Question

Explain the main objectives and impacts of trade and investment policy reforms of 1991 in India.

Hint:

State the objectives of the 1991 reforms (competitiveness, foreign investment and technology, efficiency). Then give the impacts: exports rose, prices stayed controlled, imports raised competition.

Answer 1

Step 1: Understand what the question asks:
The question wants two things about the 1991 trade and investment policy reforms: the main objectives and the impacts.
These reforms were part of the New Economic Policy of 1991, which began after the balance of payments crisis.

Step 2: State the objectives:
Objective 1: make Indian industry more efficient and able to compete with the world, so that firms modernise.
Objective 2: attract foreign investment and modern technology into India.
Objective 3: free trade and industry from heavy control, so the economy becomes more open and market based.
To do this the government removed import licensing, cut tariffs, ended most industrial licensing and allowed higher foreign investment.

Step 3: State the impacts on exports and prices:
Exports grew in areas such as pharmaceuticals, engineering goods, IT services, textiles and auto parts.
Rising prices were kept under control, because more goods and cheaper imports were available in the market.

Step 4: State the impact on domestic industry:
Imports increased after tariffs and quotas were reduced.
This brought more competition for domestic industries, which had to improve quality and cost to survive.

Final Answer:
The reforms aimed to raise competitiveness, bring in foreign investment and technology, and improve industrial efficiency. They raised exports and kept prices under control, but stronger imports increased competition for domestic firms.