IEPR M2

1. New economic policy

Aspect Description
Introduced Dr. Manmohan Singh, then Finance Minister, under the leadership of Prime
By Minister P.V. Narasimha Rao in July 1991.
- Severe balance of payments crisis.
- High fiscal deficit (8.4% of GDP in 1990-91).
Reason for
- Low foreign exchange reserves (enough for only 3 weeks of imports).
Introduction
- High inflation (~17%) and slow GDP growth (~1.1% in 1991).
- Iraq War
- Shift from state-controlled to market-driven economy.
- End of License Raj and reduction in trade restrictions.
Key
- Privatization of state-owned enterprises to improve efficiency.
Features
- Globalization through FDI and trade liberalization.
- Deregulation of industries to attract private investments.
- Stabilization – Control inflation, fiscal deficit, and improve foreign reserves.
- Structural Reforms – Encourage market-driven economic growth.
Objectives
- Integration with Global Economy – Increase foreign investments and trade
participation.
1. Liberalization – Removal of restrictions on industries, foreign trade, and
investments.
Reforms
2. Privatization – Reduced government ownership in PSUs, allowing private
Introduced
sector participation.
3. Globalization – Opened up the economy for foreign investments (FDI, FII).
- GDP Growth Accelerated – From ~1.1% (1991) to ~7-8% in later years.
- FDI Inflows Increased – India became a major investment destination.
Impact - Rise in Exports & Foreign Reserves – Strong integration with the global
economy.
- Growth of IT & Service Sector – Led to India's dominance in IT outsourcing.
- Widening Income Inequality – Growth benefited urban and corporate
sectors more than rural areas.
Criticism - Jobless Growth – Employment generation lagged behind economic growth.
- Agricultural Neglect – Farmers faced increased competition and price
volatility.

2. Scope of lpg reforms

Term Meaning
Reducing government control over industries, trade, and financial markets
Liberalization
to promote competition and efficiency.
Shifting ownership and control of industries from the public sector
Privatization
(government) to private companies to improve productivity.
Integrating the Indian economy with the world, allowing free trade, capital
Globalization
flow, and foreign investments.

Aspect Description
- Removal of industrial licensing (except in key sectors).
- Reduction in trade barriers (lower tariffs, import duties).
Liberalization
- Financial sector reforms (private & foreign banks allowed).
- Decontrol of foreign exchange & investment regulations.
 - Disinvestment in Public Sector Undertakings (PSUs) to improve
efficiency.
Privatization - Encouragement of private sector participation in key industries.
- Public-Private Partnerships (PPPs) in infrastructure, telecom, and energy
sectors.
- Integration with the world economy through trade and investment.
- Foreign Direct Investment (FDI) liberalization across multiple sectors.
Globalization
- Encouragement of Multinational Companies (MNCs) to set up businesses
in India.
- Industrial Sector – End of License Raj, rise of private players.
- Banking & Financial Sector – Entry of private & foreign banks, stock
Sectors
market reforms.
Impacted
- Agriculture – Opened up to global trade but lacked strong policy support.
- Services Sector – IT & outsourcing boom, making India a global hub.
- Boosted economic growth (GDP >7% in later years).
Employment &
- Created jobs in IT, telecom, and private sectors, but some industries
Growth
faced jobless growth.
Impact on - India's exports and foreign exchange reserves grew significantly.
Foreign Trade - Increased dependence on foreign investments and global trade cycles.

3. Impact of lpg reforms

Impact Area Positive Impact Negative Impact
Economic GDP growth increased from 1.1% Growth was unequal, benefiting urban &
Growth (1991) to 7%+ in later years. corporate sectors more than rural areas.
Industrial End of License Raj, rise in private Small-scale industries struggled due to
Development sector participation. foreign competition.
Foreign
Higher FDI inflows, MNCs set up Overdependence on foreign capital,
Investment
businesses in India. leading to market fluctuations.
(FDI & FII)
Employment IT, telecom, and private sectors Jobless growth in some sectors, with
Generation created new job opportunities. increasing contractual employment.
Banking &
Private & foreign banks improved Public sector banks faced increased
Financial
services & competition. competition and NPAs.
Reforms
Agriculture Farmers gained access to global Neglect of agriculture, leading to price
Sector markets & new technology. fluctuations & rural distress.
Services & India became a global IT Other sectors (manufacturing &
IT Boom outsourcing hub, boosting exports. agriculture) lagged behind.
Trade & Increased global trade Higher import dependency for critical
Exports partnerships & export growth. goods.
Income Economic growth improved urban Rural-urban divide increased, with rich
Inequality middle-class income. benefiting more.

