ECONOMY

India pursue a mixed economy and until 1991, the year liberalisation knocked at our door, the border line between public and private sectors was clear. Business environment was regulated and licence Raj prevailed.
 
Sweeping reforms, introduced in by the Narasimha Rao Government in 1991, and continued by successive governments, had radically changed the course of the Indian economy. External trade was liberalised through lowering of tariffs and reduction of import duties. Political parties, save Left-oriented ones, gave the green signal for economic liberalisation.
 
The reforms, in the initial days, got a morale booster with better growth rates, higher investment and trade flows. However, the South East Asian economic crisis of 97 had adversely affected Indian economy at a time it was going global. The result was slow down in agricultural and industrial growth coupled with a decline in the growth rate to 5.1 per cent.
Public sector industries, once the strong point of India, had bore the brunt of liberalization. A disinvestment spree is on in both industrial and service sectors. The Union Government set up a Disinvestment Commission in August 1996, for making recommendations on disinvestment of Government equity in PSUs. 

The present BJP- led National Democratic Alliance Government at the Centre formed a separate Ministry for facilitating disinvestment. As a result, many domains which once were the stronghold of public sector had already fallen to private hands. Even profit making ports in the country has thrown open for private investment. Private presence is tangible in Telecom sector.  

The changes unleashed by globalisation were a rude shock for Indian companies that were enjoying the smug comfort of an assured domesti. As the Indian economy got integrated with the world economy, the crisis in the agricultural and industrial sectors worsened. The economic scenario emerged from the liberalized world saw the Indian market flooded with foreign players and their products, however effort of Indian traders to enter foreign market piped at the post. 
 

Political instability in the second half of 90’s and the post-pokhran sanctions slapped by world nations have slowed the growth pace in the past three years. The Kargil crisis fell upon the country at a time it was struggling to recuperate from the crisis.   
The only solace was the favourable monsoon in the past few years, however did not yield agricultural growth.
Indian agricultural scenario is reeling under a crisis unheard in the recent history. Though agriculture provides employment to about 65 per cent of the country's population, its share in the GDP has been declining alarming sending shock waves down the spine of the country. Even favourable monsoon in past successive years did not help the farmers bail out from the crisis. 

IT Sector Poised For Major Leap 

Indian software industry is expected to earn revenue of Rs. 60,000 crores ($13 billion) in 2001-02, according to a report of Indian Software and Services Companies (Nasscom). Of this, about Rs. 44,000 crores ($9.5 billion) would be generated by software exports and Rs. 16,000 crores ($3.5 billion) from the domestic market.

According to estimates, I T exports will touch $14 billion and domestic market  $5 billion, giving a total of $19 billion in 2002-03.  Growth in these areas is expected to go up to $50 billion and $37 billion respectively, earning a total of $87 billion by 2007-08. During 2001-02, an e-commerce solution alone is expected to generate Rs. 10,000 crores of revenue ($2.17 billion). Another important segment is that of telecom software including network solutions and solutions for wireless Internet. 

In the domestic market, the emerging revenue in 2001-02 will be generated from e-governance, e-banking and digital content development.

Inflow of Venture Capital (VC) to dotcom companies has thinned due to various reasons. The flow has taken a diversion to software and emerging technologies. The expected investment in this sector is expected to be Rs. 65,000 crores ($14.13 billion) in 2001-02 as compared to Rs. 32,000 crores ($6.95 billion) in the current year.

Deficit in Oil Pool Account

Deficit in oil pool account has been a bane of Indian economy. The latest estimate prepared by the Petroleum Ministry says that the deficit in the oil pool account by the end of the current financial year may be around Rs 10,000 crore as against the anticipation of Rs 12,000 crore. That is still a cold comfort for a cash- strapped Government struggling to rebuild the earthquake-ravaged Gujarat.

The oil pool deficit was Rs 5,701 crore at the end of 1995-96, escalated to Rs 15,976 crore at the end of 1996-97 due to sharp rise in oil price in the international market and India’s inability to revise the domestic price.   

This deficit came down to Rs 14,156 crore at the end of 1997-98, primarily because of the hike in the domestic prices of petroleum products in September 1997 when the government initiated reforms in the oil sector.

The deficit further came down to Rs 3,408 crore at the end of 1998-99 when the government issued oil bonds in March 1998 and the international prices of oil declined sharply. 

Banking Scenario  

A strong and vibrant banking sector with a network of over 64,500 branches supports Indian economy. Besides, a number of national and state level financial institutions, a large number of domestic and foreign institutional investors, investment funds, equipment leasing companies and venture capitalists add vigour to Indian banking arena.

In the recent years, Indian banking sector is undergoing an existential crisis. In the pre-privatisation period Indian banks were well ensconced in the financial sector. Then came the catalyst, Banking Regulation Act of 1993, which opened the floodgates for foreign banks. 

Foreign banks are in the fray forcing their Indian counterparts to adopt a customer-centric approach, ensure no erosion in bottomlines due to Non-Performing Assets (NPAs), falling interest rates, cash reserve ratios, undue exposures, and maintaining adequate capital adequacy ratio.   

Once the Voluntary Retirement Scheme (VRS) implemented, Indian banks both private and public would see an exodus of efficient ones to greener pastures. Drain of competent heads would further compound the crisis.    

The move to minimise overheads goaded several Indian banks to engage in an affair with foreign banks. The recent mergers are Times Bank with HDFC Bank, Bank of Madura with ICICI Bank and now Global Trust Bank with UTI Bank

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