desubsidisation p o l i c i e s .
Prof.Sachs
: economic
provides
reforms
countries.
some evidence o f p o s i t i v e
i n terms o f opening o f economy
effects
of
of
developing
He observed t h a t poor c o u n t r i e s tend t o grow
faster
than r i c h ones as long as t h e poor and r i c h c o u n t r i e s are
linked
to
trade.
He believes t h a t i f t h e growth r a t e o f I n d i a i s
pro-
j e c t e d a t 8 per cent, t h i s would r e s u l t i n r a l s i n g per c a p i t a GDP
by
2.4 times from $ 340 t o $ 800 by 2010 AD, and t h e
below t h e poverty l i n e would drop down t o 19 per
people
In
number
order
t o a t t a i n higher growth r a t e , h e suggested
such as t o p r i v a t i e e t h e p u b l i c
economic
reforms
socially
responsible manner, unshackle t h e p r i v a t e
of
26
cent.
to
adopt
sector
in
sector
a
from
s t a t e c o n t r o l , c l o s e down s i c k companies, t o reform labour l e g i s l a t i o n and opening o f t h e economy.
Prof.Diwan
is
not
trade
and Dr.Chakravarthy showed e m p i r i c a l l y t h a t
c o m p e t i t i v e i n i n t e r n a t i o n a l comparison and
f o r I n d i a degenerate i n t o c r e a t i n g more
debt,
India
hence
free
dependence
26
and e v e n t u a l l y a depressed economy.
Prof.Tay1or c i t e d t h e example o f Chile, Argentina, Mexico
Turkey
and
suggested t h a t any attempt by t h e a u t h o r i t y
not
and
to
intervene and t u r n a l l t h e d e c i s i o n making over t o t h e market can
b a c k f i r e f o r a v a r i e t y o f reasons n o t j u s t c o n f i n e t o t h e
o f economics.
sphere
He argued t h a t C h i l e was a success f o r l i b e r a l i z a -
t i o n on t h e b a s i s o f i t s r a p i d export-led growth s i n c e mid-1980s.
The country went through a very long t r a n s i t i o n towards t h e
market under a very tough m i l i t a r y government.
free
Despite t h e i r use
of
t h e best IMF medicine, they could n o t succeed i n s t a b i l i z i n g
27
i n f l a t i o n and output losses t i l l exports took o f f .
I n other
words
s t a b i l i z a t i o n a i d n o t come before adjustment.
Argent4 na
has been growing since 1991 a f t e r the reforms.
Prof.Sau argued t h a t e q u i l i b r i u m i s most l i k e l y t o be s t a b l e
if t h e i n t e r e s t e l a s t i c i t y o f f o r e i g n d i r e c t investment 18 h i g h
28
and t h a t o f f o r e i g n p o r t f o l i o investment i s low.
According t o
him,
the
experience o f I n d i a i n d i c a t e s
the
reverse
situation
which i m p l i e s the p o s s i b i l i t y o f i n s t a b i l i t y
Dr.Madhur
analyzed
Asian experience and argued
for
an
o r i e n t e d p o l i c y f o r a dynamic manufacturing export sector.
been a t r e n d towards decreasing government
has
out
There
intervention
t h e area o f t r a d e p o l i c y where e a r l i e r reformers l i k e Taiwan
Korea
of
had intervened q u i t e i n t e n s i v e l y .
economic
and
past experience o f t r a d e and exchange reforms i n
The
Asia
and
He found t h a t t h e
reforms was f a s t e r than t h a t o f Taiwan
in
pace
Korea.
developing
d i d n o t i n d i c a t e any unique p a t t e r n o f sequencing o f
trade
29
and
exchange
countries
reforms.
have
placed
He found t h a t , ASEAN and
more emphasis
on
South
liberalizing
Aeian
foreign
investment and other c a p i t a l flows than Korea and Taiwan
:
Prof.Bhatt examined t h e changes i n growth r a t e o f I n d i a i n p r e
Fnd
post
economic reforms, w i t h a regression model.
found
He
'$hat growth r a t e s i n some of t h e key s e c t o r s of t h e economy
'as
gross
:allied
,have
n a t i o n a l product, per c a p i t a income,
activities,
and domestic savings from
such
agriculture
corporate
r i s e i n post-reform p e r i o d whereas i t has f a l l e n
in
and
eector
other
30
sectors.