4. Monetary policy committee

Aspect Description
Established 2016, under the Reserve Bank of India (RBI) through an amendment to the
In RBI Act, 1934.
To set India’s monetary policy, primarily to control inflation and ensure
Objective
economic stability.
 6 Members – 3 from RBI (Governor, Deputy Governor, & an Official) and 3
Composition
external experts appointed by the Government.
- Decides the Repo Rate, influencing interest rates across the economy.
Role &
- Inflation Targeting – Maintains 4% ± 2% inflation as per RBI’s mandate.
Functions
- Ensures price stability while supporting economic growth.
Meetings & - Meets bi-monthly (every two months) to review policy rates.
Decision - Decisions are taken by majority vote, with the RBI Governor having a
Making casting vote in case of a tie.

Highlight Outcome / Impact

Inflation Targeting
Maintains inflation at 4% (±2%), preventing excessive price volatility.
Framework
Transparent Decisions and reasoning are publicly available, increasing market
Monetary Policy confidence.
Stable Interest Rates Helps in reducing uncertainty for businesses and investors.
Balanced Growth
Ensures economic stability while supporting GDP growth.
Approach
Controlled Inflation Despite global inflationary pressures, India's CPI inflation remained
in Recent Years within RBI’s target range for most periods.
Response to Adjusted rates during COVID-19 and global slowdowns to stabilize
Economic Shocks the economy.

5. Tools of monetary policies ( qualitative and quantitative)

Tool Description Impact
Higher Repo Rate → Costlier Loans →
Rate at which RBI lends to Reduced Inflation
Repo Rate
banks. Lower Repo Rate → Cheaper Loans →
More Growth
Reverse Repo Rate at which RBI borrows from Higher Reverse Repo Rate → Banks park
Rate banks. money with RBI → Liquidity reduces
Cash Reserve % of total bank deposits that Higher CRR → Less money available for
Ratio (CRR) banks must keep with RBI. lending → Reduces inflation
% of net demand & time
Statutory
liabilities (NDTL) banks must Higher SLR → Limits bank lending →
Liquidity
invest in RBI-approved Controls inflation
Ratio (SLR)
securities.
Open Market Buying → Increases money supply
Buying & selling of government
Operations
securities by RBI. Selling → Reduces money supply
(OMO)
Rate at which RBI lends long- Higher Bank Rate → Costlier borrowing
Bank Rate
term funds to banks. → Lower inflation

Tool Description Impact

Margin RBI changes margin % for loans Higher Margin → Less Loan Amount
Requirements to control credit. Lower Margin → More Loan Amount
Moral RBI persuades banks to follow a Used to control speculation & excessive
Suasion particular policy. lending.
Selective
RBI restricts loans to speculative Prevents over-lending to sectors like
Credit
activities. stock market & real estate.
Control (SCC)
Credit RBI limits credit supply in certain Ensures priority sectors (agriculture,
Rationing sectors. MSMEs) get adequate credit.

6. Fiscal policies
Aspect Description
Fiscal policy refers to the government's use of taxation, public spending,
Definition
and borrowing to influence the economy.
- Economic Growth – Promote GDP growth through public investments.
- Inflation Control – Reduce excess demand by adjusting spending and
taxes.
Objective
- Employment Generation – Boost job creation via infrastructure projects.
- Income Redistribution – Reduce economic inequality through subsidies &
welfare programs.
- Expansionary Fiscal Policy – Increases government spending &
reduces taxes to boost growth (used during slowdowns).
Types of Fiscal
- Contractionary Fiscal Policy – Reduces government spending &
Policy
increases taxes to control inflation (used during overheating of the
economy).
Implemented By Government of India (Ministry of Finance) in coordination with RBI.

