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The main objective of the WTO is to establish a rule based trade regime to ensure optimum utilisation of world resources.

The WTO came into existence on 1^st January 1995.

The main objective of privatisation was:

• To improve financial discipline
• To improve raise the productive efficiency
• To facilitate modernization.

In India, the outsourcing is done in business areas like:

1. Legal advice

2. Computer service

3. Advertisement

4. Security etc.,

The advantages which make it a favourite out souring destination are :

• Easy availability of cheap labour. As the wage rates in India are comparatively lower than that of in the developed countries.
• Skills – Indians have reasonable degree of skills and techniques and knowledge of International language, English.
• Stable Political Environment: The democratic political environment in India provides a stable and secured environment to the MNC’s to expand and grow.
• Availability of raw material at cheaper rate India is well downed in natural resources. This ensures the MNC’s cheap availability of raw material and undisturbed and perennial supply of raw materials. This enables proper and smooth operation of MNC’s.

The structural adjustment programmes are those which bring structural change in the economy and improve its productivity. And these structural adjustment programmes are:

• Industrial sector reforms
• Trade reforms
• Public sector reforms etc

Business Process Outsourcing.

World Trade Organisation

General Agreement on Tariffs and Trade.

Good and Service Tax.

Yes, outsourcing is helpful to India. Outsourcing has intensified with the growth of information technology.

• It helps our country to get valuable foreign exchange to cover imports.
• And it helps in creation of more employment opportunities.

There are various factors which are responsible for the high growth of the service sector.

• Reforms introduced in 1991, removes various restriction on the movement of international finance which led to huge inflow of foreign capital foreign direct investments and outsourcing to India. This encouraged the service sector growth.
• Availability of cheap labour and skilled labour at lower wage rate.
• The revolution in Information Technology(IT) field in India has also played a major role in the high growth of the service sector. 
• Indian economy is experiencing structural transformation that implies shift of economic dependence from primary to tertiary sector.

• ONGC – Oil and Natural Gas Corporation.
• NTPC – National Thermal Power Corporation.
• BHEL – Bharath Heavy Electrical Limited
• BEL – Bharath Electronics Limited.

Indirect taxes are those in which tax burden is transferred to others. They are levied on goods and services.

The two examples for indirect taxes are:

1. Sales Tax

2. Service Tax

3. Value Added Tax (VAT).

Import is a process where the goods are purchased from other countries for the benefit of individuals in domestic country.

The deliberate reduction of the value of rupee against foreign currencies is called devaluation of rupee.

The LPG stands for liberalisation, privatisation, and globalisation in new economic policy introduced in 1991.

• There was decline indeman for domestic industrial products due to cheaper imports.
• Domestic industries had to face foreign competition 
• Globalisation affected domestic industries and employment opportunities.
• Hundred’s of SSI’s all over India were closed.

The two examples for direct taxes are :

1. Income Tax

2. Corporation Tax

3. Wealth tax

The direct tax is the tax which is imposed by the Government on individuals and companies and which cannot be shifted to others.

The new economic policy classified into two groups namely:

1. Stabilisation measures 

2. Structural adjustment reform measures.

Foreign exchange refers to exchange of one currency for another or the conversion of one currency into another currency.

The components of New Economic Policy are:

1. Liberalisation

2. Privatisation

3. Globalisation

Globalisation refers to opening up economy for the world trade is called globalisation. In simple words it refers to encouraging the domestic entrepreneurs to invest abroad and at the same time allowing foreign entrepreneurs to invest in India.

• Restriction is removed on the movement of goods, services capital and technology from other countries to India.
• To get identification and recognition to Indian economy in the world market.
• Approving and encouraging foreign direct investment into Indian economy.
• Approving and encouraging movement of latest technology, goods, and services from others. countries to Indian economy.

The major financial sector reforms introduced by Government of India in 1991 are as follows:

• The role of RBI was made to facilitator of financial sector to financial controller.
• Giving managerial autonomy to financial sector to take decisions.
• Promotional schemes to establish private sector banks both Indian & foreign.
• Increasing the foreign investment limit on banks to 50% 
• No more nationalization of banks.
• Allowing the foreign institutional investors (Fils) like merchant bankers, mutual funds and pensions funds to invest in Indian financial market.

India has adopted mixed economic system.

The main features of economic reforms are:

1. Changes in fiscal policy

2. Changes in monetary exchange,

3. And changes in wage income policy and reforms in trade policy

4. Industrial PO hey ……..

5. Public sector

6. Administered prices and tariff policy.

If the economic reforms have given us an opportunity in terms of greater access to global markets and high technology, it has also compromised the welfare of people belonging to poorer section.

It devasted the local producers as well as the farmers. It resulted in the greater inequalities of income and wealth.

Further, the economic reforms developed the areas that were well connected with the metropolitan cities leaving the remote and rural area underdeveloped. It resulted in growth of service sector of India especially in the form of quality education, superior health care facilities, IT (Information Technology), Tourism, multiplex, cinemas, etc., which were out of the reach of the poor section of the population.

