NEW ECONOMIC POLICY 1991

MEANING OF NEW ECONOMIC POLICY

THE NEW ECONOMIC POLICY COMPRISES OF VARIOUS POLICY MEASURES AND CHANGES INTRODUCED SINCE 1991.THE THRUST OF NEW ECONOMIC POLICY IS TOWARDS CREATING MORE COMPETITIVE ENVIRONMENT AS A MEANS TO IMPROVE THE PRODUCTIVITY AND EFFICIENCY IN THE ECONOMY. THE MAIN OBJECTIVE OF NEW ECONOMIC POLICY IS TO PROMOTE COMPETITION AND EFFICIENCY.

INTRODUCTION
ECONOMIC REFORM WERE INTRODUCED IN THE YEAR 1991.BEFORE 1991 PUBLIC SECTOR HAS BEEN ASSIGNED IMPORTANT ROLE IN THE ECONOMIC DEVELOPMENT.IT WAS REALISED THAT PUBLIC SECTOR WAS INEFFICIENT BECAUSE OF REDTAPISM, OVER STAFFING ,LACK OF INITIATIVE,ETC NET RESULT OF ALL THIS WAS THE ACUTE ECONOMIC CRISIS IN INDIA.FRESH LOAN WERE NOT AVAILABLE AND NON-RESIDENT FUNDS WERE BEING WITHDRAWN

FEATURES OF OLD ECONOMIC POLICY

1. 2. 3. 4. 5. 6. 7. MIXED ECONOMY MORE IMPORTANCE TO PUBLIC SECTOR PROTECTION AGAINST FOREIGN COMPETITION RESTRICTIONS ON FOREIGN CAPITAL. FIXED RATE OF EXCHANGE FIXED POLICY PROMOTION OF EXPORTS AND SUBSITUTION OF IMPORTS

FEATURES OF NEW ECONOMIC POLICY

1.LIBERALISATION 2.PRIVATISATION 3.GLOBALISATION 4.OTHER ECONOMIC REFORMS

LIBERALISATION
LIBERALISATION MEANS TO REDUCE UNNECESSARY RESTRICTIONS AND CONTROLS ON BUSINESS UNITS IMPOSED BY GOVERNMENT. MEASURES TAKEN FOR LIBERALISATION 1. LIBERALISATION OF INDUSTRIAL LICENSING 2. FREEDOM FOR EXPANSION AND PRODUCTION TO INDUSTRIES 3. INCREASE IN THE INVESTMENT LIMIT OF SMALL INDUSTRIES 4. FREEDOM TO IMPORT CAPITAL GOODS AND RAW MATERIALS 5. FREEDOM TO IMPORT TECHNOLOGY 6. LIBERALISATION IN TAXATION POLICY

PRIVATISATION
PRIVATISATION MEANS ALLOWING THE PRIVATE SECTOR TO SET UP MORE AND MORE AS SUCH INDUSTRIES AS WERE PREVIOUSLY RESERVED FOR PRIVATE SECTOR. MEASURES OF PRIVATISATION:1. CONTRACTION OF PUBLIC SECTOR 2. SALES OF SHARES OF PUBLIC SECTOR TO THE PRIVATE SECTOR 3. SICK PUBLIC SECTOR INDUSTRIES 4. MEMORANDUM OF UNDERSTANDING 5. NATIONAL RENEWAL FUND

GLOBALISATION
GLOBALISATION MEANS LINKING THE ECONOMY OF A COUNTRY WITH THE ECONOMIES OF OTHER COUNTRIES BY MEANS OF FREE TRADE,FREE MOBILITY OF CAPITAL AND LABOUR ,ETC MEASURES OF GLOBALISATION:1. INCREASE IN FOREIGN INVESTMENT 2. PARTIAL CONVERTIBILITY OF INDIAN RUPEE 3. FOREIGN TRADE POLICY 4. EXPORT PROMOTION

MAIN COMPONENT OF NEW ECONOMIC POLICY

1. 2. 3. 4. NEW INDUSTRIAL POLICY NEW FOREIGN TRADE POLICY NEW FISCAL POLICY NEW MONETARY POLICY

NEW INDUSTRIAL POLICY

ON 24TH JULY 1991.GOVERNMENT OF INDIA ANNOUNCED ITS NEW INDUSTRIAL POLICY,IT IS A POLICY OF LIBERALISATION AS AGAINST REGULATION AND PRIVATISATION. FEATURES OF NEW INDUSTRIAL POLICY:1. CONTRACTION OF PUBLIC SECTOR 2. EXPANSION OF PRIVATE SECTOR 3. CONCESSION FROM MONOPOLIES ACT 4. FOREIGN DIRECT INVESTMENT 5. FOREIGN TECHNOLOGY AGREEMENT

NEW FOREIGN TRADE POLICY

1.

2.
3. 4. 5. 6.

THE FOREIGNERS CAN INVEST UP TO 100% OF PAID UP CAPITAL. RUPEE IS FULLY CONVERTIBLE IN FOREIGN CURRENCY LIBERALISATION CUSTOM DUTIES AND TARIFFS ARE BEING GRADUALLY LOWERED FOREIGN TECHNOLOGY HAVE ENCOURAGED EXPORTS HAVE BEEN ENCOURAGED

NEW FISCAL POLICY

1. REDUCTION IN TAX RATES 2. REDUCTION IN NON DEVELOPMENT EXPENDITURE 3. REDUCTION IN SUBSIDIES 4. REDUCING DEPENDENCE ON EXTERNAL BORROWINGS 5. TO DISCOURAGE DEFICIT FINANCING 6. BETTER COLLECTION OF INDIRECT TAX

NEW MONITORY POLICY

1. REDUCTION IN BANK RATE ,STATUTORY LIQUIDITY RATIO AND CASH RESERVE RATIO SO AS TO INCREASE THE AVAILABILITY OF CREDIT IN THE ECONOMY 2. REDUCTION IN INTEREST RATES SO AS TO MAKE DOMESTIC INVESTMENT RATE IN LINE WITH INTERNATIONAL TRENDS 3. TO DISCOURAGE UNPRODUCTIVE LOANS SO THAT MORE FUNDS ARE AVAILABLE FOR PRODUCTIVE LOANS 4. UNIFORM OF ACCOUNTING

ARGUMENTS IN FAVOUR OF

NEW ECONOMIC POLICY

1. INCREASE IN RATE OF ECONOMIC GROWTH 2. AVAILABILITY OF MODERN TECHNOLOGY 3. IMPROVEMENT IN BALANCE OF PAYMENT 4. CONTROL ON PRICES 5. REDUCTION IN FISCAL DEFICIT 6. INCREASE IN CAPITAL Formation 7. INCREASE IN INDUSTRIALISATION 8. INCREASE IN EFFICIENCY OF PUBLIC SECTOR UNITS 9. IMPROVEMENTS IN TAX COLLECTION 10. INCREASE IN EMPLOYMENT

ARGUMENTS AGAINST

NEW ECONOMIC POLICY

1. PRESSURE FROM IMF & WORLD BANK 2. LESS IMPORTANCE TO AGRICULTURE 3. MORE DEPENDENCE ON FOREIGN DEBT 4. DEPENDENCE ON FOREIGN TECHNOLOGY 5. PROMOTION OF CONSUMPTION 6. MORE IMPORTANCE TO PRIVATISATION 7. PROBLEM OF UNEMPLOYMENT 8. LOSS TO DOMESTIC INDUSTRIAL UNITS 9. IGNORES SOCIAL WELFARE 10.PROMOTES CONSUMPTION OF ECONOMIC POWER

THANK YOU
Prime minister finance minister