Question

what were the root causes to either market failure or government failure or both for India 1991-1997

Answer 1

1) Skipping the manufacturing

As the new economic policies came in, the influx of international markets led to the crippling of Indian market which had the maximum amount of rural labor involved. The economic policies did not take care of the manufacturing that could sustantiate those who lost their jobs, and service sector was unable to secure the good amount of labor that were unemployed.

2) Lack of fiscal independence:

The loan from the IMF led to the fiscal paralysis of the Indian Economy as we would have to follow the guidelines of the monetory organization. One of the main problem was the lack of protectionism that was supposed tobe well thought by the government that did not take place.

3) Deficit not under control:

There are too many root causes for the crisis of 1991. One of them were the indiscriminate rise in government borrowing in earlier years. It was only to be expected therefore that after the crisis, the government would do all it could to curb its fiscal deficit and that of the states.

4) Lack of opportunities in the non-agricultural sector:

The government over-estimated the non-agricultural sector which led to the crippling of the employment generation. The start of the new economic policy which was supposed to generate employment actuaaly saw the lack of opportunities.

5) Lack of Saving and Investment:

It was quiet obivious that the people lacked the confidence after the public debt rose. The condition of investment in the country was not going to help as there was no security of the market or the government as well.