I n i n d u s t r i a l sector, he says, there i s a mixed
re-
sponse t o economic reform. However, i n external sector, there
is
s i g n i f i c a n t improvement i n the poet reform period.
0r.Ahluwalia
argued
that
total
factor
productivity
and
i n d u s t r i a l growth have turned around f o r good and a t t r i b u t e d them
31
to
the l i b e r a l i z a t i o n p o l i c y .
The low l e v e l o f
total
p r o d u c t i v i t y and output growth i n 1960s and 1970s was
to
supply side bottlenecks caused by import
cies,
factor
attributed
substitution
The p o l i c y i n t e r v e n t i o n i n the i n d u s t r i a l
poli-
sector,
which
s t a r t e d o f f w i t h some very dramatic p o s i t i v e r e s u l t s t u r n o u t
to
be a f a i l u r e .
Dr.Bajpai i n another paper argued t h a t any move towards dramatic l i b e r a l i z a t i o n needs t o be preceded by a successful
lization
programme.
A s t r u c t u r a l reform programme
stabi-
accompanying
r t a b i l i z a t i o n measures may n e i t h e r help t o achieve macro s t a b i l i ty
nor
bi f f e r e n t
varying
the r e s t o r a t i o n o f sustainable growth.
He
argues
that
economies w i t h d i f f e r e n t i n s t i t u t i o n a l r e l a t i o n s h i p and
lines
of causality i n t h e i r
economic
system
required
32
-d i f f e r e n t approach t o s t a b i l i z a t i o n and s t r u c t u r a l reforms.
9 ,
Nicholas
Kaldor,
a
noted economiet
from
Cambridge,
aressed
over the l i m i t a t i o n s o f the devaluation f o r balance
'&.&yments
adjustments.
He
opinea t h a t , a t y p i c a l
OJIyments problem t h a t devaluation cannot solve
balance
without
has
of
of
caueing
W t e hardship i e t h e severe i n f l a t i o n and d i s r u p t i o n s i n produc-
'won
resulting
from t h e chronic shortage
of
foreign
exchange
QCIsrracteristic o f countries pursuing s t r a t e g i e s o f import 8ubsti-
tution
mainly
by p r o t e c t i v e t a r i f f s .
According t o him,
The
"
i n t r o d u c t i o n o f a dual r a t e would confine general devaluations t o
'
those caees i n which, as a r e s u l t o f i n t e r n a l i n f l a t i o n , the c o s t
i
A
.
of
production o f a country's s t a p l e exports (whether
they
con-
s i s t e d o f cash crops, t r o p i c a l o r temperate f o o d s t u f f s , o r making
products),
had
got
seriously o u t of l i n e
with
world
prices,
expressed
i n terms o f l o c a l currency a t the p r e v a i l i n g r a t e
33
exchange. "
He a l s o says, " i t i s sometimes suggested t h a t
of
the
to
balance
of payments d i f f i c u l t i e s o f a country
are
due
external cause, such a sharp d e t e r i o r a t i o n i n t h e terms o f
from
rise
currency
in
the case o f some essential import
devaluation
auch
may aggravate the loss o f r e a l
making the d e t e r i o r a t i o n o f the terms o f trade even
if
trade
as
oil,
income
by
larger....
..
I t w i l l be found, however, t h a t such large overvaluations u s u a l l y
occur
only as a r e s u l t o f prolonged i n f l a t i o n , generally due
e t r u c t u r a l causes.
a
Consequently, devaluation could knot
l a s t i n g s o l u t i o n , since i t would n o t deal w i t h the
to
provide
underlying
34
f a c t o r s responsible f o r the external balances."