7. Tools of fiscal policies

Tool Description Impact
Adjusting income tax, corporate tax
Taxation (Direct & Higher taxes reduce demand,
(direct) & GST, customs duties
Indirect Taxes) lower taxes boost consumption.
(indirect) to regulate spending.
Spending on infrastructure, More spending stimulates
Government
education, defense, and welfare growth; less spending controls
Expenditure
schemes. inflation.
Helps finance projects but can
Public Borrowing Raising funds through bonds,
lead to fiscal deficit and debt
(Deficit Financing) treasury bills, and external loans.
burden.
Subsidies & Providing financial aid to agriculture, Supports lower-income groups but
Welfare Programs healthcare, fuel, and education. can strain government finances.
Government investing in industries,
Public Sector Boosts employment and economic
infrastructure, and national
Investments growth.
projects.
Government payments like pensions,
Increases disposable income and
Transfer Payments scholarships, and unemployment
supports social welfare.
benefits.
Selling stakes in Public Sector
Disinvestment & Raises funds but reduces
Undertakings (PSUs) to generate
Privatization government control in key sectors.
revenue.
Fiscal Deficit Controlling the gap between Prevents excessive borrowing and
Management government expenditure & revenue. inflation.

8. Union budget
Aspect Description
The Union Budget is the annual financial statement of the Government of India,
Definition detailing revenue and expenditure for the upcoming fiscal year. It is presented by
the Finance Minister in Parliament.
Legal Article 112 of the Indian Constitution mandates the government to present the
Basis Annual Financial Statement (Budget).
Prepared The Ministry of Finance, with inputs from various ministries and government
By departments.
Presented
Finance Minister in Lok Sabha (usually on 1st February every year).
By
- Presented in Parliament.
Approval
- Discussed & voted on by both Houses of Parliament.
Process
- Approved by President of India before implementation.
Time
Period 1st April – 31st March (Fiscal Year of India).
Covered
- Economic Stability – Manage inflation & growth.
- Resource Allocation – Fund essential sectors (infrastructure, health, defense).
Objectives - Welfare & Development – Introduce schemes for social and economic growth.
- Revenue & Deficit Management – Ensure sustainable borrowing and
expenditure.

9. Classification of union budget

Category Description
Deals with government receipts and expenditures. It consists of:
- Revenue Receipts (tax & non-tax income).
Revenue Budget
- Revenue Expenditure (day-to-day operational expenses like salaries,
subsidies, and interest payments).
Deals with capital receipts and capital expenditures. It includes:
- Capital Receipts (borrowings, loans, disinvestments).
Capital Budget
- Capital Expenditure (infrastructure, asset creation, and development
projects).
Balanced When government revenue = government expenditure, ensuring no deficit
Budget or surplus.
When government revenue > expenditure, leading to savings (used in
Surplus Budget
economic boom periods).
When government expenditure > revenue, requiring borrowing to meet
Deficit Budget
expenses (common in developing countries like India).
Zero-Based Every government department justifies all expenditures from scratch,
Budgeting (ZBB) avoiding unnecessary spending.
Outcome-Based Budget allocation based on expected outcomes, ensuring funds are used
Budgeting efficiently for impact-driven results.

10. Union interim budget 2024 to 2025

Aspect Description
An Interim Budget is a temporary budget presented when a full budget
Definition
cannot be introduced, usually before general elections.
Presented By Finance Minister Nirmala Sitharaman on 1st February 2024.
- Ensures government spending continues until the next elected
Purpose government presents a full budget.
- Covers essential expenditures but avoids major policy changes.
- No new tax changes; existing tax structure continues.
Key
- Capital expenditure allocation increased to boost infrastructure
Announcements
development.
 - Social sector & welfare schemes funding maintained.
- Fiscal deficit target lowered for economic stability.
Valid from April 2024 – July 2024 (until the new government presents the
Duration
full Union Budget).

