UNIT 1
New Economic Policy
New Economic Policy of India was launched in the year 1991 under the leadership of P. V.
Narasimha Rao. This policy opened the door of the India Economy for the global exposure for
the first time. In this New Economic Policy P. V. Narasimha Rao government reduced the import
duties, opened reserved sector for the private players, devalued the Indian currency to increase
the export. This is also known as the LPG Model of growth.
Objectives of New Economic Policy 1991
Enter into the field of ‘globalization’ and make the economy more market-oriented.
Reduce the inflation rate and rectify imbalances in payment.
Increase the growth rate of the economy and create enough foreign exchange reserves.
Stabilize the economy and convert the economy into a market economy by the removal of
unwanted restrictions.
Allow the international flow of goods, capital, services, technology, human resources,
etc. without too many restrictions.
Enhance the participation of private players in all sectors of the economy. For this, the
reserved sectors for the government were reduced to just3.
Economic Reforms in India 1991
Economic reforms in India 1991 indicate the onset of the country’s economy to increase the
function of the private sector and international investment. In 1991, India faced an unusual
economic crisis, leading to reforming its absolute financial position and fundamental
transformation in monetary policy. The main objective of the Economic reforms in India 1991
was to penetrate the domain of globalization and drive the economy to be more market-aligned.
The Indian Government launched stabilization guidelines that strived to fix the imperfections on
the fiscal and BOP fronts and structural reforms that aimed to remove the inflexibility in several
Indian economic sectors. Economic reforms in India 1991 got in LGP reforms in the country,
including liberalization, Globalization, and Privatization. This article illustrates major economic
reforms in India 1991, essential steps taken under these reforms, why the 1991 reforms got
implemented, their strong impact and the limitations that followed.
The major components of the economic reforms in India 1991 comprised Liberalization,
Privatization, and Globalization. The Government of India aimed to open up the economy by
applying these measures and load India to evolve as a market economy from the old Soviet-
model economy.
The initiation was started in 1991 and is still a continuing procedure.
Economic reforms were expected to recall various international actions like the
destruction of the socialist economy and the rising endorsement of economic
globalization worldwide.
Steps under economic reforms of 1991
The branches of the new economic policy are threefold:
1. Liberalization
2. Privatization
3. Globalization
The government sought to open up the Indian economy through these measures and gear India
from a Soviet-model economy to a market economy. This is an ongoing process and the
initiation was done in 1991.
Steps taken under Liberalisation
1. Commercial banks were given the freedom to determine interest rates. Previously,
the Reserve Bank of India used to decide this.
2. The investment limit for small scale industries was raised to Rs. 1 crore.
3. Indian industries were given the freedom to import capital goods like machinery and raw
materials from foreign countries.
4. Previously, the government used to fix the maximum production capacity of industries.
Now, the industries could diversify their production capacities and reduce production
costs. Industries are now free to decide this based on market requirements.
5. Abolition of restrictive trade practices: Previously, companies with assets worth more
than Rs.100 crore were classified as MRTP firms (as per Monopolies and Restrictive
Trade Practices (MRTP) Act 1969), and were subject to severe restrictions. These were
lifted.
6. Industrial licensing and registration were removed: as per this, the private sector is free to
start a new venture of business without obtaining licenses except for the following sectors
(which still need licenses):
1. Cigarette
2. Liquor
3. Industrial explosives
4. Defence equipment
5. Hazardous chemicals
6. Drugs
Steps taken under Privatisation
Privatization refers to opening up the private sector to industries that were previously reserved
for the government sector. This chiefly involved selling the PSUs (private sector undertakings) to
private players. This was meant to remove the political interference in PSUs which was making
them models of inefficiencies.
The following steps were taken under the privatization reforms:
1. Selling shares of PSUs to the public and financial institutions. For example, shares of
Maruti Udyog Ltd. were sold to private parties.