While
change
Rajat
the
Rate
Management system and devaluation i n
India,
With r i g i d i t y o f
Prof.
effects
recent exchange rage p o l i c i e s i n I n d i a i n terms o f
Jones-Corden ( 1 9 7 6 ) model.
Ex-
Liberalised
Acharya, examines the s h o r t run trade balance
tended
Pate
analyzing the recent trends o f t h e
of'
the
money
exwage
as t h e t a r g e t o f concurrent f i s c a l p o l i c y , a change i n
LERMSformula
$elatively
improves trade balance on1y i f non-tradable.
labour-intensive.
the
large
A devaluation might s t i l l f a i l
to
improve trade balance, on the other hand, i n presence o f imported
input.
of
The Jones-Corden c o n d i t i o n thus gets modified i n presence
imported
payment
I n h i s paper, he examined
and other macroeconomic e f f e c t s o f t h e
exchange
model
input.
the
balance
above
r a t e p o l i c i e s i n terms o f the two sector
developed by Findlay ( 1 9 7 3 ) , and Jone and
of
mentioned
structuralist
Corden
(1976).
He says t h a t , t h e move from dual t o u n i f i e d exchange r a t e
system,
an
important p o l i c y adopted i n I n d i a , may n o t have t h e
effects,
expected
namely b e t t e r export performance and a balance o f
pay-
ment improvement. k This can happen only i f exportable are
rela-
35
tively
capital
effects,
both
inflationary.
intensive.
the
Besides the
balance
exchange r a t e p o l i c i e s are
of
payment
observed
Also, the f i s c a l a u t h o r i t y must c a r e f u l l y
an accommodating f i s c a l p o l i c y t o avoid any unemployment
ing
to
the LERMS o r devaluation.
be
pursue
follow-
but t h i s may be i n c o n f l i c t
with
the o b j e c t i v e o f reducing budget d e f i c i t i n I n d i a when exportable
are r e l a t i v e l y labour intensive t h a t necessitates an expansionary
f i s c a l policy,
Unemployment may, therefore, be w e l l on the card.
There i s , thus, a large body o f l i t e r a t u r e on t h e
cal
and empirical aspect of s t r u c t u r a l adjustment programmes
developing countries i n c l u d i n g I n d i a .
rtructural
rocial
Majority o f studies
to
the people.
programme
Fchieved without pain.
do
The
n o t claim
proponents
that
The easing of p r i c e c o n t r o l 8
and
structural
adjustment
&he i n i t i a l stages, lead t o a eudden jump i n price.,
'hi
1T
of
in
found
reforms as detrimental t o s t a b l e economic growth
justice
adjustment
't,
theoreti-
would
be
might,
at
but
eventu-
a l l y , as p r i c e s e t t l e d t o new l e v e l s , i n f l a t i o n a r y preesure would
be
brought
rule
under control.The Fund-Bank p r e s c r i p t l o n e
does
o u t growing poverty, i n e q u a l i t y o r unemployment, but,
t h l s would be t h e p r i c e t o pay f o r past f o l l i e s
argue,
not
they
and
for
future prosperity.
This research
at
work analyses t h e progresr o f I n d i a n
the macro l e v e l from mdd-1991 t o 1996.
Here, we
economy
propose
to
concentrate t h e c o n t r i b u t i o n o f t h e s t r u c t u r a l adjustment reforms
i n promoting economic development o f I n d i a , p a r t i c u l a r l y
through
i n t e r n a t i o n a l trade. While examining t h e o v e r a l l economic
impor-
tance o f i n t e r n a t i o n a l trade, an attempt has been made t o
assess
b r i e f l y t h e r o l e o f devaluation, c o n v e r t i b i l i t y o f t h e rupee
f o r e i g n investment i n the context o f our newly emerging
and
economic
scenario.
