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Financial reforms continue

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Finance Minister P. Chidambaram's maiden budget for the residual part of financial year 1996-97 indicates reforms will continue.

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Economic liberalisation has been beneficial for the country.

Even industry has recovered from the early shocks and the temporary recession caused by the reforms in the first three years (1991-94).

During that period, the severely depleted foreign exchange reserves (down to US$1.5 billion, equivalent to 20 days' payment for petroleum supplies) and an adverse balance of payments situation forced the Rao government to clamp down on imports and bank credit.

There was consequently a sharp reduction in industrial output during 1991-92.

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N. Vaghul, chairman of the Industrial Credit and Investment Corporation of India, said: 'Recovery in the subsequent two years was also slow owing to inherent adjustment lags in the process of restructuring, a slowdown in imports, prevailing high rates of interest and corporate taxes.' But the situation has changed since then.

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