11. Importance of union budget

a. Economic Planning & Growth – Guides India’s economic direction and ensures
balanced development.
b. Revenue & Expenditure Management – Allocates funds for infrastructure, defense,
healthcare, education, and welfare.
c. Inflation & Deficit Control – Manages tax rates, subsidies, and public spending to
control inflation and fiscal deficit.
d. Investment & Employment Generation – Provides tax cuts, incentives, and public
projects to boost job creation and entrepreneurship.
e. Social Welfare & Inclusivity – Supports MGNREGA, PM-KISAN, Ayushman Bharat
for economic equity and poverty reduction.
f. Foreign Investment & Trade – Promotes FDI, trade incentives, and ease of doing
business reforms to attract investors.
g. Sectoral Growth & Reforms – Strengthens agriculture, industry, digital economy,
and startups through policy support.
h. Transparency & Accountability – Ensures efficient public spending and economic
policy clarity.
12. Industrial policies of india
Policy Year Key Features Impact
- Laid the foundation for state-
- First policy after independence.
led industrialization.
Industrial
- Encouraged private
Policy - Established India as a mixed
1948 participation but with
Resolution economy (Public + Private sector).
restrictions.
(IPR) 1948
- Government control over strategic
industries (railways, defense, steel,
atomic energy).
- Strengthened public sector;
- Expanded PSUs (Public
divided industries into three
Sector Undertakings).
categories:
Industrial 1. Exclusively state-controlled - Restricted private sector
Policy (defense, railways, heavy machinery). expansion in key industries.
1956
Resolution 2. Public-private collaboration
(IPR) 1956 (steel, aviation, telecom).
3. Private sector with government
regulation (consumer goods,
textiles).
- Focused on small-scale industries - Boosted small businesses &
(SSI) and rural enterprises. rural employment.
- Limited big industries to reduce - Limited large-scale private
Industrial
1977 monopolies. sector growth.
Policy 1977
- Introduced district industrial
centers (DICs) to promote local
industries.
 - Encouraged large-scale industries - Increased industrial
& foreign technology collaboration. productivity & exports.
- Some economic
Industrial - Focused on export-oriented
1980 liberalization started before
Policy 1980 industries.
1991.
- Introduced measures to improve
industrial efficiency.
- Liberalization, Privatization & - Rapid economic growth &
Globalization (LPG) reforms). foreign investments increased.
New - Abolished License Raj, allowing - IT & service sectors expanded
Industrial private sector expansion. significantly.
1991
Policy (NIP) - Opened up Foreign Direct - Some PSUs suffered
1991 Investment (FDI). inefficiencies & job losses.
- Disinvestment of PSUs (reducing
government ownership in industries).
- Boosted domestic manufacturing - Strengthened manufacturing
& foreign investments. & export sector.
- Focused on 25 key sectors
Make in - Created jobs in production &
2014 (defense, textiles, electronics,
India infrastructure.
automobiles, etc.).
- FDI limits increased in major
industries.
- Financial incentives for - Encouraged domestic
Production-
manufacturers in key industries production & reduced
Linked
2020 (electronics, pharma, auto, telecom). dependency on imports.
Incentive
- Aimed at reducing imports & - Increased investments in
(PLI) Scheme
boosting exports. high-tech sectors.
- Encouraged entrepreneurship & - Boosted startup ecosystem,
innovation. increasing job opportunities.
Startup
2016 - Provided tax benefits, funding
India - Helped India become a global
support, and easier business
hub for innovation.
regulations.

13. Land reforms

Aspect Description
Land reforms refer to government policies aimed at redistributing land
Definition ownership, improving agricultural productivity, and ensuring social
justice.
- Eliminate feudal land systems and ensure land-to-the-tiller.

Objective - Reduce land inequality and promote fair distribution.

- Increase agricultural productivity by providing secure land rights.

Implemented Post-Independence (1950s onwards), led by state governments under
During Five-Year Plans.

System Introduced By Description Impact

Lord Cornwallis Zamindars (landowners) Farmers were exploited
Zamindari (1793) – Bengal, collected taxes from farmers with high taxes and no
System Bihar, Odisha, UP, and paid a fixed revenue to land ownership. Led to
Tamil Nadu the British government. rural poverty and debt.
 Thomas Munro Farmers (ryots) paid taxes Gave farmers ownership
Ryotwari (1820s) – Madras, directly to the British rights but imposed high
System Bombay, Assam, government without taxes that led to
Karnataka middlemen. indebtedness.
Holt Mackenzie Villages (Mahals) collectively
Burden on village leaders
Mahalwari (1822) – Punjab, paid taxes; revenue was
who had to collect taxes,
System Haryana, MP, UP, assessed based on land
leading to exploitation.
Rajasthan fertility.