The r o l e o f the Reserve Bank o f I n d i a , which i s t h e custodian
of
t h e o v e r a l l monetary management of I n d i a
has
also
been
evaluated.
I n t h i s research work we proceed on t h e assumption t h a t
government
tion,
#holly
has taken
licensing
i t s decisions on such issues
policy, industrial policy, trade
as
the
devalua-
policy
etc.,
on t h e basis o f t h e i r merits.
I n a d d i t i o n t o t h e c r i t e r i a which should be a p p l i e d when a
-$ecision on s t r u c t u r a l reforms have t o be taken, we s h a l l a l s o
.Y
I
discuss
some of t h e important s t r a t e g i e s t h a t should be
adopted
f o r maintaining and defending t h e e x t e r n a l value o f t h e rupee.
The
1996,
period
covered by t h e study i s between
1991
and
We have selected t h i s p e r i o d obviously because i t has been
t h e most c r u c i a l p e r i o d i n t h e growth o f t h e I n d i a n economy.
t h e years, before 1991, t h e pace o f economic programmes i n
For
India
had been very slow and then t h e country had t o i n t r o d u c e
reforms
intended
economy
Into
t o transform i t s inward-looking,
one
favouring f r e e markets.
control-bound
So i n 1991,
the
government
jntroduced a long discussed and widely desired l i b e r a l i z a t i o n and
deregulation
p o l i c i e s i n t h e I n d i a n economy.
Hence, t h e
period
I s very important and t h e developments d u r i n g t h e p e r i o d need
to
be thoroughly i n v e s t i g a t e d .
The
orisis.
Indian
The
economy Jn
1990-91
encountered
c r i s i s keenly f e l t i n t h e f o l l o w i n g
unprecedented
three
fields.
1 ) I n f l a t i o n a r y pressure.
2 ) Rapid increase i n e x t e r n a l debt, and
3 ) Acute balance of payments d i s e q u i l i b r i u m .
I t was,
6ltated
some
wonomic
qopted
indeed, t h e c a l l o f such economic s i t u a t i o n s
major and f a r reaching s t r u c t u r a l reforms
regime
a
to
overcome t h e c r i s i s .
So,
the
new s t r a t e g y o f s t r u c t u r a l adjustment t o
necesin
our
government
combat
* p i s i s i n t h e mid-1991 and t o promote econom'ic development.
the
This
distinctive
adjustment attempts t o e s t a b l i s h I n d i a n economy as a
system compared t o other countries o f t h e world.
The basic o b j e c t i v e o f the present study i s t o make a c r i t i cal
appreciation o f the decision of t h e government
structural
tune
adjustment
programme i n I n d i a during
in
adopting
mid-1991.
w i t h t h i s basic o b j e c t i v e , the s p e c i f i c objectdves
of
In
the
study are;
1. t o analyze the immediate e f f e c t s o f devaluation o f t h e
rupee i n 1991 on I n d i a ' s f o r e i g n trade.
2.
t o ass88 the impact o f New Foreign Trade P o l i c y on
f o r e i g n exchange reserves o f I n d i a .
3. t o analyze the impact o f s t r u c t u r a l adjustment
programmes on the balance o f payments p o s i t i o n of
I n d i a from 1991 t o 1996.
4.
t o analyze the IMF-World Bank economic 'packages
h e l p i n g t o s t a b i l i z e t h e external value o f the
rupee.
6 . t o examine the p o l i c i e s designed t o a t t r a c t Foreign
D i r e c t Investment and i t ' s magnitude i n the I n d i a n
economy.
6 , t o analyze t h e i m p l i c a t i o n s o f the s t r u c t u r a l
adjustment programmes on I n d i a ' s o v e r a l l economic devel
opment
.
