Ans.
The BOP position during post reform period has been for
more under contract but it still highlighted the deficits and was highly
unfavorable for the development of Indian economy. Therefore govt. of India found it necessary
to solve BOP problem for which govt. adopted following measures.
1) Devaluation of Currency: - The govt. in
collaboration with RBI undertook devaluation of currency as first important
results into fall in the value of Rupee against major currencies like Dollars,
Pound, Franc & Yen. This fall in the
value makes Indian commodity cheaper to the foreigners and expensive in the
domestic economy, which reduces domestic consumption and induces foreign
consumption. This has resulted into
increase in the exports.
2) Macro economic stabilization: -Govt. as a measure to
solve BOP position adopted macro economic stabilization policy, which included
reduction in rate of inflation, reduction in Fiscal deficits in the budgets
etc.
3) Private Remittances : -Private remittances from abroad
played a major role for curing BOP position in Indian economy. The transfer payment of Indian workers
migrated abroad has increased significantly in the post –reform period resulting
into positive balance in the invisible A/C.
4) External Commercial
borrowing & NRI deposits: -The
govt. of India has been giving more importance to external commercial
borrowings (ECB) & NRI deposits to cure adverse BOP position. This method of govt. to overcome BOP problem
is called as high cost method as it results into interest burden on Indian
economy.
5) Structural Reforms: -The govt. adopted
structural reforms in the industrial policy.
The industrial policy of 1991 abolished licensing system allowed foreign
equity participation and also removed restrictions from monopoly firms. NIP 1991 also diluted the role of public
sector and encouraged private sector to invest more and more in the process of
industrialization.
6) Trade Policy: - The govt. of India
adopted free trade policy in post reform period. Indian economy in the post independence
period had a policy of export promotion import substitution. But in the post reform period the attitude of
govt. has changed and govt. with the view of liberalization & globalization
adopted the policy in the form of export promotion and import liberalization.
7) Full convertibility o f
rupee: - The
government announced full convertibility of rupee in trade account in 1993-94,
which was aiming at increasing the exports of the Indian economy. Full
convertibility in current account provided freedom to the exporters to buy or
sell foreign exchange in the open market with respect to al international
transactions.
The above measures taken by the government during
nineties yielded some goods results and the balance of payment position has
improved in the post reform period