2. Disinvestment in PSUs. This means selling PSUs to the private sector.
3. The number of industries that were reserved for the public sector was decreased from 17
to only 3. These are:
1. Transport and railway
2. Atomic energy
3. Mining of atomic minerals
Steps taken under Globalisation
Globalization refers to opening up the economy more towards foreign investment and global
trade.
1. Reduction in tariffs: a gradual reduction in the customs duties and tariffs on exports and
imports to make India attractive to global investment.
2. Long term trade policy: trade policy was enforced for a longer duration. The main
features of the trade policy are:
1. Liberal policy
2. Encouragement of open competition
3. Controls on foreign trade were removed
3. Before 1991, imports to India were regulated by a positive list of freely importable items.
From 1992 onwards, the list was replaced by a limited negative list. Almost all
intermediate and capital goods were freed from the list for import restrictions.
4. The Indian currency was made partially convertible.
5. The equity limit of foreign capital investment was raised from 40% to 100%. The Foreign
Exchange Management Act (FEMA) was enacted replacing the draconian Foreign
Exchange Regulation Act (FERA).
The economic reforms of 1991 led to widespread economic development in the country. Many
sectors such as civil aviation and telecom saw great leaps from deregulation and surged ahead.
India is also home to many start-ups and mushrooming businesses because of the end of the
dreaded License Raj. The process is, however, far from complete and many areas need
improvement.
नई आआआआआआ आआआआ
भभभभ भभ नई भभभभभभ भभभभ भभभभ 1991 भभभ भभ. भभ. भभभभभभभभ भभभ
भभ भभभभभभभ भभभ भभभभ भभ गई भभभ इस भभभभ भभ भभभभ भभभ भभभभभभभ
भभभभभ भभ भभभ भभभभभभ भभभभभभभभभभभभ भभ भभभभभ भभभभभ इस नई
भभभभभभ भभभभ भभभ भभ. भभ. भभभभभभभभ भभभ भभभभभ भभ भभभभ भभभभभ
