of monetary policy. during the first phase of financial sector reforms, various structural rigidities were eased, so as to bis central bankers ’ speeches increase participation in financial markets as well as develop and strengthen inter - linkages amongst market segments, and foster competition. the focus of various reform measures in financial market was on ensuring adequate liquidity in various segments of the market spectrum, and developing the regulatory, legal, institutional and technological infrastructure for orderly functioning of market activity. in the second phase of reforms, more sophisticated financial instruments were introduced. further, issues relating to the stability of financial markets received priority in the policy agenda. the key objective of the external reforms was to move to a more open trade regime by correcting for the implicit anti - export bias. moreover, there was a greater recognition of the need to view trade policies, exchange rate policies and industrial policies in an integrated manner. in pursuance of this, the administered exchange rate regime gave way to a flexible market - determined system. the exchange rate has since been guided by underlying demand and supply conditions and the broad principles of careful monitoring and management of exchange rates with flexibility, without a fixed or preannounced target or band. the trade policy reforms comprised withdrawal of the quantitative restrictions on exports and imports, phasing out of the system of import licensing and lowering the level and dispersion of nominal tariffs so as to bring them on par with the east asian economies. the peak customs tariff rate was progressively brought down from 150 per cent in 1991 – 92 to 10 per cent by 2008 – 09. the liberalization of restrictions on various external transactions led to current account convertibility under article viii of the articles of agreement of the imf in 1994. with respect to capital account liberalization, india embarked on a gradual and well sequenced opening up of the capital account. the active capital account management framework was based on a preference for non - debt creating capital inflows like foreign direct investment and foreign portfolio investment. the capital account is virtually free for nonresidents and resident corporates with some restrictions on financial institutions and higher restrictions on resident individuals. economic progress post - 1991 the initiation of economic reforms in the 1990s saw india gradually breaking free of the low growth trap which was euphemistically called the “ hindu growth rate ” of 3. 5 per cent per annum. real gdp growth averaged 5. 7 per cent per annum in the 1990s, which accelerated further to 7. 3 per cent per annum in 2000s. a

feature of the growth acceleration during the period was that while the growth rate of industry and services increased that of agriculture fell. this was because there was no notable technological breakthrough after the “ green revolution ” of the mid - 1960s which saw sharp increase in yields of cereal production particularly in northern part of india. by the 1990s, the momentum of “ green revolution ” had died down. consequently, the yield increases in the 2000s were much lower than those experienced even in the 1990s. notably, the decade of the 2000s encompassed the inflexion point in the growth trajectory with an annual average gdp growth of about 9 per cent for the 5 - year period 2004 – 08. growth in all the sub - sectors of the economy, including agriculture, accelerated during this period. however, this growth process was interrupted by the global financial crisis. subsequently, the average growth slowed down to 7. 8 per cent during 2009 – 11 with a noticeable slow down in both agriculture and industry. the growth dynamics altered the structure of the indian economy with a decline in the share of agriculture from 28. 4 per cent in the 1990s to about 15 per cent in 2009 – 11. there was corresponding gain in the share of services, including construction, from 52 per cent to 65 per cent during the same period. what is, however, of concern is that the share of industry has remained unchanged at around 20 per cent of gdp. this suggests that india ’ s growth acceleration during the last two decades has been dominated by the services sector. bis central bankers ’ speeches the pace of average annual industrial growth had nevertheless picked up from 5. 7 per cent during the 1990s to 9 per cent during 2004 – 08 before being interrupted by the global financial crisis ( table 1 ). while the share of industry in gdp remained stagnant, there was noteworthy structural transformation in manufacturing over the period. as a process of restructuring, while the gross value added in organized manufacturing increased by 8 per cent per annum at current prices, employment fell by 1. 5 per cent per annum during 1995 – 2003. subsequently, during 2004 – 09 gross value added growth accelerated to 20 per cent per annum at current prices ; but significantly, employment also increased by 7. 5 per cent per annum. with work participation rate of 39. 2 per cent, india had a workforce of 400 million in 2009 – 10. of this, 53 per cent was in agriculture and the rest 47 per cent in non - agricultural activity. while the bulk of the employment is in agriculture despite