Measure Description Impact

1. Abolition of Removed landlords (zamindars) as
Ended feudal landownership,
Zamindari intermediaries, giving land directly to
benefiting small farmers.
System cultivators.
Set a limit on landholdings, Reduced land concentration but
2. Land Ceiling
redistributing excess land to the weak implementation in some
Act
landless. states.
3. Tenancy Gave legal rights and protection to Provided security from eviction
Reforms tenant farmers. and fair rent policies.
4. Consolidation Merging small fragmented land pieces Improved productivity and
of Landholdings into larger farms for better efficiency. reduced land wastage.
5. Bhoodan & Led by Vinoba Bhave, encouraging
Helped landless peasants gain
Gramdan voluntary land donations for
land ownership.
Movements redistribution.
6. Cooperative Encouraged group farming for better Increased agricultural output and
Farming efficiency and resource-sharing. rural cooperation.
Improved land ownership
7. Land Records Digitization of land records to reduce
transparency and reduced illegal
Modernization disputes and corruption.
land grabbing.
8. Forest Rights Recognized land rights of tribal Protected indigenous rights and
Act (2006) communities living in forest areas. prevented displacement.

14. Objectives of land reforms

Objective Description
1. Abolition of Zamindari
Eliminate landlordism and give direct ownership to cultivators.
System
Ensure fair land distribution by setting a ceiling on
2. Redistribution of Land
landholdings.
3. Protection of Tenants Secure legal rights for tenant farmers to prevent exploitation.
4. Consolidation of Merge fragmented lands for efficient farming and better
Landholdings productivity.
5. Increase Agricultural Provide farmers with secure land rights to encourage long-term
Productivity investment in agriculture.
6. Promote Social Equity Reduce wealth disparity by ensuring equitable access to land.
7. Modernization of Land Digitize land records to prevent fraud, reduce disputes, and
Records improve transparency.
8. Empowerment of Tribal
Recognize land rights of indigenous and forest-dwelling
& Marginalized
communities.
Communities

15. Drawbacks of land reforms

Drawback Description
Land reforms were poorly executed in many states due to lack of
1. Weak Implementation
political will and legal loopholes.
2. Land Ceiling Laws Were Many landlords transferred land to family members to escape
Avoided redistribution.
Delays and manipulation in land redistribution due to
3. Bureaucratic Corruption
inefficiencies and corruption.
4. Lack of Awareness Many small farmers were unaware of their land rights and failed
Among Farmers to claim benefits.
5. Fragmentation of Even after consolidation efforts, land remained divided into
Landholdings smaller, uneconomical plots.
6. Incomplete Tenancy While laws existed, tenant farmers still faced evictions and
Reforms unfair rents in many states.
7. Agricultural Productivity Lack of irrigation, modern equipment, and support led to low
Challenges farm productivity despite land reforms.
8. Slow Digitization of Many states have outdated land records, leading to legal
Land Records disputes and ownership issues.

16. Tax reforms

Aspect Description
Tax reforms refer to changes in tax policies and structures to make
Definition
taxation simpler, fairer, and more efficient for economic growth.
- Increase government revenue without burdening taxpayers.
- Simplify the tax system and reduce evasion.
Objective
- Promote investment and business growth.
- Ensure equitable taxation for all income groups.
Types of Taxes - Direct Taxes: Income Tax, Corporate Tax, Capital Gains Tax.
Reformed - Indirect Taxes: GST (earlier Excise Duty, VAT, Service Tax).
- GST simplified the tax structure and increased compliance.
Impact of Tax
- Lower corporate tax rates made India attractive for investment.
Reforms
- Faceless tax assessments reduced corruption and harassment.
- GST implementation issues (frequent changes, compliance burdens).
Challenges - Tax evasion & loopholes still exist.
- Need for further simplification of direct taxes.