कम भभभभ, भभभभ भभभभभभभभभभ भभ भभभ भभभभभभभ भभभभभभभ भभभभ,
भभभभभभभ भभभभभभ भभ भभभ भभभभभभ भभभभभभ भभ भभभभभभभभ भभभभभ
भभभ भभभभभ भभ भभभभभभ भभभभ भभ भभभ भभभ भभ भभभभ भभभभ भभभ
नई आआआआआआ आआआआ 1991 आआ आआआआआआआआ
• 'भभभभभभभभभ' भभ भभभभभभभ भभभ भभभभभभ भभभभ औरभभभभभभभभभभभभ भभ भभभभ
भभभभभभभभभभभ भभभभभभ
• भभभभभभभभभभभभ भभ दर कमभभभभ औरभभभभभभ भभभ भभभभभभभ भभ भभभभभभभभ
• भभभभभभभभभभभभ भभ भभभभभ दर भभभ भभभभभभ भभभभ औरभभभभभभभभ भभभभभभ
भभभभभभ भभभभभ भभभभभभ
• भभभभभभभ भभभभभभभभभभ भभ भभभभभ भभभभभभभभभभभभ भभ भभभभभ भभभभ और
भभभभभभभभभभभभ भभ भभभभभ भभभभभभभभभभभभ भभभ भभभभभभ
• भभभभ भभभभ भभभभभभभभभभ भभ भभभभ भभभ, भभभभभ, भभभभभभ, भभभभभभभभभभभभ,
भभभभ भभभभभभ भभभ भभ भभभभभभभभभभभभभभ भभभभभभ भभ भभभभभभ भभभभ
• भभभभभभभभभभभभ भभ भभभ भभभभभभभभभ भभभ भभभभ भभभभभभभभभभ भभ
भभभभभभभभ भभभभभभभ भभभभ भभभ भभभभभ भभ भभभ भभभभभभभ भभभभभभभभभ भभ
भभभभभ भभभभभ 3 कर भभभभ भभभभ
आआआआ आआआ आआआआआआ आआआआआ 1991
भभभभ भभभ 1991 भभ भभभभभभ भभभभभ भभभभ भभभभभभभ औरभभभभभभभभभभभभभभ
भभभभभ भभ भभभभभ भभ भभभभभभ भभ भभभ भभभ भभ भभभभभभभभभभभभ भभ भभभभभभ
भभ भभभभभ भभभभ भभभभ 1991 भभभ, भभभभ भभ एकभभभभभभभभ भभभभभभ भभभभ भभ
भभभभभ भभभभ भभभभ, भभभभभ भभभभ भभभभभ भभभभभभभ भभभभभभ भभभ भभभभभ भभभ
औरभभभभभभभ भभभभ भभभ भभभभभ भभभभभभभभ भभभभ भभभभ भभभ 1991 भभभ भभभभभभ
भभभभभभभ भभ भभभभभ भभभभभभभभ भभभभभभभभभ भभ भभभभभभभ भभभ भभभभभभ
भभभभ औरभभभभभभभभभभभभ भभ भभभभ भभभभभ-भभभभभभभ भभभभ भभ भभभ भभभभभभभ
भभभभ भभभ
भभभभ भभभभभ भभ भभभभभभभभभ भभभभभभभभभभभ भभभभ भभभ भभ भभभभभभभभ और
भभभभभभ भभभभभभ भभभभभभभ औरभभभभभभभभभभ भभभभभभभ पर भभभभभभभ भभ भभभ
भभभभ भभ भभभ भभभभभभभभ भभ, भभभभभ भभभभभभभभ कईभभभभभभ भभभभभभ
भभभभभभभभभ भभभ भभभभभभभ भभ भभभ भभभभ भभभ भभभभ भभभ भभभभभभ भभभभभ
1991 भभभ भभभभभभभभ, भभभभभभभभभ औरभभभभभभभ भभभभ भभभ भभभ भभभभभभ
भभभभभ भभभभ यह भभभ भभभभ भभभ 1991 भभ भभभभभभ भभभभभभ भभभभभभभ, इन
भभभभभभभ भभ तहत भभभभ गए भभभभभभ भभभभभ, 1991 भभ भभभभभभभ भभ भभभभभ भभभभ
भभभभ भभभ, भभभभ भभभभभ भभभभभभ औरभभभभ भभभ भभ भभभभभभ भभ भभभभभभभ भभभ
1991 भभभ भभभभ भभभ भभभभभभ भभभभभभभ भभ भभभभभभ भभभभभ भभभ
भभभभभभभभ, भभभभभभभ और भभभभभभभभभ भभभभभ भभभ भभभभ भभभभभ भभ
