now let's talk about some of India's key
economic reforms many of which started
in the early 1990s for the most part
these reforms liberalized markets and
helped India grow one part of these
reforms included a significant cut in
tariffs so for instance at the time of
1991 to 1992 the average tariff rate was
over seventy two percent that's quite
high by the time the mid-90s roll around
that rate has gone down to about twenty
four percent there's also an economic
concept called the effective rate of
protection which has to do with how much
tariffs really matter and from the
period 1962 1985 this rate was
remarkably high when Indians tried to
buy intermediate inputs to help their
businesses the rate during that period
averaged about a hundred and forty seven
percent and of course that's a
considerable disincentive to starting or
expanding an enterprise during this time
it also became much easier to spend
foreign exchange on inputs although note
some of those reforms had already been
started in the 1980s the whole idea of
made in India as an explicit goal of
economic policy very much moved to the
background India was moving to freer
trade and it was becoming a closer and
more integrated part of the global
economy also with respect to foreign
investment the Indian reformers also
dismantled a lot of the country's
earlier industrial policy so before the
early 1990s eighteen industries were
considered more or less the salt
province of the public sector and a lot
of those industries were quite important
including iron and steel heavy plant and
machinery telecom minerals oil mining
air transportation electricity and
insurance by the time the reforms were
over there were pretty much just three
sectors left which were then considered
the more or less sole province for
public activity and those had to do with
defense nuclear energy
and rail FDI was liberalized that stands
for foreign direct investment so it now
was the case that one hundred percent
foreign ownership was to be allowed
although not for every sector not for
banks telecom insurance and Airlines
banking was another area that started to
see some significant changes among the
new policies were removing interest rate
controls easing licensing for foreign
exchange raising capital requirements
for banks so they would be safer but
keep in mind the banking sector as a
whole that even today in India most
banks are still public sector entities
so there was some liberalization in this
sector but it was within the context
where most of the banking sector remains
state-owned there was also an entire set
of macro economic reforms which were
more or less forced on India by a
financial crisis those involved the
budget and exchange rates among other
features and we'll be covering those
separately perhaps most importantly
these reforms involved a new vision for
India and a new sense of what the Indian
economy would be that is more globalized
freer more liberalized and moving away
from earlier notions of five-year plans
and industrial policy but that's it keep
in mind while these reforms were quite
significant there are still very large
parts of the Indian economy which have
very heavy levels of regulation price
controls bureaucracy and are subject to
burdens and taxes from corruption so
it's hardly the case that these reforms
brought India to being any kind of free
market economy that simply didn't happen
for further reading in this area here
are some good sources to start with
their online and also you can google any
of the basic terms in the areas we've
been discussing the references in these
two pieces also are extremely useful I
would recommend some of the other videos
in particular the one on India's growth
inflection to get a better understanding
of just what these reforms the
it and did not manage to succeed with