First Steps towards Liberalising the Economy

The first budget presented by the Rajiv Gandhi government— by the finance minister, V.P. Singh—sought to remove some of the controls that were stifling the growth of the economy. Besides simplifying the licensing scheme, the trade regime was liberalised with reduction in duties on several import items and incentives to promote exports. Tax rates were reduced and curbs on company assets were loosened. As a result of these steps, business houses did well, and the growth rate of industry was good. However, the period also saw businessmen and politicians getting closer with the former doling out gifts (even of money) that were eagerly accepted by the latter for favours done. Real estate became a potent source of corruption and unaccounted money with the politicians.

However, by the end of his term as prime minister,

Rajiv Gandhi, faced with several problems in the country, went back to populism. Taxes were increased on consumer durables and air travel made more expensive. In April 1989, the National Rural Employment Programme (NREP) and the

Rural Landless Employment Guarantee Programme (RLEGP) were merged into a single programme, the Jawahar Rozgar Yojana.