Economic Reforms and Employment Growth in India Impact of Economic Reforms

CHAPTER III
Impact of Economic Reforms
The measures that have been undertaken as part of the economic reform
programme so far have benefited the economy / people in various ways. They have
resulted in a sea change in the standards of living and life-styles of people. The
benefits that have already accrued are enormous. Some of these are discussed in
brief in the following paragraphs.
1. Improvement in Performance of the Economy National Product
The economys performance in the post reform era has been quite
impressive. The reforms started in year 11 and if one leaves out 11-!" which
was e#ceptionally a bad year" the average annual growth rate between 1!-$ and
1-!%%% was &.$'. (er capita income and capital accumulation were all higher
and their coefficients of variations lower during 1!-!%%1 than in the 1)%s or 1*%.
The +,( at -actor .ost at current prices grew by $%%' during 1%-1 to !%%%-%1
as against !*$' during 1*%-*1 to 1%-1 and the ,,( at -actor .ost at current
prices went up by $%/' during 1%-1 to !%%%-%1 as against !)*' during 1*%-*1
to 1%-1. 0ith regard to per capita ,,( at -actor .ost at current prices" the
increase was !$!' during 1%-1 to !%%%-%1 and !%&' during 1*%-*1 to 1%-
1. The absolute figures relating to ,ational (roduct at -actor .ost at current prices
can be seen below 1Table $.12.

Tale !.1 " Estimated National Product at #actor Cost at Current Prices
Item 1$%&'%1 1$$&'$1 (&&&'&1
+,( 1 3s.crore 2 1!!))! /)%!& 1**4)1$
,,( 1 3s.crore 2 11%&*4 /1*%)/ 1&*)*1*
(er .apita ,,( 1 3s.2 1&$% /*$ 1&4&$
Town and Country Planning Organisation Social Infrastructure Planning Division
14
Economic Reforms and Employment Growth in India Impact of Economic Reforms
+,( 5nde# 1 1*%-*1 6 1%% 2 1%% $*$ 14$&
,,( 5nde# 1 1*%-*1 6 1%% 2 1%% $)* 14!4
(er .apita ,,( 11*% -*161%%2 1%% $%& 1%1&
Source : Statistical Abstracts India 1997 & 2003 published by Central Statistical Oranisation! "o#ern$ent o% India
7ooking at the inde#" it is seen that +,( shot up by 114$ points during 1%-
1 to !%%%-%1 as compared to !*$ points during 1*%-*1 to 1%-1. The ,,( grew
by 11/) points during 1%-1 to !%%%-%1 as compared to !)* points during 1*%-*1
to 1%-1 and the (er .apita ,,( increased by )1% points during 1%-1 to
!%%%-%1 as against !%& points during 1*%-*1 to 1%-1.
(. )ide Choice of Consumer *oods and +ervices
8conomic reforms have resulted in a sea-change in the standards of living
and life-styles of people. The benefits that have already accrued are enormous.
Today" one has variety of choices to choose from with regard to many of the
consumer durables like fridges" televisions" music systems" 9:9s" cars etc. -oreign
brands of many of the consumer durables are easily available. 9ue to cutthroat
competition" the prices of consumer durables have either come down or remained
static. The T.:. viewers today en;oy !/-hour news channels. These !/-hour news
channels and other channels depend heavily on the advertising industry" which in
turn" depends on 5ndias increasing transformation into a consumerist society.

!. Easy Availaility of ,an- .oans
5n the pre-reforms era" getting loan from a bank was unthinkable for a
common man. The scenario has completely changed today. The reforms carried out
in the banking sector have led to easy availability of loans. <anks are running after
customers today requesting them to take loans. 7ending rates have fallen.
.omputeri=ation and installation of >T?s have brought sea change in the services
being rendered by banks. 5ndian banks have started giving @8uropeanA look. The
day is not far off when 5ndian banks may be preferred when compared to foreign
banks.
Town and Country Planning Organisation Social Infrastructure Planning Division
1&
Economic Reforms and Employment Growth in India Impact of Economic Reforms
/. *ro0th in Employment 1pportunities and ,etter Emoluments
8mployment opportunities have tremendously increased due to coming up of
many new domestic private companies as well as multinational companies 1?,.s2.
