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Front Cover -- Title Page -- Copyright Information -- Table of Contents -- Preface -- Foreword -- Part I: Introduction -- The Road to the 1991 Industrial Policy Reforms and Beyond: A Personalized Narrative from the Trenches -- Part II: The Big Picture: Past, Present and Future -- India's 1991 Reforms: A Retrospective Overview -- Remembering 1991 . . . and Before -- The Political Economy of Reforms: The Art of the Possible -- India's Entry into the Global Economy -- Trade-policy Reform in India Since 1991 -- Part III: Foreign and Security Policy for a Resurgent India -- Foreign Policy in the Wake of Economic Reforms: New Options and Friends -- Navigating the Post-Cold War Landscape: India's Rise in a Contested Geopolitical Space -- Security and Sovereignty in an Open Economy: New Thinking after 1991 -- Part IV: Changing Contours of Indian Governance -- India's Governance Challenges: Why Institutions Matter -- Changing Colours of Government-Business Relations -- Union-State Relations and Reforms -- Energizing the States -- Part V: The Parts of The Whole: Sectoral Developments -- 25 Years of Policy Tinkering in Agriculture -- Indian Manufacturing Industry: On the Path to Global Leadership -- Political Economy of Petroleum Sector Deregulation -- India Evolving: Infrastructure since 1991 -- Infrastructure: Hopefully a Renewed Opportunity for the Private Sector -- Part VI: Human Development: Miles to Go -- Liberalization sans Liberalism: The Control Raj and the Perils of Ideology and Rents in Higher Education -- Healthcare in India: A Fork in the Road -- Part VII: The Financial Sector: An Opportunity for Innovation and Growth -- Reforms and the Transformation of the Monetary and Banking Sectors -- Liberalizing Indian Capital Markets: Highly Successful Reforms and an Unfinished Agenda -- Institution-Building in the Financial Sector: The HDFC Experience

In 2008 - 09 the world experienced the most severe financial and economic crisis since the Great Depression. The global financial crisis is attributed to a variety of factors, such as developments in the subprime mortgage sector, excessive leverage, lax financial regulation and supervision, and global macroeconomic imbalances. At a fundamental level, however, the crisis also reflects the effects of a long period of excessively loose monetary policy in the major advanced economies during the early part of this past decade. The global financial crisis has led to a new wave of thinking on all issues related to both monetary policy and financial regulation. The practice of both monetary policy and financial regulation had tended to become too formula bound and hence predictable. While these new principles are being debated, it is important to realize that in the face of unexpected developments that always arise in the financial sector, there is an important role for the exercise of judgment by both monetary authorities and financial regulators. Whereas considerable progress has been achieved on the principles governing this regulatory overhaul, very significant challenges remain on the implementation issues that will arise as a new regime takes hold globally.

India embarked on a strategy of economic reforms in the wake
of a serious balance-ofpayments crisis in 1991. A central plank of the
reforms was reform in the financial sector and, with banks being the
mainstay of financial intermediation, the banking sector. The objective
of the banking sector reforms was to promote a diversified, efficient
and competitive financial system with the ultimate objective of
improving the allocative efficiency of resources through operational
flexibility, improved financial viability and institutional
strengthening. Beginning from 1992, Indian banks were gradually exposed
to greater domestic and international competition. India's approach to
banking reforms has been somewhat different from many other countries.
Whereas there has not been privatisation of public sector banks, through
a process of partial disinvestment a number of public sector banks have
been listed in Stock Exchanges and have become subject to market
discipline and greater transparency in this manner. Besides, newly
opened banks from the private sector and entry and expansion of several
foreign banks resulted in greater competition. Consequent to these
developments, there has been a consistent decline in the share of public
sector banks in total assets of commercial banks and a declining trend
of Herfindahl's concentration index. Improvements in efficiency of the
banking system were reflected in a number of indicators, such as, a
gradual reduction in cost of intermediation (defined as the ratio of
operating expense to total assets) in the post reform period across
various bank groups (barring foreign banks), and decline in the
non-performing loans. As a result of these changes, there has been an
all-around productivity improvement in the Indian banking sector. While
the cost income-ratio (i.e., the ratio of operating expenses to total
income less interest expense) as well as net interest margin (i.e., the
excess of interest income over interest expense, scaled by total bank
assets) of Indian banks showed a declining trend during the post-reform
period, the business per employee of Indian banks increased over
three-fold in real terms exhibiting an annual compound growth rate of
nearly 9 percent. At the same time, the profit per employee increased
more than five-fold, implying a compound growth of around 17 percent.
Branch productivity also recorded concomitant improvements. Such
productivity improvements in the banking sector could be driven by two
factors: technological improvements, which expands the range of
production possibilities and a catching up effect, as peer pressure
amongst banks compels them to raise productivity levels. As far as the
future of Indian banking is concerned, a number of issues, such as the
credit to small and medium enterprises, customers' interests and
financial inclusion, reducing procedural formalities, listing of the
public sector banks in the stock exchange and related market discipline
are of paramount importance.