Reform Year Description Impact

Goods and
Unified multiple indirect taxes into a Simplified tax structure;
Services Tax 2017
single nationwide tax. increased compliance.
(GST)
Corporate Tax Lowered corporate tax rate from 30% Boosted investment; enhanced
2019
Reduction to 22% for domestic companies. global competitiveness.
Introduced anonymous and online
Faceless Tax Increased transparency;
2020 tax assessment to reduce discretion
Assessment reduced taxpayer harassment.
and corruption.
Encouraged startup
Abolition of Removed tax on investments above fair
2024 investments; reduced funding
Angel Tax market value in startups.
hurdles.
- Short-Term Capital Gains (STCG)
2024
tax increased from 15% to 20%.
 - Long-Term Capital Gains (LTCG)
Rationalization Aimed to reduce speculative
tax increased from 10% to 12.5%;
of Capital trading; increased tax
exemption limit raised from ₹1 lakh to
Gains Tax revenue.
₹1.25 lakh.
- No tax on income up to ₹12 lakh.
Revised - Standard deduction increased to Increased disposable income
Income Tax 2025 ₹75,000. for middle-class; simplified tax
Slabs - New tax rates for higher income structure.
brackets.
Reduction in
Lowered STT on equity derivatives to Reduced transaction costs;
Securities
2024 0.1% for options and 0.02% for encouraged market
Transaction
futures. participation.
Tax (STT)
Introduction of
Proposed to simplify tax laws and Aims for a more transparent
New Income 2025
reduce compliance burden. and taxpayer-friendly system.
Tax Bill

17. Financial reforms

Aspect Description
Financial reforms refer to changes in policies and regulations to improve the
Definition
efficiency, stability, and inclusiveness of the financial system.
- Promote Financial Inclusion – Expand banking and credit access.
- Increase Efficiency – Reduce bureaucratic delays in financial services.
- Strengthen Banking & Capital Markets – Ensure stable and secure financial
Objective
institutions.
- Enhance Transparency & Digitalization – Reduce fraud and improve service
delivery.
1. Banking Sector Reforms (1991) – Allowed private & foreign banks; reduced
government control over interest rates.
2. Capital Market Reforms (1992) – Established SEBI (Securities and
Exchange Board of India) to regulate stock markets.
Key 3. Insurance Sector Reforms (1999) – Allowed private & foreign investment in
Financial the insurance sector.
Reforms in 4. Financial Inclusion Programs (2000s-Present) – Jan Dhan Yojana, UPI,
India Digital Payments to expand banking access.
5. Insolvency and Bankruptcy Code (IBC) (2016) – Streamlined debt recovery
and corporate bankruptcy resolution.
6. Digital Finance & Fintech Growth (2018-Present) – Boosted digital
transactions, UPI, and mobile banking.
- RBI’s Digital Rupee (CBDC) (2022) – Introduction of Central Bank Digital
Currency for secure digital transactions.
Recent
- Merger of Public Sector Banks (2019-2020) – Consolidated banks to
Financial
strengthen financial stability.
Reforms
- Privatization of PSUs (Ongoing) – Reducing government stake in public sector
banks and financial institutions.
- Increased banking penetration in rural areas.
Impact of
- Strengthened stock markets and investor confidence.
Financial
- Boosted digital transactions & financial technology (FinTech) growth.
Reforms
- Improved ease of doing business through better credit and banking services.
Challenges - High NPAs (Non-Performing Assets) in public sector banks.
 - Financial scams & frauds affecting investor trust.
- Digital divide affecting rural financial inclusion.

