Which of the following best characterizes the nature and objectives of second-generation economic reforms in India, initiated after the initial 1991 liberalization?
Show answer & explanation
Correct answer: B
Explanation
Solution: The correct answer is They aimed at deepening structural changes by improving governance, labor laws, financial sector regulation, and infrastructure development.
Explanation:
☛ First-generation economic reforms (1991) primarily addressed macroeconomic stabilization and crisis management, focusing on delicensing industry, trade liberalization, exchange rate flexibility, and opening doors to foreign investment.
☛ Second-generation economic reforms, initiated around 2000–2001, focused on institutional, factor market, and structural reforms.
☛ The main objectives included reforming labor laws, enhancing public sector governance, accelerating disinvestment, and strengthening financial sector supervision.
☛ These reforms also emphasized promoting public-private partnerships (PPP) in infrastructure development and implementing strict fiscal discipline.
Extra Exam-Relevant Facts:
☛ Fiscal Responsibility and Budget Management (FRBM) Act: Enacted in 2003 as a major second-generation reform to mandate fiscal discipline and curb the fiscal deficit.
☛ Banking Sector Reforms: The SARFAESI Act of 2002 was introduced to empower financial institutions to recover non-performing assets (NPAs) without court intervention.
☛ Disinvestment Policy: A dedicated Ministry of Disinvestment was established in 1999 to facilitate strategic sales and privatization of central public sector enterprises (CPSEs).
☛ Competition Act, 2002: Replaced the archaic MRTP Act, 1969 to promote and sustain market competition and protect consumer interests.
Important One-Liners for Upcoming Exams:
☛ In which year was the New Economic Policy (LPG reforms) launched in India? → 1991
☛ Who was the Union Finance Minister of India during the 1991 economic reforms? → Dr. Manmohan Singh
☛ In which year was the Fiscal Responsibility and Budget Management (FRBM) Act enacted? → 2003
☛ Which committee recommended wide-ranging banking and financial sector reforms in 1991 and 1998? → M. Narasimham Committee
☛ In which year was the SARFAESI Act passed to tackle the problem of NPAs in banks? → 2002