?any of the foreign companies are now outsourcing their ;obs to 5ndia thereby
increasing the ;ob opportunities available in the country. 5n 11" many 5ndians were
terrified that globali=ation would cost us millions of ;obs. Today" >merican politicians
are terrified that millions of their ;obs will be outsourced to 5ndia. The latest business
to be outsourced to 5ndia by the BS is mathematics coaching. Cealth services such
as pathological and radiological tests are also being outsourced to 5ndia by some
countries now. The ;obs that have come up in computer software and call centres
could not have been predicted ten years ago. The economic reforms have not only
increased the ;ob opportunities in 5ndia" but have also raised pay packages in many
of the sectors benefiting the youngsters from the middle-class. This scenario has
come up because the ?,.s" which have set up their plants / units in 5ndia" pay
much higher emoluments than the domestic companies. Dne important sector"
which has vastly e#panded and has generated vast employment opportunities in the
country after liberali=ation" is the E5nformation Technology. Dther notable sectors in
this connection are the telecom" automobiles" civil aviation and electronics.
2. .ar3e Reserves of #orei3n E4chan3e
5n the pre reforms era" the country did not have large reserves of foreign
e#change and therefore" was not easily available for a person traveling abroad. The
procedure for getting foreign e#change was very cumbersome and one had to run
from pillar to post to get even a small amount of foreign e#change. There were
widespread illegal transactions in foreign e#change. The situation has changed and
today foreign e#change is easily available in any amount for persons traveling
abroad. The removal of restrictions has also helped in eliminating @black moneyA
generated as a result of illegal transactions in foreign e#change. This is mainly
because of the tremendous increase in foreign e#change reserves of the country.
The foreign e#change reserves increased from BSF 4.* billion 1amounting to !.4
months import bill2 in 1% to BSF /!.! billion 1providing an import cover for *.&
months2 in !%%1.
5. 6ast E4pansion in Telecommunications
Town and Country Planning Organisation Social Infrastructure Planning Division
1)
Economic Reforms and Employment Growth in India Impact of Economic Reforms
> notable revolution has occurred in the telecom sector. 5n the pre reforms
era" this was entirely in the hands of the central government and due to lack of
competition" the call charges were quite high. -urther" due to lack of funds with the
government" the government could never meet the demand for telephones. 5n fact" a
person seeking a telephone connection had to wait for years before he could get a
telephone connection. The service rendered by the government monopoly was also
very poor. 0rong billing" telephones lying dead for many days continuously due to
slackness on the part of the telecom staff to attend to complaints" cross connections
due to faulty / ill maintained telephone lines" obsolete instruments and machinery in
the telephone department were the order of the day in the pre reforms era.
Today" there are many players in the telecom sector. The ultimate beneficiary
has been the consumer. (rices of services in this sector have fallen drastically.
Telephone connections are today affordable to everyone and are also easily
available. +one are the days" when one had to wait for years to get a telephone
connection. The number of telephone connections which was only !.14 million 1fi#ed
lines2 in 1*1 increased to 4.%) million1fi#ed lines2 in 11. Today 1 as in !%%$2" there
are 4/.&! million telephone connections of which /1.$$ million are fi#ed line
telephone connections" 1!.& million are cellular mobiles and the remaining %.&%
million are 077 telephones
1
. 0ireless in 7ocal 7oop 10772 telephones and cellular
mobile telephones were unknown in 5ndia a few years ago. .ell phones charges
have come down so much that today one can see even a common man going
around with a cell phone in his hand. The private companies are giving various
incentives to attract customers" a situation which is entirely opposite to the conditions
prevailing in the pre reforms era when one had to wait for years to get a telephone
connection. .
7. Civil Aviation *ro0th in Air Travel
-or a common man of 5ndia" traveling by air would have remained a dream"
had there been no reforms. The civil aviation was the monopoly of the central
government and the fares were very high. There has been a vast e#pansion in the
civil aviation sector due to reforms. ?onopoly has been replaced by stiff competition.