18. Reforms in banking sector

Aspect Description
Banking sector reforms refer to structural and policy changes to improve the
Definition
efficiency, stability, and accessibility of banks.
- Ensure financial stability and reduce Non-Performing Assets (NPAs).
- Increase competition by allowing private & foreign banks.
Objective
- Enhance financial inclusion and credit accessibility.
- Strengthen banking supervision & regulations.
1. 1991 Narasimham Committee Reforms – Allowed private & foreign banks,
introduced capital adequacy norms.
2. Banking Regulation Act Amendment (2016) – Empowered RBI to act
against NPAs.
Key Banking 3. Merger of Public Sector Banks (2019-20) – Consolidated banks for better
Reforms efficiency & capital strength.
4. Introduction of Basel Norms – Strengthened risk management & capital
requirements.
5. Digital Banking Growth – Expanded UPI, mobile banking & fintech
partnerships.
- Privatization of Public Sector Banks (PSBs) – Govt reducing stakes in select
PSBs to boost efficiency.
Recent
- Central Bank Digital Currency (CBDC) (2022) – Digital Rupee introduced by
Banking
RBI for secure transactions.
Reforms
- New NPA Resolution Framework (2023) – Focus on fast-track recovery of
bad loans.
Impact of - Improved credit availability for businesses & individuals.
Banking - Digital banking & fintech boom enhanced financial access.
Reforms - Strengthened bank balance sheets but NPAs remain a concern.

19. Reforms in foreign exchange market

Aspect Description

Foreign exchange (forex) market reforms involve policy changes to improve

Definition
currency stability, ease of forex transactions, and global trade participation.

- Ensure currency stability & avoid forex crises.

Objective
- Facilitate smooth international trade & capital flows.
- Strengthen India’s forex reserves for economic stability.
1. Liberalized Exchange Rate Management System (LERMS) (1992) – Allowed
market-based exchange rates.
2. Current Account Convertibility (1994) – Allowed free currency transactions
Key Forex
for trade & remittances.
Market
3. FEMA Act (1999) – Replaced FERA, making forex regulations more business-
Reforms
friendly.
4. Capital Account Liberalization (2000s-Present) – Gradual easing of FDI, FII,
and overseas investments.
- Increased FDI limits in various sectors to attract investments.
 - Promotion of INR in global trade (2023) – Efforts to reduce dependency on USD
Recent
in international transactions.
Forex
- Boosting forex reserves (2023-24) – RBI intervening in forex markets to stabilize
Reforms
the rupee.
Impact of - Strengthened forex reserves ($600B+ in 2024).
Forex - Improved stability of the Indian Rupee.
Reforms - Facilitated higher global trade & investment inflows.

20. FDI
Aspect Description
Foreign Direct Investment (FDI) refers to investment by foreign entities in
Definition of
Indian businesses, either by setting up operations or acquiring
FDI
ownership/control in a company.
- Boosts Economic Growth – Brings in capital and creates jobs.
Why FDI?
- Technology Transfer – Helps in modernizing industries.
(Importance of
FDI) - Strengthens Forex Reserves – Increases India's foreign exchange inflows.
- Global Market Access – Improves India's integration into global trade.
- Greenfield Investment – Foreign company sets up new operations (e.g.,
Tesla setting up a factory in India).
- Brownfield Investment – Foreign company acquires or merges with an
existing business (e.g., Walmart acquiring Flipkart).
Types of FDI
- Horizontal FDI – Investment in the same industry as the investor’s home
country (e.g., Apple opening stores in India).
- Vertical FDI – Investment in a different stage of production (e.g., a US auto
company investing in an Indian parts supplier).
FDI in India - FDI inflows (2023-24): $85 billion (one of the highest globally).
(Recent - Top Sectors: Services, IT, Telecom, Auto, Pharma, Infrastructure.
Trends) - Top Investors: Singapore, USA, Mauritius, UAE, Japan.
- Automatic Route – No government approval needed (e.g., IT, manufacturing).
- Government Route – Requires approval for sensitive sectors (e.g., defense,
telecom).
FDI Policies &
- Increased FDI Limits – Raised in insurance (74%), defense (74%), telecom
Reforms
(100%).
- Production-Linked Incentive (PLI) Scheme – Attracts FDI in
manufacturing.
- Bureaucratic Delays – Complex approval process for some sectors.
Challenges in - Regulatory Uncertainty – Frequent policy changes affecting investor
FDI confidence.
- Infrastructure Gaps – Need for better logistics and industrial zones.
- Boosted IT & Startups – Google, Amazon, and Facebook investing in India.
Impact of FDI - Manufacturing Growth – Apple, Samsung setting up factories under Make in
in India India.
- Employment Generation – Millions of jobs created across sectors.

21. New education policies and its principles

Aspect Description
The Government of India, Ministry of Human Resource Development
Introduced By
(now Ministry of Education) in July 2020.
 - To provide universal access to quality education.

