Without a major injection of funds into Indias infrastructure, the economy could be on the edge of a financial crisis. In an effort to promote investment, the government has tried to do away with complex licensing and opened the doors to the private sector.
TThe private sector is slowly being allowed into previously reserved infrastructure sectors like power, telecommunications and petroleum. Complex licensing has been abolished for industrial undertakings except in nuclear power and defence. Price restrictions have been done away with. Import tariffs have been lowered, but remain relatively high at 65 percent.
In the deregulated financial sector, companies are now allowed to raise funds overseas. They can freely price public offerings of equity. Foreign Portfolio Investments have been permitted into the Stock Markets.
Private banks have been invited in. Foreign companies with 100 percent participation have also been permitted.
The rupee is a freely floating currency with full convertibility on the current account.
Reforms have infused fresh blood into India's economy. Commerce and industry have grown. Although the country still runs a hefty trade deficit, its foreign exchange reserves are healthy. Inflation has stayed below five percent. Fiscal deficit has been kept in check.