There are already many private airlines and more are being added. 9ue to cutthroat
competition" prices are continuously falling and every company is thinking of new
1
Source G Selected Socio-8conomic Statistics H 5ndia H !%%!" published by the .entral Statistical Drganisation" +ovt. of 5ndia
Town and Country Planning Organisation Social Infrastructure Planning Division
1*
Economic Reforms and Employment Growth in India Impact of Economic Reforms
incentives to attract customers. >ir 9eccans lowest air fare is 3s.4%%. 5ndian
>irlines" >ir Sahara and Iet >irways have already announced four levels of fares
without any advance booking prerequisites. The lowest-level fare varies from &%-
*%' of the highest-level fare. The number of flights for important destinations has
increased considerably. >ir travel has become cheaper and more comfortable. The
day is not far off when air will become the most popular mode of transport for an
average 5ndian. 5t has to be noted that not only domestic airfares have fallen" but
fares for flying to foreign destinations have also come down drastically.
The number of hours flown under domestic services registered a fantastic
growth of 1$*' during 1%-1 to !%%!-%$ as against a mere !)' during 1*1 to
1%-1 1total number of hours flown under domestic servicesG *%%% in 1*1"
1!/%%% in 1%-1 and !4%%% in !%%!-%$2
!
. The growth in the number of
passengers carried in the domestic sector increased from /!' during 1*1 to 1%-
1 to )&' during 1%-1 to !%%!-%$ 1passengers carriedG 44&%%%% in 1*1"
)1!%%% in 1%-1 and 1$41%%% in !%%!-%$2. 5n terms of inde#" if 1*1 is taken as
the base year 1inde# 61%%2" then the inde# for 1%-1 works out to 1/! and !4% for
!%%!-%$" thereby showing that the inde# went up by 1%* points during 1%-1 to
!%%!-%$ as against /! points during 1*1 to 1%-1.
%. Easier Access to #orei3n Technolo3y
Dne of the greatest benefits of economic reforms has been the free flow of
global technology. > case in point is the cell phone technology" which came into 5ndia
after liberali=ation. Cad there been no reforms" this technology would have taken
much more time to make entry into 5ndia. 9ue to easy accessibility to latest foreign
technology" many of the private companies are adopting latest technology in their
production processes to increase production and productivity" as well as to lower
production costs to benefit the consumer.
$. +i3nificant #all in Poverty Ratio
!
Source G Statistical >bstracts - 5ndia H 1) and !%%$" published by the .entral Statistical Drganisation" +overnment of 5ndia
Town and Country Planning Organisation Social Infrastructure Planning Division
1
Economic Reforms and Employment Growth in India Impact of Economic Reforms
There has been a spectacular achievement in the sphere of poverty
alleviation. The poverty ratio decreased from $&' in 1$ - / to !&.1' in 1 H
!%%% H a fall that was steeper than that in the 1)%s or 1*%s. Dver the si#-year
period 1))-1)* to 1*$" the poverty ratio fell from 41.$ to //.4 percentJ the decline
between 1*)-1** and 1$-/ was from $*.' to $&'. 5ndeed" while from the
mid-1*%s to early 1%s" the absolute number of the poor continued to hover
around $!% million" the number registered a significant fall at !&% million by 1-
!%%%. The percentages of population below the poverty line for urban and rural areas
separately can be seen below 1Table $.!2.
Tale " !.( " Percenta3e of population elo0 the poverty line in India
8ear Rural 9ran Total
1)$-)/ 4&./ /.% 4/.
1))-)* 4$.1 /4.! 41.$
1*$ /4.) /%.* //.4
1*)-** $.1 $*.! $*.
1$-/ $).$ $!./ $&.%
1-!%%% !).1 !$.& !&.1
Source : Selected Socio&'cono$ic Statistics India 2002! published by the Central Statistical Oranisation! "o#t(o% India
1&. #all in Inflation Rate
8conomic reforms pushed up production of goods and services in the country
resulting in either prices falling or remaining constant. The fall in inflation rate can be
attributed to some e#tent to a substantial decline in consumer price inflation. The
rate of consumer price inflation" which was always in double digits during 1% H
1$" fell sharply to less than /' by the end of the millennium. 5t has to be noted
that prices of many of the consumer durables like T:s" >.s" washing machines"
fridges" and computers have either nose dived or remained constant.
