ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

1990sSubscribe to 1990s

Foreign Direct Investment in India in the 1990s

This paper documents the trends in foreign direct investment in India in the 1990s, and compares them with those in China. Noting the data limitations, the study raises some issues on the effects of the recent investments on the domestic economy. Based on the analytical discussion and comparative experience, the study concludes by suggesting a realistic foreign investment policy.

Poverty in India in the 1990s

The authors examine the poverty situation in 15 major states across four distinct dimensions of headcount ratio, size of the poor population, depth and severity for the rural, the urban and the total population. The poverty situation, they find, worsened over the six-year period 1993-94 to 1999-2000 in Assam, Madhya Pradesh and Orissa. In the remaining 12 states there was a distinct improvement in terms of the most visible indicator, namely, the absolute size of the poor population. Overall, despite diversity across poverty indicators and across states, the overwhelming impression is one of greater improvement in the poverty situation in the 1990s than in the previous 10�½-year period.

Financial Exuberance

There have been significant financial sector reforms through the 1990s. One of the major policy changes affecting the financial markets has been reduction in government's recourse to claims on loanable funds through statutory liquidity ratio as well as high levels of Cash Reserve Ratios. The central government has switched to market borrowing to finance its fiscal deficit on a larger scale than before. There is a general move towards market determined rates and flows in the financial sector. One area where administered rates are still important is the small saving instruments. The government sets these interest rates and mobilises funds for meeting the fiscal deficits at the centre and more so at the state level. If these rates were to be determined by the markets, what would happen to the interest rates in general. One argument is that the small saving rates act as a floor to the deposit rates of the banking sector and hence also determine the lending rates. If the overall balance of demand and supply of loanable funds is such that interest rates can be lower, the small saving rates do not let that emerge. Further, as interest rates decline, there would be significant gains in economic growth. This paper is an attempt to examine this viewpoint. We develop a monetarist model of the economy and assess the implications of alternative methods of financing the fiscal deficit of the government, central and states combined. The results support the view that overall interest rates would decline if the small saving rates were to be liberalised but the gains in economic growth would not be dramatic.

An Analysis of India's Exports during the 1990s

This paper has two broad objectives: First, identify a set of factors that appear to be responsible for a significant decline in India's export growth during the post-reform era, and second, an examination of the possible impediments for high export growth in a sustained manner. The decline in Indian exports during 1996-97 was due mainly to a fall in the growth rate of export volumes. This analysis brings out the nature of demand-side factors, as against supply-side bottlenecks, that have constricted the growth of exports. However, easing of supplyside constraints too would have aided the revival of export growth.

Has Poverty Declined in India in the 1990s?

The issue of poverty reduction in India has been a subject of debate for long. Following the initiation of economic reforms in 1991 the issue has gained added importance in that the question being asked is, has growth trickled down. The answer to the question has depended on the data used, and which data who has used has largely been guided by faith. Believers in National Sample Survey (NSS) hold that poverty has not come down whereas nonbelievers hold that poverty has come down rapidly in the 1990s.

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