I n a c h i e v i w t h e above said objectives, we have proposed t h e
following hypotheses,
1. "There i s a s i g n i f i c a n t p o s i t i v e r e l a t i o n s h i p between
t h e s t r u c t u r a l adjustment programme and the balance o f
payments p o s i t i o n o f I n d i a " .
2. " There i s a p o s i t i v e growth i n the f o r e i g n exchange
reserves o f I n d i a and increaue i n the external value
o f the rupee a f t e r the s t r u c t u r a l adjustment i n i t l a tion."
3 . " The c o n v e r t i b i l i t y o f the Indian rupee has reduced some
d i s t o r t i o n s associated w i t h f o r e i g n exchange."
4.
"Foreign d i r e c t investment has accelerated i n c e r t a i n
sectors o f the economy a f t e r the implementation o f
s t r u c t u r a l reforms."
METHODOLOOY :
t
I n the present study, the secondary data p e r t a i n i n g t o
~ c r o e c o n o m i cgoal variables and p o l i c y instruments are
tor
the I n d i a n economy f o r a period o f f i v e years
t891 and 1996.
both
utilized
between
The major variables included and analyzed i n
midthe
present study are ; imports, exports, f o r e i g n exchange
exchange
rate
reserves,
and f o r e i g n d i r e c t investment p e r t a i n i n g
to
the
I n d i a n economy du.ring the said period.
For empirical analysis, the ordinary l e a s t squares method of
estimation i s used i n f i t t i n g the relevant equations t o t h e basic
data.
The c r i t e r i a adopted i n judging the goodness o f
those
employed i n any q u a n t i t a t i v e exercise, namely, the
tudes o f t h e c o e f f i c i e n t o f m u l t i p l e determination, t h e
error
of
magnistandard
the estimate and the s t a t i s t i c a l s i g n i f i c a n c e
measured e f f e c t s of exogenous variables.
techniques
have
been
used.
The
are
fit
of
the
Most o f t h e time s e r i e s
chief
statistical
tech-
!niques/concepts used i n the present study are ; compound r a t e s o f
growth, indices, percentages and r a t i o s , c o r r e l a t i o n c o e f f i c i e n t s
and
elasticity
coefficients
derived
from
simple
econometric
;
functions.
problems
An appropriate care i s also taken t o keep econometric
and t h e i r adverse e f f e c t s on the r e s u l t 8 t o a
minimum.
{C
Despite
have
t h i s , the l i m i t a t i o n s and c o n s t r a i n t s o f
been sorted out c l e a r l y whenever they e x i s t
various
to
sorts
circumvent
1;
any r e s u l t a n t ambiguity and/or misunderstanding about t h e
J.tative
conclusions t h a t we reach about any o f t h e
variables,
quali-
macroeconomic
Furthermore, extensively graphs, r a t i o s o f
variables
r e w e l l as growth r a t e s o f d i f f e r e n t v a r i a b l e s t o apprai8e
their
>%%k
b h a v i o u r over a period o f time are used t o work o u t t h e implications
o f t h e s p e c i f i c type o f behaviour and even t o compare
$&amporal behaviour o f macroeconomic magnitudes.
'bPtf56
the
4
This research work i s based on the secondary data.
?,
Numerous
to
,eources o f data f o r f a c t u a l information owes t o i t s existence
the c o n t r i b u t i o n s made by a l a r g e number o f authors i n the
of
devaluation,
foreign trade, I M F
- World Bank,
field
monetary
and
f i s c a l p o l i c y etc. References t o these sources are made a t approp r i a t e places.
For
ii
on
c o l l e c t i n g the basic s t a t i s t i c s we have l a r g e l y
various publications o f the Reserve Bank o f
gurveys,
Economic
India,
and P o l i t i c a l Weekly, I n d i a Year
relied
Economic
Book
etc.,
Data has a l s o c o l l e c t e d from the publications o f non-governmental
agencies and the r e l a t e d research taken out by i n d i v i d u a l s .
Necessary
Business
India,
Economist
Oeccan
d
data are c o l l e c t e d from magazines, journals
etc.