भभभभभभभभ इन भभभभभभ भभ भभभभ भभभभ भभभभभभभभभभभभ भभ भभभभभ और
भभभभ भभ भभभभभभ भभभभभभ-भभभभ भभभभभभभभभभभभ भभ भभभभभ
भभभभभभभभभभभभ भभ भभभ भभभ भभभभभभ भभभभ भभ भभभ भभभ भभभभ भभभ
• भभभभभभ 1991 भभभ भभभभ भभ गई भभ और भभभ भभ एक सतत भभभभभभभभभ
भभभ
• भभभभभभ भभभभभभभ भभ भभभभभभभभ भभभभभभभभभभभभ भभ भभभभभ और
भभभभभभ भर भभभ भभभभभभ भभभभभभभभभ भभ भभभभभ भभभभभभ भभभभ
भभभभभभभ भभभभभभभभभभभभभ भभभभभभभभभभभ भभ भभभ भभभ भभ भभभभभभ
भभभ
1991 आआ आआआआआआ आआआआआआआ आआ तहत कदम
नई आआआआआआ आआआआ आआ आआआआआआ आआआ आआआआ आआआ:
1. भभभभभभभभ
2. भभभभभभभ
3. भभभभभभभभभ
भभभभभ भभ इन भभभभभभ भभ भभभभभभ भभ भभभभभभ भभभभभभभभभभभभ भभ भभभभभ और
भभभभ भभ भभभभभभ-भभभभ भभभभभभभभभभभभ भभ भभभभभ भभभभभभभभभभभभ भभभ
भभभभभ भभ भभभभ भभभ यह एकसतत भभभभभभभभभ भभ औरभभभभ भभभभभभ 1991 भभभ भभ
गई भभभ
आआआआआआआआ आआ तहत आआआआ गए कदम
भभभभभभभभभ भभभभभभ भभ भभभभभ भभभभ भभभभभभभभभ भभभभ भभ भभभभभभभभभभ
भभ गई। भभभभ यह भभभभभ भभभभभभ भभभभ ऑफ
भभभभभभ भभभभ भभभ
भभभ भभभभभभभभ भभ भभभ भभभभभ भभ भभभभ भभभभभभ भभ. 1 भभभभभ
भभभभभभ भभभभभभभभ भभ भभभभभभभ भभ भभभभभभ औरभभभभभ भभभ भभभभ भभभभभभभ
भभभभभभभ भभ भभभभ भभ भभभभभभभभभभ भभ गई।
भभभभ भभभभभभभभ भभ भभभभभभ भभभभभभभ भभभभभभ भभभभभ तय भभभभ भभभ अब,
भभभभभभ भभभभ भभभभभभभ भभभभभभ भभभ भभभभभभभ भभ भभभभ भभभ औरभभभभभभभ
भभभभ कमकर भभभभ भभभभ भभभभभभ अबभभभभभ भभ भभभभभभभ भभ भभभभ पर भभभ तय
भभभभ भभ भभभ भभभभभभभभ भभभभ
भभभभभभभभभभभभभ भभभभभभभ भभभभभभभ भभ भभभभभभभ: भभभभ, 100 भभभभभ
भभभभभ भभ भभभभ भभ भभभभभभभ भभभभ भभभभभभभभ भभ MRTP भभभभभभ (भभभभभभभभ
औरभभभभभभभभभभ भभभभभभभ भभभभभभभ (MRTP) भभभभभभभ 1969 भभ भभभभभभ) भभ
भभभ भभभ भभभभभभभभ भभभभ भभभ भभ, औरभभ भभभभभ भभभभभभभभभभ भभ भभभभ
भभभभ भभभभभभ भभभ भभभभ भभभभ
भभभभभभभभ भभभभभभभभभभ औरभभभभभभभ भभ भभभ भभभभ भभभ: भभभभ भभभभभभ,
भभभभ भभभभभभभ भभभभभभभभभभ भभभभभभभभभ भभ भभभभभभ (भभभभभभभ भभभ भभ
भभभभभभभ भभ भभभभभभभभ भभ) भभभभभभभ भभभभभभभ भभभ भभभभ भभभभभभभ भभ एक
भभभ भभभभभ भभभभ भभभभ भभ भभभ भभभभभभभभ भभ:
भभभभभभ
भभभभ
भभभभभभभभ भभभभभभभभ
भभभभभ उपकरण
भभभभभभ भभभभभ
भभभभभभ
आआआआआआआ आआ तहत आआआआ गए कदम
भभभभभभभ भभ भभभभभभभभ भभभभ भभभभभभभ भभ उन भभभभभभभभ भभ भभभ भभभभभ
भभ भभ भभभभ भभभभभभ भभभभभभभ भभ भभभ भभभभभभभ भभभ भभभभभ भभभभभ भभभ भभ
