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Chapter 6 Ne

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16 views14 pages

Chapter 6 Ne

Uploaded by

yash d
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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In 1991,the Government of India initiated a series

of economic reforms to pull the economy out of


the crises of 90’s. These reforms came to be
known as New Economic Policy (NEP).
Components of NEP
1. Liberalisation (L) in place of Licensing (L) for the
industries and trade.
2. Privatisation (P) in place of Quotas (Q) for the
industrialists.
3. Globalisation (G) in place of Permits (P) for
exports and imports
LPG was set to replace LQP in 1991.
NEED FOR NEP OR
ECONOMIC REFORMS
*High Fiscal Deficit.
*Balance of Payments (BOP) Crises.
*Fall in Foreign Exchange Reserves.
*Inflationary Spiral (Rise in Prices).
*Poor performance of Public Sector
Undertakings (PSUs).
LIBERALISATION
Liberalisation of the economy means
freedom of the producing units from
direct or physical controls imposed
by the Government.
 Industrial Sector Reforms

 Financial Sector Reforms

 Fiscal Reforms

 External Sector Reforms.


1. INDUSTRIAL SECTOR REFORMS
* Abolition of Industrial licensing
* Contraction of Public Sector
* De – reservation of Production areas
* Expansion of production capacity
* Freedom to import Capital goods
2. FINANCIAL SECTOR REFORMS
Financial sector reforms refers to the reforms in
country’s monetary and banking policies.
Financial sector includes (i) banking and non –
banking financial institutions, (ii) stock exchange
market, and (iii) foreign exchange market.
3. FISCAL REFORMS
Fiscal reforms refer to increasing the revenue of the
government and lowering the expenditure in a
way that it causes no adverse effect on production
and economic welfare. Tax reforms are the
principal component of fiscal reforms.

4. EXTERNAL SECTOR REFORMS


External sector reforms include (i) foreign exchange
reforms and (ii) foreign trade policy reforms.
PRIVATISATION
Privatisation is the process of involving the
private sector in the ownership or
operation of a state owned enterprise.
Privatisation happens in two ways:
(a) Outright sale of the government
enterprises to the private entrepreneurs
(b) Withdrawal of the government
ownership and management from the
mixed enterprises.
GAINS AND LOSSES OF
PRIVATISATION
GAINS LOSSES
Privatisation implies Socialist pattern of the
supremacy of self – interest society is left to survive only
over social interest. as theoretical possibility.
It expects private enterprises
to work in a competitive Privatisation encourages the
environment – both free play of market forces.
domestic as well as But in the process, goods are
international. produced only for those who
It promotes diversification of have the means to buy them.
production.
It promote consumers’
sovereignty.
GLOBALISATION
Globalisation may be defined as a process
associated with increasing openness, growing
economic interdependence and deepening
economic integration in the world economy.
POLICY STRATEGIES PROMOTING
GLOBALISATION OF THE INDIAN
ECONOMY
 Increase in Equity Limit of
Foreign Investment
 Partial Convertibility
 Long – term trade Policy
 Reduction in Tariffs
 Withdrawal of Quantitative
Restrictions
Merits and Demerits of LPG Policies
MERITS DEMERITS
Vibrant Economy Neglect of Agriculture
Stimulant to Industrial
Production Urban concentration of
A check on Fiscal Deficit growth process
A check on Inflation
Consumer’s Sovereignty Economic colonialism
A Substantial increase in
Foreign Exchange Reserves Spread of consumerism
Flow of Private foreign
investment Lopsided growth process
Recognition of India as an
emerging Economic power Cultural erosion
A shift from Monopoly
Market to Competitive
Market

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