11. ,etter Performance after Privati:ation
Town and Country Planning Organisation Social Infrastructure Planning Division
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Economic Reforms and Employment Growth in India Impact of Economic Reforms
?any public sector companies have been privati=ed after 11. 5t has been
reported that productivity and production in all these companies have gone up very
high after privati=ation. The liberali=ed economic policy freed entrepreneurs to
enable them to innovate and go in for moderni=ation of their plants. The <harat
>luminium .ompany 7td. introduced :3S for its employees after privati=ation and
went in for computeri=ation in a big way. The plant was also moderni=ed. >ll this has
led to increased efficiency and significant increase in production.
1(. Remar-ale *ro0th in #orei3n Trade
The most remarkable improvement in the economys performance has been"
in the e#ternal sphere. The trade-+9( ratio crawled from 1$.& to 1/.! per cent
between 1*%-1*1 and 1*-1%" but ;umped to !!.1' by !%%%-!%%1. The 1%s
also saw a reversal of the declining trend in 5ndias share of e#ports in world trade"
with the share registering an increase from %.4 to %.& per cent between the beginning
and the end of the decade. The total value of imports increased from 3s.1!4/14
lakh in 1*%-*1 to 3s./$1!*& lakh in1%-1 and to 3s.!)!%4*) lakh in !%%!-%$"
thereby showing a growth rate of about !//' between 1*%-*1 and 1%-1 and
4**' between 1%-1 and !%%!-%$. >s regards e#ports" the value increased from
3s.&)1%)% lakh in 1*%-*1 to 3s.$!44$$/ lakh in 1%-1 and to 3s.!441$)!* lakh
in !%%!-%$" thereby showing a growth rate of about $*4' between 1*%-*1 and
1%-1 and &*$ ' between 1%-1 and !%%!-%$.
The Bnit :alue 5nde# of imports rose by !)* points during 1%-1 to !%%!-%$
as against 1$/ points during 1*%-*1 to 1%-11Bnit :alue 5nde# of 5mportsG 1$/ in
1*%-*1" !&* in 1%-1 and 4/& in !%%!-%$. <ase yearG 1)*-) 61%%2. The
Kuantum 5nde# of imports rose by 4&/ points during 1%-1 to !%%!-%$ as against
1%% points during 1*%-*1 to 1%-11Kuantum :alue 5nde# of 5mportsG 1$* in 1*%-
*1" !$* in 1%-1 and *%! in !%%!-%$. <ase yearG 1)*-) 61%%2. 0ith regard to
e#ports" the Bnit :alue 5nde# rose by $!) points during 1%-1 to !%%!-%$ as
against 1*/ points during 1*%-*1 to 1%-11Bnit :alue 5nde# of 8#portsG 1% in
1*%-*1" !$ in 1%-1 and &!% in !%%!-%$. <ase yearG 1)*-) 61%%2. The
Kuantum 5nde# of 8#ports ;umped up by 4!* points during 1%-1 to !%%!-%$ as
against ;ust *& points during 1*%-*1 to 1%-11Kuantum 5nde# of 8#portsG 1%* in
1*%-*1" 1/ in 1%-1 and )!! in !%%!-%$. <ase yearG 1)*-) 61%%2
$
. These
$
Source G Statistical >bstracts - 5ndia H 1) and !%%$" published by the .entral Statistical Drganisation" +overnment of 5ndia
Town and Country Planning Organisation Social Infrastructure Planning Division
!1
Economic Reforms and Employment Growth in India Impact of Economic Reforms
figures clearly prove the vast e#pansion in foreign trade after ushering in of the
economic reforms.
