Which one of the following is correct regarding stabilization and structural adjustment as two components of the new economic policy adopted in India?
A
Stabilization is a gradual, multi-step process while structural adjustment is a quick adaptation process
B
Structural adjustment is a gradual, multi-step process, while stabilization is a quick adaptation process
C
Stabilization and structural adjustment are very similar and complementary policies. It is difficult to separate one from the other
D
Stabilization mainly deals with a set of policies which are to be implemented by the Central Government while structural adjustment is to be set in motion by the State Governments
Correct Answer: Option B
Explanation
1. The new economic policy adopted in India (since 1991) comprised two main components: stabilization and structural adjustment.
2. Stabilization measures are typically short-term policies aimed at controlling inflation, reducing fiscal deficit, and correcting the balance of payments deficit. They involve demand-side management and are usually implemented relatively quickly to restore macroeconomic stability. Hence, it is a 'quick adaptation process'.
3. Structural adjustment measures are long-term policies aimed at improving the efficiency and competitiveness of the economy. They involve supply-side reforms like deregulation, privatization, trade liberalization, and reforms in the financial sector. These reforms are complex and take time to implement and yield results. Hence, it is a 'gradual, multi-step process'.
4. Therefore, structural adjustment is a gradual process, while stabilization is a quick adaptation process.