The
and
Economist,
Monthly
leading d a i l i e s l i k e
Commentary,
The
like
Southern
Economic
Times,
Herald, The Hindu, Financial Express etc. Datae are
collected
from annual reports, special notes, conference
a180
papers
and various publications o f commercial bank
%
The
study
carries with it certain limitations
and
it
is
h c e s s a r y t o draw a t t e n t i o n t o these a t t h e outset.
t
-
since
the
research work i s c o n e t i t u t e d only
for
a
brief
w r i o d from mid-1991 t o 1996, several phenomena which are s l g n i f w a n t 1y
pecul i a r
t o the s t r u c t u r a l
adjustment
programmes
are
y>
,&nexplained.
And the study cannot claim t o be based upon detai l e d
4%
axam am in at ions
.A,
of
@arkets,
small
private
sector
individual
-scale
sectors
industries,
(like
banking,
transportation,
financial
public
industries, i n f r a s t r u c t u r e s e t c . ) which
or
can
regarded as adequate f o r suggesting concrete reforms i n a l l
be
such
cases.
The
k
work
basic aim o f t h i s research work i s t o present a
o f analysis t h a t could be used f o r f u r t h e r
frame-
enquiries.
The
Y
*bject o f t h i s etudy would be f u l f i l l e d i f an awarenee8 i s treated about the order o f the problems c f the Indian economy and
basic
enquiries/approaches
We
Light
t h a t need t o be
adopted
have divided the t h e s i s i n t o three p a r t s
chapters.
for
the
their
consisting
I n the f i r s t p a r t two chapters, i n
the
of
second
4
four and i n the l a s t p a r t two chapters are included.
-6-
I
The
study
begins
w i t h an examination
of
the
historical
background and the main features o f i n t e r n a t i o n a l trade of I n d i a .
?he
f i r s t introductory chapter deals w i t h the concept o f
Qural
adjuetment,
ecope, objectives,
hypothesis,
struc-
methodology,
mference period, sources of datas, the review of l i t e r a t u r e
and
$4mi t a t ions o f the study.
,*
The second chapter i s deeigned t o analyae t h e need t o
d r a e t i c step o f s t r u c t u r a l a d j u ~ t m n tprogramme
kr
adopt
durlnp
the
[year
This chapter a l s o p o i n t s out some o f
1991.
I
!pol icies/reforms
the
important
introduced f o r bath i n t e r n a l and external
sec-
(J t o r s o f the economy,
The
the
t h i r d chapter describes the causes f o r
devaluation
I n d i a n rupee and i t s immediate e f f e c t e on the
of
international
'trade o f I n d i a .
The
Cbslance
?he
fourth
chapter discusses the
performance
of
of payments a f t e r the s t r u c t u r a l adjustment
aspects
covered i n t h i s chapter are value
of
India,s
programmes.
exporte
and
lmports,and b r i e f l y , the d i r e c t i o n o f foreign trade o f I n d i a .
The
programme
this
f i f t h chapter examines the
post-structural
scenario o f f o r e i g n exchange reserves.
adjustment
Especially
chapter much concentration has been given f o r the
in
analysis
of the external value o f the rupee and the c o n v e r t i b i l i t y aspect.
The s i x t h chapter analyses the newly emerged Foreign
Direct
Znvestment regime i n r e l a t i o n t o s t r u c t u r a l adjustments o f I n d i a .
Here, an attempt has a l s o been made towards the c o n t r i b u t i o n s
of
the P o r t f o l i o Investments and NRIs on the I n d i a n economy.
The
seventh
chapter b r i e f l y reviews t h e
profile
of
I n d i a n economy since 1991 by covering the important aspecte
the
inflation,external
debt, external value o f
the
rupee
the
like
and
other major indices.
5 *',
The
l a s t chapter preeents t h e summary and conclusions
k
mme p o l i c y suggestions.
with
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