Early Crisis Met: Reform Measures
Some of the early major steps taken to manage the economic crisis were the following:
Fiscal correction aimed at reducing fiscal deficit by about7,700 crore in 1991-92 (compared to 1990-91),
Announcement of New Industry Policy in July 1991 seeking to deregulate the industry with the objective of promoting the growth of a more competitive and efficient industrial economy
Abolition of industrial licensing for all industrial projects except 18 industries of high strategic and environmental importance and with high import content. About 80 per cent of the industries were delicensed,
Amendment of the MRTP Act to eliminate the need for prior approval of the Central Government by large companies for capacity expansion, diversification and merger and amalgamation.
Nine areas in basic and core industries earlier reserved for the public sector were opened to the private sector
Limit of foreign equity holding raised from 40 per cent to 51 per cent in a wide range of priority industries,
Foreign Investment Promotion Board (FIPB) established to negotiate proposals from large international firms and expedite clearances of the investment proposals,
Rupee devaluation by 18 per cent during July 1-3, 1991 supported by a standby credit of $2.3 billion from the IMP over a 20 months period negotiated in October 1991,
Negotiation of $500 million Structural Adjustment Loan from the World Bank in April 1992 and a loan totalling SDR 1.3 billion from the International Monetary Fund (IMF) between January-September 1991:
Introduction of India Development Bond Scheme and Immunity Scheme for repatriation of funds held abroad in October 1991, under which more than $2 billion were mobilised during 1991-92,
Bringing back of gold earlier pledged to the Bank of England and the Bank of Japan Continuance of the measures of import control and credit squeeze
Administered licensing of imports replaced by freely tradeable import entitlements (called Exim Scrips) linked to export earnings. The measure was expected to introduce self balancing mechanism in India's foreign trade, Introduction of Liberalised Exchange Rate
Management System (LERMS) under which a dual exchange rate system was established, one rate being effectively floated in the market, and
Import licensing in most capital goods, raw materials, intermediates and components eliminated. Advance Licensing System considerably simplified. The initial series of measures set the tone for the future economic reforms. Any of the measures taken above was continued to form a part of the ongoing reform process
State few effects of such reforms on Indian business and industry

Explanation

Effects of Liberalisation policy on business and industry
(a) Increasing competition
(b) More demanding Customers
( c) Market orientation