1!. Re3ulated Capital ;ar-et
There was a @free for allA atmosphere in the stock market prior to the
introduction of regulation of capital market. There were many @scandalsA in the stock
market" which pauperi=ed small investors. The setting up of S8<5 1Stock 8#change
<oard of 5ndia2 has greatly helped the government to keep an eye on the stock
market and regulate it to protect small investors. Trading in shares has become very
easy" quick and transparent. Stock 8#change brokers can no more take small
investors for a ride. 9ue to demateriali=ation of shares" the investors have been
freed from botheration of getting delivery of shares and sending the same to the
concerned companies for transfer of names etc. -urther" delays in transfer of shares"
loss/pilferage of share certificates" the need to keep shares in safe custody by the
investors have become a thing of the past.
1/. Increasin3 #orei3n <irect Investment
There is no doubt that after liberali=ation" foreign investment as well as
domestic private investment has increased by leaps and bounds. 9uring 11-!
1>ugustH?arch2" the foreign direct investment inflows were only 3s./%* crore and
the figure increased to 3s.1%/ crore during 1!-$. 9uring !%%$-%/" the -95
inflows were 3s.1!11) crore" which is more than ten times the figure of 1!-$. The
-95 inflows during !%%/-%4 were 3s.11)!& crore up to ,ovember !%%/
/
. -oreign
investors are showing a keen interest in investing in 5ndia. > confidence survey by
global consultancy >T Learney rated 5ndia as the third most favored -95 destination"
ne#t only to .hina and the Bnited States.
12. Easy Availaility of ;otor 6ehicles
There has been tremendous e#pansion in the automobile industry after
ushering in of economic reforms. 5n the pre reforms era" one had to wait for years to
get a scooter or car. <lack marketing in cars and scooters was rampant. Today" the
car and scooter industries are running after customers. The number of registered
motor vehicles increased from 41)$%1$ in 1*%-*1 to !1$)/!%% in 1%-1 and to
/
Source G 8conomic Survey H !%%/-!%%4 1(age 1&12" published by the ?inistry of -inance" +ovt. of 5ndia
Town and Country Planning Organisation Social Infrastructure Planning Division
!!
Economic Reforms and Employment Growth in India Impact of Economic Reforms
4/1%!& in !%%%-%1
4
. Taking the base year as 1*%-*1 61%%" the inde# for the
years 1%-1 and !%%%-%1 works out to /1$ and 1%&$ respectinely" thereby
showing an increase of &4% points in the inde# during 1%-1 to !%%%-%1 as against
$1$ points during 1*%-*1 to 1%-1.
15. E4pandin3 Tourism
8conomic reforms have brought prosperity in every sector and the tourism
industry is no e#ception. The e#pansion in civil aviation sector seems to have made
a very big positive impact on the tourism industry. The number of foreign tourists
increased from 1!)!1% in 1*1 to 1&))4%* in 11 and to !4$)!*! in !%%1
&
. The
flow of foreign tourists during 11 to !%%1 has" thus" been more than double the
flow during 1*1 to 11 1 *4))/ during 11-!%%1 as against $*!* during
1*1-112. The inde# works out to 1* for !%%1 and 1$1 for 11" if 1*1 is
considered as the base year with an inde# of 1%%. The increased flow of foreign
tourists has been one of the factors that has pushed up our countrys foreign
e#change earnings considerably.
17. +ustantial *ro0th in Corporate +ector
Dne of the greatest gains due to economic reforms is the huge e#pansion in
the corporate sector. 0ith easy flow of foreign investment and increase in domestic
private investment" the number of industries in the corporate sector has gone up very
high. 5n 1*%-*1" there were only &!)1/ companies with an aggregate paid up
capital of 3s.1444/.4 crore. Today 1as in !%%!-%$2" there are &1!144 companies in
the corporate sector with a total paid up capital of 3s. /$4$1%. crore and the
corresponding figures for 1%-1 are !!//4! and 3s.&*11%.& crore
)
. 0hen 1*%-
*1 is taken as the base year11%%2" the inde# of number of companies is observed to
be )& for !%%!-%$ and $4) for 1%-1" thereby indicating that the inde# increased
by a huge figure of &1 points during 1%-1 to !%%%-%1 as against !4) points
during 1*%-*1 to 1%-1.

