India's economic reforms: private corporate sector response
By: Joseph, Mathew et al.
Material type:
ArticlePublisher: 1998Description: p.43-63.Subject(s): Economic reform - India | Economic reform
In:
International Journal of Development BankingSummary: The economic reforms introduced in India from 1991 involved two aspects for the corporate sector: first, a physical one implying enhanced freedom to produce and trade, and second, financial, having access to more avenues of finance both domestically and globally. Industry and exports grew rapidly after reforms but the growth slowed in the last two years. The study examines the contours of corporate response to reforms based on representative samples of private companies for the period 1991-98. The study finds evidence of shifts in the pattern of finance to take advantage from the emergence of new cheaper sources of funds, large benefits from tax policy changes and limited cost reductions. The private corporate sector has built up large productive capacity during the post-reform period and while capacity utilisation has gradually improved, there exists large underutilized capacity particularly in intermediate and capital goods. Size-wise analysis indicates that the response from large firms has been the fastest but the return from capital employed of those firms has been the lowest. The study also brings out the increasing outward orientation of private firms with export intensity of sales overtaking the import intensity during the post-reform period. Finally, the paper notes a slow-down towards the last two years of the study and points to the need for a fresh round of reforms to rejuvenate the corporate sector. - Reproduced
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Articles
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Indian Institute of Public Administration | Volume no: 16, Issue no: 2 | Available | AR40998 |
The economic reforms introduced in India from 1991 involved two aspects for the corporate sector: first, a physical one implying enhanced freedom to produce and trade, and second, financial, having access to more avenues of finance both domestically and globally. Industry and exports grew rapidly after reforms but the growth slowed in the last two years. The study examines the contours of corporate response to reforms based on representative samples of private companies for the period 1991-98. The study finds evidence of shifts in the pattern of finance to take advantage from the emergence of new cheaper sources of funds, large benefits from tax policy changes and limited cost reductions. The private corporate sector has built up large productive capacity during the post-reform period and while capacity utilisation has gradually improved, there exists large underutilized capacity particularly in intermediate and capital goods. Size-wise analysis indicates that the response from large firms has been the fastest but the return from capital employed of those firms has been the lowest. The study also brings out the increasing outward orientation of private firms with export intensity of sales overtaking the import intensity during the post-reform period. Finally, the paper notes a slow-down towards the last two years of the study and points to the need for a fresh round of reforms to rejuvenate the corporate sector. - Reproduced
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