Objective - Shift from rote learning to conceptual and skill-based education.

- Strengthen multidisciplinary learning.

- Improve equity, inclusivity, and access to education for all.

- New 5+3+3+4 Structure (instead of 10+2) covering ages 3-18.
- Early Childhood Care & Education (ECCE) integrated into the system.
- Multilingualism & Mother Tongue as a medium of instruction up to
Key Features (School Grade 5.
Education) - Holistic, Experiential & Skill-Based Learning replacing traditional
rote methods.
- Technology & Digital Integration (E-learning, AI-based tools, online
assessments).
- Multidisciplinary Approach – No strict separation between arts,
science, commerce.
- Flexible Degree Options – Multiple Entry-Exit System in college
Key Features (Higher
education.
Education)
- National Research Foundation (NRF) to boost research & innovation.
- Regulatory Reforms – Single higher education regulator HECI (Higher
Education Commission of India).
- Vocational Training from Class 6 onwards (internships, skill-
Vocational
building).
Education & Skill
- Integration of Coding, AI, Data Science, and Digital Literacy in
Development
school curricula.
- 4-Year Integrated B.Ed. Program for teacher qualification.
Teacher Reforms &
- Focus on continuous professional development & incentives for rural
Training
teachers.
- Board Exams Redesigned – Focus on concepts & skills rather than
Assessment & memorization.
Examinations - Introduction of Adaptive Assessments (PARAKH – National
Assessment Center).
Technology & Digital - Expansion of Online & Hybrid Learning models.
Learning - Use of AI & Digital Infrastructure for education.
- Focus on economically disadvantaged groups (SEDGs).
Equity & Inclusion
- Scholarships & financial aid for marginalized communities.
Implementation & - Aim to increase public investment in education to 6% of GDP.
Financing - Strengthening public-private partnerships (PPP) in education.
- Increased flexibility, practical learning, and digital adoption.
Impact & Challenges - Challenges in rural infrastructure & teacher training.
- Need for effective execution across states.

22. Atmanirbhar bharat

Aspect Description
Launched By Prime Minister Narendra Modi on 12th May 2020.
- Make India self-reliant by boosting domestic manufacturing and
Objective reducing import dependency.
- Strengthen MSMEs, startups, and rural industries.
 - Encourage local production & global competitiveness.

- Vocal for Local – Promote indigenous products and industries.

- Production-Linked Incentive (PLI) Scheme – Incentives for
electronics, pharma, auto, and other sectors to increase domestic
production.
Key Features
- Infrastructure Development – Major investment in roads, railways,
digital infrastructure, and defense.
- Ease of Doing Business Reforms – Simplified regulations for business
setup, taxation, and compliance.
- Economy – Transition from incremental growth to quantum leap
growth.
Five Pillars of - Infrastructure – World-class infrastructure to improve efficiency.
Atmanirbhar Bharat - Technology-Driven Systems – Digital India expansion.
- Vibrant Demography – Utilizing India's large youth workforce.
- Demand & Supply Chain – Strengthening domestic markets.
- Manufacturing & MSMEs – Financial aid for small businesses.
Sectors Benefiting - Defense – Increased indigenous defense equipment production.
from Atmanirbhar - Agriculture – Farm reforms, better MSP, and improved supply chains.
Bharat - Startups & Digital Economy – Govt support for AI, fintech, and e-
commerce.
- Make in India – Encourage local production & foreign investment.
Key Government
- Startup India – Promote innovation and entrepreneurship.
Schemes Under
- PM Mudra Yojana – Easy credit access for small businesses.
Atmanirbhar Bharat
- PLI Scheme – Incentives for companies producing in India.
- ₹20 lakh crore economic stimulus package to revive post-pandemic
economy.
Recent Initiatives - Boost in semiconductor & electronic manufacturing (FDI in
(2023-24) chipmaking units).
- Encouraging rupee trade & global market expansion for Indian
businesses.
- Dependence on imports still high in critical sectors (electronics,
Challenges & defense).
Criticism - Slow infrastructure execution in some regions.
- Need for stronger innovation & R&D ecosystem.