Business Environment

India was faced with a serious balance of payments (BOP) crisis in 1990-91, following a decade of expansionary policies, accompanied by both indiscriminate commercial borrowing abroad and trade liberalization, and in the immediate context of adverse international developments especially with respect to the price of oil. Thanks to the same expansionary policies financed by large scale internal borrowing and large budgetary deficits arising from an unwillingness to tax the rich to finance increased government spending, India also ran into a fiscal crisis, with government's revenues falling far short of expenditures. The twin crisis of BOP and fiscal crunch was used by the minority government of Narasimha Rao to push through a program of structural adjustment dictated by the World Bank and the IMF.

SWOT Analysis

STRENGTHS

 Government liberalized trade that means it has removed the tariff, subsidies and other restrictions on the flow of goods and services between countries.

 This also led to awareness or import of better production techniques or technology that may change input-output coefficients which may affect intermediate demand.

 Privatization helped in modernizing and diversifying the public sector units.

 Privatization helped in making public sector more competitive

 Privatization actually helped the revival of sick units that became a liability on the government

 Globalization involves increasing interaction among national economic system, more integrated financial markets, economies of trade, higher factor mobility, free flow of technology and spread of knowledge throughout the world.

 It improves the efficiency of resource, reduce the capital output ratio and increase labor productivity, help to develop the export spheres