1%. *ro0th in Ta4 Revenue of Central *overnment
4
Source G Statistical >bstracts H 5ndia H 1*/ and !%%$" (ublishec by the .entral Statistical Drganisation" +ovt. of 5ndia
&
Source G Statistical >bstracts H 5ndia H 1*/ and !%%$" (ublished by the .entral Statistical Drganisation" +ovt. of 5ndia
)
Source G Statistical >bstracts H 5ndia H 1*/ and !%%$" (ublished by the .entral Statistical Drganisation" +ovt. of 5ndia
Town and Country Planning Organisation Social Infrastructure Planning Division
!$
Economic Reforms and Employment Growth in India Impact of Economic Reforms
0hen investments in industrial and other sectors e#pand" the benefits of such
investments would also accrue to the central government in the form of more ta#es.
The ta# revenue of the central government registered a sharp increase of
3s.*4!$.! crore during !%%%-%1 to 1%-1 whereas the corresponding figure
during 1*%-*1 to 1%-1 was only 3s. $$&!% crore. The ta# revenues of the
.entral +overnment during 1*%-*1" 1%-1 and !%%%-%1 were 3s. $4* crore"
3s./!)* crore and 3s.1!*!)1.! crore" respectively
*
. The inde# for !%%%-%1"
keeping 1*%-*1 as the base 11%%2" works out to 1$)% as against /4" which
indicates that the inde# rose sharply by 11 points between 1%-1 and !%%%-%1 as
compared to $4 between 1*%-*1 and 1%-1. 0hen there is more money in the
kitty of the central government" it can take up more development-oriented and social
welfare schemes.
1$. <eclinin3 E4ternal <et
The reforms undertaken in the e#ternal sector since 11 has enabled 5ndia
to place itself in a comfortable position as far as e#ternal debt is concerned. The
policy focus of the government has been on concessional and relatively less
e#pensive source of funds" preference for long maturity loans" monitoring of short-
term debt and emphasis on non-debt creating capital flows. The focus has also been
on prepayment of costly government and non-+overnment loans" rationali=ation of
interest rates etc.
The e#ternal debt to +9( ratio declined from !*.) per cent in 11 to 1).*
percent in !%%/. The ratio of e#ternal debt to current receipts came down sharply
from $!*. per cent in 11 to 4.4 percent in !%%/. The short-term debt to +9(
ratio declined from !. per cent in 11 to %.) percent in !%%/. The ratio of short-
term debt to foreign e#change assets nose-dived from $*!.1 per cent in 11 to /./
percent in !%%/

.

(&. Comfortale Position of ,alance of Payments on Current Account
*
Source G G Statistical >bstracts - 5ndia H 1) and !%%$" published by the .entral Statistical Drganisation" +overnment of 5ndia

8conomic Survey H !%%/-!%%4 " published by the ?inistry of -inance" +ovt. of 5ndia
Town and Country Planning Organisation Social Infrastructure Planning Division
!/
Economic Reforms and Employment Growth in India Impact of Economic Reforms
Dne of the remarkable achievements of economic reforms has been the
comfortable position with regard to balance of payments on current account. The
balance of payments" which was adverse in the pre reforms era" made a turn around
after reforms were ushered in. 5n the year 1*%-*1" there was a deficit of 3s.!!1$.4
crore and this increased to 3s. 1)$&& crore in 1%-1" whereas in the year !%%!-
%$" the balance of payments on current account was favourable with a net earning of
3s.1*) crore. This was mainly because of earnings from @invisiblesA which
amounted to 3s. *!/14 crore during !%%!-%$. The invisibles include earnings from
e#port of services" remittances from 5ndian workers" income from financial assets
and earnings from foreign tourists. 9ue to unbelievable e#pansion in the 5T sector
brought about by economic reforms" the earnings from e#port of services as well as
from remittances made by 5ndian 5T professionals employed abroad have given a big
push to earnings from invisibles. The overall net earnings from merchandise and
invisibles can be seen below.
