 It refers to loosening or removal of controls so that economic

development gets encouragement.

 It includes abolition of those economic policies, rules,

regulations, administrative controls and procedures which
impede economic development

 Economic liberalization is a new economy policy of

promoting market determined economic decisions rather
than bureaucratic arbitrary economic decisions
INDIA
 Reasons for liberalization
 Over the 1980s, government expenditure in India grew at a faster
rate than government revenues.

 The subsidies grew at a faster rate .

 Expenditure on subsidies rose from Rs.19.1 billion in 1980-81 to

Rs. 107.2 billion in 1990-91.

 Oil-shocks during the last decade.

 License raj

 Lack of foreign reserves .

 Gold reserve was empty.

 India was a closed economy before 1991.

 The government was close to default and its foreign exchange

reserves had reduced to the point that India could barely finance
three weeks’ worth of imports.

 The Government of India headed by Chandra Shekhar decided

to form several reforms that are collectively termed as
liberalisation in the Indian media with Man Mohan Singh whom
he appointed as a special economical advisor.
 Dr. Man Mohan Singh, a professional economist and an economic
administrator, was appointed Finance Minister. Man Mohan Singh is
undoubtedly the architect of the most far reaching reforms in India.
 Government economists such as Dr. Arvind Virmani took upon
themselves the task of clarifying the goals, objectives and methods of the
reform package along with:-
 C. Rangarajan,
 Montek Singh Ahluwalia,
 Shankar Acharya and
 Y. Venugopal Reddy.
 Effect of reforms
• The reforms brought changes in three broad areas, collectively known as
liberalization, privatization and globalization.

• Liberalization did away with regulatory hurdles and minimized licensing

requirements.

• Privatization reduced the role of the state and public sector in business.
• Globalization made it easier for the MNCs to operate in India.

• This policy was later continued by Prime minister P. V. Narasimha Rao,

and he was fully supported by his finance minister Manmohan Singh
and other officials such as C. Rangarajan, Montek Singh Ahluwalia,
Shankar Acharya and Y. Venugopal Reddy.
 India is one of the fastest growing economies in the world.
 India: Fourth largest economy in terms of Purchasing Power Parity
 Tenth most industrialized economy
 GDP growth rate of 8.1% - Second highest in the world.
 In Services’ sector, India was ranked as the 4th most attractive destination
(up from 14th place in 2002)
 BRIC Study of Goldman Sachs (2003) predicts that:
INDIA WILL EXCEED
 France’s GDP in 2020
 Germany’s in 2025
 Japan’s in 2035

TO BECOME THE 3RD LARGEST ECONOMY IN THE WORLD BY

2050
In order to speed up the process of clearing FDI proposals, the government
also set up Foreign Investment Promotion Board
India also signed the Convention of the Multilateral Investment
Guarantee Agency in order to provide protection to foreign investors
The government also liberalized imports by abolishing the import
approval system. Tariff rates since 1991 have been appreciably
lowered
CHINA
 During the 1930s, China developed a modern industrial sector,
which stimulated modest but significant economic growth.
Before the collapse of international trade that followed the
onset of the Great Depression
 The economy was heavily disrupted by the war against Japan
and the Chinese Civil War from 1937 to 1949, after which the
victorious Communists installed a planned economy
 The economy largely stagnated and was disrupted by the Great
Leap Forward famine which killed between 30 and 40 million
people
Economic reforms began after Deng Xiaoping and his
reformist allies ousted the Gang of Four Maoist faction.
By the time Deng took power, there was widespread
support among the elite for economic reforms. As de
facto leader,
Deng's policies faced opposition from party
conservatives but were extremely successful in
increasing the country's wealth.

