Positive impacts of LPG Reforms on Indian Economy

1. Increase in GDP growth rate

  India’s GDP growth rate is increased. During 1990-91 India’s GDP growth rate was only 1.1% but after 1991 reforms due LPG policy India’s GDP growth rate is increased year by year and in 2017 it was recorded 7.2 and in 2016-17 it was estimated to be 7-7.5% by IMF.

  Because of the Abolition of Industrial licensing, privatisation, advanced foreign technology and Reduction of taxes India’s GDP is increased after 1991 reforms.


2. Increase in Foreign Direct Investment (FDI):

  India has already marked its presence as one of the fastest growing economies of the world.

  It has been ranked among the top 3 attractive destinations for inbound investments.

  Since 1991, the regulatory environment in terms of foreign investment has been consistently eased to make it investor-friendly.

  India has also firmly established itself as a lucrative foreign investment destination. Foreign direct investment inflows hit an all-time high of $60.1 billion in 2016-17.

  India’s forex reserves have been rising with a total accretion of $4.389 billion to the kitty since 14 July 2017. It had touched a record high of $393.448 billion after it rose by $581.1 million in the week to 4 August 2017.

  India has allowed 100% FDI in medical services, Telecom sector, and single brand retail etc.


3. Increase in per capita income-

  Per capita income or average income measures the average income earned per person in a given area (city, region, country, etc.).

  It is calculated by dividing the area’s total income by its total population.

  In 1991 India’s Per capita Income was Rs. 11235 but in 2014-15 Per Capita Income is reached to Rs.85533.

  Per Capita income is increased due to Increase in Employment, due to new economy policy of globalization and privatization many job opportunities are created so, and people’s income was increased.


4. Unemployment rate is reduced-

 In 1991 unemployment rate was 4.3% but after India adopted new LPG policy more employment is generated. Because of globalization many new foreign companies came in India and due to liberalization many new entrepreneurs have started new companies because of an abolition of Industrial licensing / Permit Raj so, employment is generated, and due to which India’s unemployment rate is reduced from 4.3% in 1991 to 3.6% in 2014. However recent trends shows an increase in unemployment rate. “Unemployment in India is projected to increase from 17.7 million last year to 17.8 million in 2017”- United Nations, ILO


5. Privatization has resulted into reduction of the government’s financial and administrative burden.



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