Globalisation has given an opportunity to choose variety of goods at cheaper prices. There has been a revolution in telecommunication

The fiscal policy reforms are the reforms introduced by the Government in respect of taxation, subsidies public borrowings etc.,

The major fiscal policy reforms are as follows:

• Continuous reduction in tax rates on individual income in order to prevent tax evasion.
• Gradual reduction of corporate tax.
• Reducing Government expenditure by reducing the size of administration in the Government.  
• Reducing subsidies on food grains, chemical fertilizers, exports, etc.,

The origin of financial crisis of Indian economy goes back to 1980’s. The Government expenditure exceeded its revenue. This forced the Government to borrow from public, banks and from international financial institutions. On the other hand, the Government had to spend its revenue to meet the problems like unemployment, poverty and population explosion.

The development programmes of the Government did not generate additional revenue from taxation. The income from public sector undertakings was insufficient. At times, the external borrowing was spent on meeting consumption needs. Sufficient attention was not given to reduce such expenditure and boost our exports to pay for the growing imports.

In the late 1980’s the Government expenditure started exceeding its revenue by huge margin. Even the borrowings were not enough to meet expenditure. Fiscal deficit rose to 8.5 percent of GDP.

Current account deficit in external balance rose to 2.5 percentage, rise in prices of essential goods, sharp increase in imports, sharp decline in foreign exchange reserves, erosion of international confidence etc., were other major problems.

India approached World Bank and International Monetary Fund (IMF) for loan. The country receives 7 billion as loan to manage the crisis.

These international agencies laid down certain conditions for loan. India was directed to liberalise and open up the economy. This was be achieved through removal of restrictions on the private sector, reducing the role of the Government in many areas and removal of restrictions in foreign trade.

India agreed to the conditions laid down by the World Bank and International Monetary Fund. The then prime minister Shri. P. V.Narasimha Rao and finance minister Dr.Man mohan Singh formulated a package of economic policy reforms. The new economic policy (NEP) was announced in July 1991.

It consisted wide range of economic reforms. The main thrust of the policy was to create a more competetive environment in the economy and removing the barriers to entry and growth of firms.

The economic crisis at the end 1980’s created more hurdles in the process of growth and development in India, hence it resulted with introduction economic reforms.

The causes for introducing new economic reforms are:

• The Government expenditure was more than its revenue.
• The current account deficit was more than 2.5%
• The fiscal deficit increased to 8.5%
• Inflation was also one of the main cause
• A sharp increase in imports caused decline in foreign exchange reserves.

The FDI is necessary for India because :

• FDI also helps in bringing technical expertise to our country.
• FDI also helps in access to foreign markets.
• FDI is also helpful to increase more employment opportunities.

Since 1991 the Government removed trade barriers because :

1. To make Indian producers compete with producers across the world.

2. The Government felt that competition would improve the quality and performance of producers within the country.

3. To liberalize foreign trade and investment.

4. To increase the volume of Foreign Direct Investment.

Difference between Strategic and Minority Sale.

Bilateral and Multi – lateral trade

Tariff and Non – tariff barriers.

The economic reforms of 1991 have not been able to benefit agriculture, where the growth rate has been decelerating.

The reasons are:

1. Public investment in agriculture sector, especially in infrastructure, which includes irrigation, power, roads, market linkages and research and extension, have been reduced in the reform period.

2. Removal of subsidies on fertilizers pushed up the cost of production of agriculture. This made farming more expensive, thereby, adversely affecting the poor and marginal farmers.

3. Since the commencement of WTO, this sector has been experiencing a number of policy changes such as reduction in import duties on agricultural products, removal of minimum support price and lifting of quantitative restrictions on agricultural products.

4. They have to face international competition. Further, export oriented policy strategy in agriculture has encouraged the farmers to enter export market and take up the cultivation of cash crops. This has led to rise in prices of food grains.

The RBI controls the Commercial Banks through: 

1. The RBI decides the amount of money that the banks can keep with themselves.

2. RBI fixes the interest rates

3. Nature of lending to various sectors

4. It safeguards the interests of account holders 5. What do you understand by devaluation of rupee? 

Devaluation of rupee means a deliberate downward adjustment in the official exchange rate of rupee relative to other currencies, Devaluation is different from depreciation which is a fall in the value of a currency in a floating exchange rate due to supply and demand side factors and not due to government decision.

consumers, discouraging imports. As is evident, this was done to reduce India’s Balance of Payments (BoP) deficit.

Under floating exchange rate system as followed in India at present, the RBI maintains the exchanges rate of rupee by buying or selling foreign currency, usually US Dollar. There were two important implications of devaluation of rupee.

First devaluation made India’s exports relatively less expensive for foreigners and increased their competitiveness and second, it made foreign products relatively more expensive for domestic consumers, discouraging imports. As is evident, this was done to reduce India’s Balance of Payments (BOP) deficit.

The liberalisation policy paved the way to RBI to change its role from controller to facilitator of financial sector to enjoy freedom to take their decisions on several matters in India.

Tariffs are imposed to make imports from foreign countries relatively expensive than domestic goods. This discourage imports and protect domestically produced goods.