Examine the impact of economic reforms on growth rate of GDP and FDI.

 India initiated economic reforms in 1991 with the aim of transforming its economy from a centrally planned system to a more market-oriented one. These reforms involved a range of measures such as liberalization, privatization, and globalization. The impact of these reforms on the growth rate of GDP and FDI in India is discussed below.

Impact on Growth Rate of GDP:

The economic reforms had a significant impact on the growth rate of GDP in India. The average growth rate of GDP in the pre-reform period (1980-1990) was around 5.6%, while the average growth rate in the post-reform period (1991-2021) was around 6.8%. This increase in growth rate can be attributed to several factors, including:

1. Liberalization of trade policies: One of the key aspects of the economic reforms was the liberalization of trade policies. This led to an increase in competition, which in turn led to greater efficiency in the economy. As a result, the manufacturing sector, which had been struggling in the pre-reform period, saw a significant increase in growth.
2. Privatization of public sector enterprises: The economic reforms also involved the privatization of public sector enterprises. This led to greater efficiency in the economy, as private sector enterprises are typically more efficient than public sector enterprises.
3. Increased foreign investment: The economic reforms also led to an increase in foreign investment in India. This provided the necessary capital for businesses to grow and expand, leading to an increase in the overall growth rate of the economy.
4. bb The economic reforms led to an increase in productivity in the economy. This was due to a combination of factors, including greater competition, better technology, and greater efficiency in the use of resources.

Impact on FDI:

The economic reforms also had a significant impact on FDI in India. The average FDI inflows in the pre-reform period (1980-1990) were around $201 million, while the average FDI inflows in the post-reform period (1991-2021) were around $29 billion. This increase in FDI inflows can be attributed to several factors, including:

1. Liberalization of investment policies: The economic reforms involved the liberalization of investment policies in India. This made it easier for foreign companies to invest in India, which in turn led to an increase in FDI inflows.
2. Privatization of public sector enterprises: The privatization of public sector enterprises also led to an increase in FDI inflows. This was because foreign companies were more likely to invest in private sector enterprises, which were seen as being more efficient and profitable.
3. Increased competition: The economic reforms led to an increase in competition in the Indian market. This made it more attractive for foreign companies to invest in India, as they could see the potential for growth and expansion.
4. Greater market access: The economic reforms also led to greater market access for foreign companies in India. This was due to the liberalization of trade policies, which led to a reduction in tariffs and other trade barriers.

Overall, the economic reforms in India had a significant impact on the growth rate of GDP and FDI. The liberalization of trade policies, privatization of public sector enterprises, and increased foreign investment all contributed to the growth of the Indian economy. However, there are still several challenges that need to be addressed, including the need for greater infrastructure and support services, and the need for more skilled workers. Additionally, there is a need for greater collaboration between the government and the private sector to support the growth and development of the Indian economy.

For PDF copy of Solved Assignment

Any University Assignment Solution

WhatsApp - 8409930081 (Paid)