PHASE 1 : 1978-1984
PHASE 2 : 1984-1993
PHASE 3 : 1993-2005
Deng's first reforms began in agriculture, a sector
long neglected by the Communist Party.
Decollectivizing agriculture and emphasizing the
Household-responsibility system, which divided the
land of the People's communes into private plots
A dual price system was introduced, in which state-
owned industries were allowed to sell any production
above the plan quota, and commodities were sold at
both plan and market prices
Controls on private businesses and government
intervention continued to decrease, and there was
small-scale privatization of state enterprises which
had become unviable
Reopening of Shanghai Stock Exchange closed by
Mao 40 years earlier
Inflation became problematic in 1985, 1988 and 1992
Privatizations began to accelerate after 1992, and the
private sector surpassed the state sector in share of
GDP for the first time in the mid-1990s
 In 1997 and 1998, large-scale privatization occurred, in which
all state enterprises, except a few large monopolies, were
liquidated and their assets sold to private investors
 Between 2001 and 2004, the number of state-owned enterprises
decreased by 48 percent
 reduced tariffs, trade barriers and regulations, reformed the
banking system, dismantled much of the Mao-era social
welfare system, forced the PLA to divest itself of military-run
businesses, reduced inflation, and joined the World Trade
Organization
 The domestic private sector first exceeded 50% of GDP in
2005 and has further expanded since
Source : http://en.wikipedia.org/wiki/File:Prc1952-2005gdp.gif
Adoption of egalitarian and populist policies
Subsidies and control over the health care sector
Hault to Privatization
The privileged state sector was the primary recipient of
government investment
 CHINA’S TRADE STATISTICS
China’s trade with the World
China’s Top Exports
China’s Top Imports
China’s Top Trade Partners
China’s Top Export Destinations
China’s Top Import Suppliers
Not Similar Economies
Institutional conditions
The financial sector
Rates of GDP growth
 INDIA CHINA
GDP
Nominal 2009 $1.367 trillion $4.99 trillion
PPP 2009 $3.862 trillion $9.05 trillion
GDP Growth
Rate 8.80% 9.10%
GDP Percapita
$ 1124 (142th) $ 3735
Nominal 2010 (97th)2009
$ 3176 (127th) $ 6778 (98th)
PPP 2010 2009

Source: wikipedia.org/wiki/Economyof_India
wikipedia.org/wiki/Economy_of_the_People's_Republic_of_Chin
a
 INDIA CHINA
GDP by Sector Service 57% 42.60%
Industry 28% 46.80%
Agriculture 15% 3.30%
Inflation (CPI) 8.62% 3.30%
Population
Below poverty
line 37% 2.80%
Labour Force 467 million 813.5 million
Unemployment 9.40% 4.20%
Ease of Doing
Business In
Rank 133rd 79th

Source: wikipedia.org/wiki/Economyof_India
wikipedia.org/wiki/Economy_of_the_People's_Republic_of_Chin
a
 INDIA CHINA

Exports $176.5 billion (18th; $1.2 trillion (1st; 2009)

2009)
Export goods software, petroleum electrical and other machinery, including data processing equipment,
products, textile apparel, textiles, iron and steel, optical and medical equipment
goods, gems and
jewelry, engineering
goods, chemicals,
leather manufactures
Main export partners US12.3%, UAE 9.4%, US 20.0%, Hong Kong 12.0%, Japan 8.3%, South Korea 4.6%, Germany
 China9.3% (2008) 4.3% (2009)
Imports $287.5 billion (15th; $1.01 trillion (2nd;
2009) 2009)
Import goods crude oil, machinery, electrical and other
gems, fertilizer, machinery, oil and
chemicals mineral fuels, optical
and medical equipment,
metal ores, plastics,
organic chemicals
Main import partners China11.1%, Saudi Japan 12.3%,Hong
Arabia 7.5%, US6.6 Kong 10.1%, South
%, UAE 5.1%, Iran 4 Korea 9.0%, US
.2%, Singapore4.2%,  7.7%, Taiwan
Germany 4.2% 6.8%, Germany
(2008)
5.6% (2009)

Source: wikipedia.org/wiki/Economyof_India
wikipedia.org/wiki/Economy_of_the_People's_Republic_of_Chin
a
The service sector has been growing rapidly over the
last decade and the trend is likely to continue. This
has become the main contributor to the GDP
India made the transition from an agricultural
economy to a service economy in 1979.In 1985, the
service sector accounted for 47 per cent of GDP
The share of service sector in the real GDP in India
has surpassed that of agriculture and industry at a
relatively faster pace as compared to other
industrialized
 
In India, the service sector contributes to more than
54 per cent of GDP while its GDP share in China is
much smaller (below 41 per cent in 2004)
 ‡China is just showing a gradual growth in the field
of service sector. ‡India will grow faster than China
by 2014
High savings curtails consumption
Reliance on investment expansion ‡increased growth
volatility
Diminishing returns
misallocation of capital ‡non-performing loans
 Lack of investment funds led to neglect of infrastructure
 High production costs ‡stunted manufacturing sector ‡will
eventually constrain the growth of high-tech centres IT and IT-
enabled services are skill-intensive, rather than labour-
intensive
 Jobless growth: rural unemployment and poverty
 Lack of progress in urbanization
 India seems to have a brighter future prospect compared to China
with a population that is growing younger and will continue to
supply young work force for a long time compared with the aging
 Chinese population, the result of the Chinese government planning
strategies and rapid rise in life expectancy of the Chinese people. 
 ‡‡By 2028 India is expected to be fifth largest consumer economy
due to sustained growth. ‡We can make India the super power
country of the world if we work together by making it a corruption
free country.
 Presented by:
Kritika sharma (gen92/55)
Anshul kaushal (ib/04)
Ashwini kumar (ib/05)
Devkant rath (ib/09)