भभभभभभभभभ भभभभभभभभ (भभभभ भभभभभभभ भभ भभभभभभभभ) भभ भभभभ
भभभभभभभभभभ भभ भभभभभ भभभभभ भभभ भभभभ भभभभभभभभ भभभभभभ भभभ
भभभभभभभभ भभभभभभभभभ भभ भभभ भभभभ भभ भभ भभभभभभ भभभभभभभभभ भभ भभभभ
भभभ भभभ भभभ
आआआआआआआ आआआआआआआ आआ तहत आआआआआआआआआआ कदमआआआआ गए:
भभभभ औरभभभभभभभ भभभभभभभभभ भभ भभभभभभभभभ भभभभभभभभ भभ भभभभ
भभभभभभ भभभभभभ भभ भभभ, भभभभभभ भभभभभभ भभभभभभभ भभ भभभभ भभभभ
भभभभभभभभभ भभ भभभभ गए।
भभभभभभ भभभ भभभभभभभभ भभभभ मतलबभभ भभभभभभभभभ भभभभभभभभ भभ भभभभ
भभभभभभभ भभ भभभभभभ
भभभभभभभभभ भभभभभभभ भभ भभभ भभभभभभभ भभभभभभभभ भभ भभभभभभ 17 भभ
भभभभभ भभभभ 3 कर भभ गई। भभ भभभ:
भभभभभभ औरभभभभभ
भभभभभभ भभभभभ
भभभभभभ भभभभभभ भभ खनन
आआआआआआआआआ आआ तहत आआआआ गए कदम
भभभभभभभभभ भभ भभभभभभभभ भभभभभभभभभभभभ भभ भभभभभभ भभभभभ और
भभभभभभभ भभभभभभभ भभ ओरभभभभ भभभभभ भभभ
आआआआआ आआआ आआआ: भभभभ भभ भभभभभभभ भभभभभ भभ भभभ भभभभभभ भभभभभ भभ भभभ
भभभभभभभ औरभभभभ पर भभभभ भभभभभ औरभभभभभ भभभ भभभभ-भभभभ भभभभ
आआआआआआआआआआ आआआआआआआ आआआआआ भभभभभभभ भभभभ भभ भभभभभभभभभभ भभभभ भभ
भभभ भभभभ भभभभ भभभभ भभभभभभभ भभभभ भभ भभभभभ भभभभभभभभभ भभभ:
आआआआ आआआआ
भभभभ भभभभभभभभभभभ भभ भभभभभभभभभभ
भभभभभभ भभभभभभभ पर भभ भभभभभभभभ भभभ भभभभ भभभ
1991 भभ भभभभ, भभभभ भभभ भभभभ भभ भभभभभ भभभ भभ भभभभ भभभभभ भभभभभभभ भभ
एकभभभभभभभभभ भभभभ भभभभभभ भभभभभभभभभ भभभभ भभभभ भभभ 1992 भभ भभभ भभ,
भभभभ भभ एकभभभभभ भभभभभभभभभ भभभभ भभ बदल भभभभ भभभभ लगभगभभभ
भभभभभभभभभ औरभभभभभभभ भभभभभभभ भभ भभभभ भभभभभभभभभभ भभ भभभभ भभ
भभभभभ कर भभभभ भभभभ
भभभभभभ भभभभभभ भभ भभभभभ भभभ भभ भभभभभभभभभभ भभभभभ भभभ भभभ
भभभभभभ भभभभभ भभभभभ भभ भभभभभभभ भभभभ 40% भभ भभभभभभ 100% कर भभ गई।
भभभभभभ भभभभभभ भभभभभभभ भभभभभभभ (भभभभ) भभ भभभभ भभभभभभ भभभभभभ
भभभभभभभ भभभभभभभ (भभभभ) भभ भभभभभ पर भभभभभभभभभ भभभभ भभभ भभभ
1991 भभ भभभभभभ भभभभभभभ भभ भभभभ भभभ भभभ भभभभभभ भभभभभभ भभभभभ भभभभ
भभभभभभ भभभभभभ औरभभभभभभभभ भभभभ कईभभभभभभभभभ भभ भभभभभभभ भभ भभभभ
भभभभभ भभभभ औरभभभ भभभभभ भभभभभभ भभभभभभभ भभभ भभ भभभभभभभ भभ भभभभ
भभभभ कईभभभभभभभ-अपऔरभभभभभभभभभभभ भभ भभभभभभभ भभ भभ घर भभभ
भभभभभभभ, यह भभभभभभभभभ भभभ भभभभ भभभभ भभभ भभ औरकईभभभभभभभभभ भभभ
भभभभभ भभ भभभभभ भभभ
