Macro Economics Case – Group 12
An analysis of National Incomes are as shown. The graphs below show the trend in Gross national Income and Net National Income. Analysis of National Income trend since 1951
Analysis from 1990-91
Now, coming to identifying the inflexion points in analyzing the National Income from 1990-91, we are able to find multiple inflexion points. Although such is the case, we would like to choose the point where there is a dramatic inflexion. Based on this opinion we would like to choose the year 1991-92 as the inflexion point over the time period in discussion. Let us now have a look at the reasons for this dramatic change in National Income by identifying the reasons. Indian economy had experienced major policy changes in early 1990s. The new economic reform, popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making the Indian economy as fastest growing economy and globally competitive. The series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient. Slower economic growth and higher inflation in the fiscal years 1990 and 91 increased the population below poverty line to 38% reversing the previous trends until then. The balance of payments BoP crisis of 1990 and subsequent policy changes led to a temporary decline in the GDP growth rate which fell from 4.9% in FY 1990 to 1.1% in 1991. The crisis in 1991 was caused by currency over-valuation, the CAD and Investor confidence played a significant role in the sharp exchange rate depreciation. The gulf war was also one of the reasons contributing to this inflexion. Oil Imports bill swelled, exports slumped and credit dried up which led to investors taking back their investments from India. The Central Government fiscal deficit had expanded steadily...
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