End of license raj
On 24 July 1991, Prime Minister Narasimha Rao announced the end of the license-permit Raj and Finance Minister Manmohan Singh presented a historic budget that rolled out economic liberalisation in India.
It proposed getting rid of the Monopolies and Restrictive Trade Practices asset limit totally. Industrial licensing would be abolished for all projects except for a small list of 18 industries.
Financial sector reforms :
- Reduce the role of RBI from regulator to facilitator of financial sector.
- These reforms led to the establishment of private banks.
- FDI in banks was raised to 50%.
- But certain managerial aspects have been retained with the RBI, to safeguard the interests of the account holders.
Tax reforms
- Corporate tax, which was very high earlier has been gradually reduced.
- The tax procedures have been simplified and the rates also have been lowered.
- In 1973-74 there were 11 tax slabs, with rates from 10 to 85 per cent. In 1990-91 In five Budgets between 1991-96, FM Manmohan Singh reduces IT slabs to three (20, 30 and 40 per cent).
Trade and investment policy reforms
- Dismantling of quantitative restrictions on imports.
- Reduction of tariff rates(taxes on imports)
- Removal of licensing procedures for imports except in case of hazardous and environmentally sensitive products
- Quantitative restriction on imports was also fully decreased later.
- Export duties have been removed to promote exports.