3

Reforms in the Financial System

Chapter Objectives

This chapter will enable you to develop an understanding of the following:

  1. Why reforms were initiated in India

  2. What the state was of the Indian Financial System in the pre-reforms period

  3. Objectives of financial system reforms.

  4. Achievements of reforms

BACKGROUND

The pre-reforms period, i.e., the period from the mid-1960s to the early 1990s was characterised by administered interest rates, industrial licensing and controls, dominant public sector, and limited competition. This led to the emergence of an economy characterised by uneconomic and inefficient production systems with high costs. This inefficient allocation and use of resources resulted in high capital-output ratios. Despite ...

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