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Meaning of economic reforms and new economic policy :-
Economic reforms refer to a set of economic policies that accelerate the rate of prosperity and growth.
To get the economy out of the economic crisis of 1990, the Government of India made several economic policies in 1991, which are called (NEP).
New economic policy:-
Need for new economic policy or economic reforms :-
For these reasons the need for a new economic policy was felt
1) High fiscal deficit
Fiscal deficit refers to the borrowing taken by the government due to excess of expenditure over income during a year.
Fiscal deficit was estimated at 5.4 percent of GDP in the year 1981-82.
It increased to 8.4 percent of GDP in 1990-91
It was almost a 'debt trap' situation for the government
2) Reduction in foreign exchange reserves
In 1990–91, India's foreign exchange reserves were so depleted that they were barely enough to pay 10 days' worth of import bills.
It was worth Rs 8151 crore in 1986-87.
They remained at Rs 6252 crore in 1989-90
3) Satisfactory performance of public sector enterprises
Public capital worth several thousand crores of rupees has been invested in the growth and development of public sector enterprises, but most of them have become breeding centers of corruption, resulting in huge losses. To reverse this trend, a new economic policy was needed.
Liberalization means freedom of productive units from direct or physical control imposed by the government.
Before 1991, the government had imposed various types of controls on private enterprises in the domestic economy.
Like- industrial license
Import license
The government estimated that as a result of these controls many shortcomings had arisen in the economy.
1) Efficiency was promoted
2) GDP growth rate decreased
For all these reasons, liberalization of the economy was considered a major component of the new economic policy.
Economic reforms under liberalization Important reforms under liberalization
1) Industrial sector reforms
The real meaning of liberalization is to free the industrial sector of the economy from control.
Abolition of industrial licensing
A new economic policy was announced in July 1991, according to which licenses for all industries except 5 have been abolished.
The industries for which license is required are
1- Alcohol
2- Cigarette
3- Defense equipment
4- Industrial explosion
5- Dangerous chemicals
expansion of production capacity
Production capacity was earlier linked to license. License means freedom from restrictions on production capacity.
what to produce
how much to produce
The producer himself will take this decision considering the market conditions.
Privatization
Privatization means the private sector acquiring full or partial ownership of the table sector enterprises and getting them managed.
need for privatization
Due to poor performance of public sector enterprises, the need for privatization was felt.
The main role of public sector units during the five year plans was
The structural change in the Indian economy was brought about by the expansion of public sector enterprises.
There was a fundamental increase in the percentage contribution of industry to GDP
Theft, inefficiency and corruption in public sector enterprises had increased so much that their privatization was considered the only solution.
Therefore, in 1991, the government decided to gradually liquidate public enterprises by selling their shares to the private sector.
Advantages and disadvantages of privatization
( Benefit )
Privatization means giving priority to self-interest over social interest.
Kaleji Karan expects that the private entrepreneur operates in a domestic and international competitive environment.
Private business competition inspires modernization and progress
Privatization promotes diversification in production
Unlike the public sector, the private sector always benefits. Multinational companies use it for expansion and diversification of production. This is a proof of this fact.
(losses)
In this, social interest is not given priority but profit is given priority.
In privatization, market forces work independently. In this process goods are produced only for those individuals who have the means to purchase them.
When prices rise, sections of the society remain deprived.
Major policy principles to encourage globalization of Indian economy
1- Reduction in tariffs
Tariff barriers have been removed on most goods traded between India and the rest of the world to promote competition.
2- Long term trade policy
In line with economic reforms, the foreign trade policy was implemented for a long period i.e. five years.
Its main feature is that it is a liberal policy, under its policy, all controls and restrictions on foreign trade are removed. It promotes open competition, import and export of any other goods except some specific goods. is done.
Evaluation of LPG Policies
LPG policies mean policies of liberalization (L), privatization (P) and globalization (G).
Evaluation of LPG policies means evaluation of the New Economic Policy (NEP).
Policy of economic reforms started in 1991
2) Consumer dominance
Consumer dominance has certainly expanded over time
This shows that a wide variety of goods and services are available to consumers in different world markets.
Demerits of LPG policies
1) Neglect of agriculture
GDP has prospered but the agriculture sector has suffered a serious setback and its growth rate has slowed down significantly (2-3 percent per annum).
For this reason, India is facing a growing gap between rural and urban needs.
In fact, slow development of agriculture can also become a hindrance in the development of industrial sector.
The reason for this is before us
Agriculture sector is an important source of raw materials for the industry sector.
Agriculture sector is an important source of demand for industrial goods like tractors and threshers.
(cultural decline)
Indian society has suffered cultural decline due to globalization.
1) Today every person is financially independent and wants to be rich, but he is forgetting this.
He has his own family and also has responsibilities towards the society.
Loyalty to one's family and faith in society, which was once considered an integral part of Indian culture are a far cry these days.
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