Tale !.! " 1verall ,alance of Payments on Current Account =#i3ures in Rs. Crore>
Item 1$%&'%1 1$$&'$1 (&&('&!
,et 8arnings from ?erchandise 1H2 &!1%.* 1H2 1&$$ 1H2 &!/!*
,et 8arnings from 5nvisibles $).$ 1H2 /$$ *!/14
Total Net Earnin3s => ((1!.2 => 17!55 1$$%7
Source : Statistical Abstracts India 1997 and 2003! published by the Central Statistical Oranisation! "o#t( o% India
(1. Elimination of Ille3al Transactions in #orei3n E4chan3e
The determination of e#change rate in the foreign e#change market" by market
forces" has eliminated illegal transactions in foreign e#change. -oreign currencies
are now easily available in any amount for persons traveling abroad. The removal of
restrictions has also helped in eliminating @black moneyA generated as a result of
illegal transactions in foreign e#change.
((. Improvement in Po0er +upply
The reforms undertaken in the power sector have already started yielding
good results. 5n 9elhi" after privati=ation of distribution of power" power availability
has drastically improved. (ower theft has almost been eliminated. .onsumers get
electricity connections or increase in load-capacity easily. 5ncidence of power failure"
Town and Country Planning Organisation Social Infrastructure Planning Division
!4
Economic Reforms and Employment Growth in India Impact of Economic Reforms
voltage fluctuations" variations in frequency etc." has come down sharply. 5n short"
privati=ation of power sector has definitely improved the quality and quantity of
power supply in 9elhi.

(!. Hi3her Revenue due to 6alue Added Ta4
:alue >dded Ta# 1:>T2 is termed as the best practice in ta#ation all over the
world. This has been introduced in 5ndia from >pril !%%4. ?any states have already
shifted to :alue >dded Ta# regime in place of Sales Ta#. There has been buoyancy
in revenue collections of many states after the introduction of :>T. >ccording to the
8mpowered .ommittee of State -inance ?inisters on :>T" the :>T regime has
improved ta# compliance among the traders and has also brought down the prices of
many commodities.
5n the very first quarter after the introduction of :>T scheme from >pril 1"
!%%4" !1 :>T states have reported 1! to 14' higher revenue earnings as a result of
implementation of :>T system. 9elhi reported more than $%' increase in its
revenue. There has been increase in revenue collections in the first quarter even in
those states where the prevailing rates of :>T are lower than the erstwhile Sales Ta#
levy.
(/. Chec- on Inflation due to competition
3ising raw material prices generally push up the prices of final products.
Cowever" globali=ation and privati=ation help to hold or even cut down the prices of
final products even when the prices of raw materials go up. This is because
competition raises productivity and thereby helps manufacturers to hold the prices at
the same level or even reduce them. >n e#ample of such a scenario is the fall in
prices of airfares even though the global oil prices have been going up during the
last few years. 5n the current year oil prices have gone through the roof" but inflation
has remained modest. The average rate of inflation in the current year 1!%%4-%&2 so
far 1till >ugust" !%%42 has remained at about $ percent as against &.4 percent last
year. Thus inflation has almost halved although oil prices ;umped up from F/4/barrel
last year 1!%%/2 to F&4/barrel this year 1!%%42. 8arlier" sharp increases in oil prices
in 1)$-)/" 1)-*% and 1%-1 led to massive inflation in the country.
+lobali=ation and privati=ation have massively increased competition and innovation"
thereby putting downward pressure on prices. (roductivity has increased
Town and Country Planning Organisation Social Infrastructure Planning Division
!&
Economic Reforms and Employment Growth in India Impact of Economic Reforms
tremendously due to infusion of global technology and management techniques.
The price of computers has crashed from 3s.1 lakh in 1*%s to 3s.1%"%%% today"
while the quality has unimaginably improved. 9ue to globali=ation" liberali=ation"
privati=ation etc." 5ndia can accommodate big increases in oil prices without suffering
a big bust of overall inflation. -urther" government can go for higher fiscal deficits
than before" without causing much inflation in the economy.
Town and Country Planning Organisation Social Infrastructure Planning Division
!)