Question

Answer the following.

Explain the new economic policy in details.

Answer 1

new economic policy was introduced by the Government on 24th July, 1991, on the failure of the earlier Industrial policy prevailing in India.
The new policy was known as LPG i.e. Liberalisation, privatisation and Globalisation. This was the brain child of Prime Minister P. V. Narasimha Rao and the finance minister Dr. Manmohan Singh.
(1) Liberalisation:
It means to liberate the industry, trade, and commerce from the unnecessary restrictions and regulations that curtailed the freedom of enterprise. Liberalisation has helped the Indian economy to open up and allowed the entry e Interaction with the world has happened after the 1991 policy.

Liberalisation policy has brought about the following measures:
(a) Encouraging Direct Foreign Investment.
(b) Wide choice of products and services enjoyed by the customers.
(c) Reduction in control of Foreign Exchange.
(d) Cost of products, price, and quality in tune to the global markets.
(e)Changing the approach towards industrial sickness.
(f) Production of quality products to meet the competitive markets.
(g)Freedom to choose the scale of business.
(h) Reduction in tax rates, tax holidays, etc.
(i) Encouraging g new technology, technological up-gradation, and foreign collaboration.
(j) Import of machinery, goods, and other services on easy terms.
(k) Abolishing licensing system for most of the industries.
(l) Opening the telecommunication sector.
Liberalisation has thus made the country achieve a high growth rate, made the rupee stronger and helped good industrial relations.
(2) Privatisation:
Privatisation is a process of transferring ownership of the business, enterprise agency, or public service from the public sector (government) to the private sector.

Features of Privatisation are:
(a) To provide a variety of business units to consumers.
(b)To ensure less political interference in running the business.
(c)To bring about more accountability.
(d)To reduce labour problem.
(e)To bring about a market-oriented approach.
(f)To make the competition more intense.
(g)To bring about more efficiency.
(h)To maintain capital market discipline.
The government of the country has followed a disinvestment policy.

Disinvestment means:
When there is a sale of a public undertaking in full or part of the private sector without transferring the ownership to the private sector.
The management and control are transferred to public undertaking e.g. Maruti Udyog Ltd., SAIL, ONGC, etc.
Improvement in the performance of the industries through Memorandum of Understanding (MOU). Privatisation helps the private sector to be efficient result oriented, productive, and active. Capitalist countries like America and Japan have followed privatisation.

(3) Globalisation:
When the operation and organization of business activities are on a global scale, it is called Globalisation. It is the integration of business activities by considering the entire world is one market. In short, globalisation means a boundary-less world, where there would be a free flow of goods, services information, capital, and people across nations. Globalisation has an effect on the socio-economic and political sphere of life.

Features of Globalisation:
(a) Buying and selling goods from/to any country is possible due to globalisation.
(b) Establishing manufacturing, production, and distribution facilities in any part of the world.
(c) Freedom to set up and operate a business in any part of the world.
(d) Render faster economic development of any country.
(e) Exchange of new ideas and technology across nations.
(f) Narrowing differences between domestic and international markets.
(g) Direct foreign private participation in the industrial development of any country. Thus it could be seen that globalisation is an evolutionary concept. Through the policy of 1991, the government moved the country to this globalisation pattern.