What Is The New Economic Policy Of India?
This one is an important question, especially if you are preparing for any competitive exam, you must know this as a bare minimum. We have already discussed what led to the introduction of Economic Reforms. Let me tell you one more thing, Economic Reforms and New Economic Policy of 1991 are the same.
Okay, Let’s learn. The main aim of India’s New Economic Policy of 1991 was towards creating a more competitive environment in the economy and removing the trade barriers to entry. In short, this policy focused on some core elements (elements are L.P.G. That I will discuss in a while).
The set of policies under New Economic Policy was grouped as:
- The Stabilization Measures: These are short-term measures to correct the Balance of Payment situation of the country and to bring inflation under control.
- The Structural Measures: These are long-term measures aimed at improving the efficiency of the economy. It also includes increasing the country’s international competitiveness by removing restrictions in various segments of the Indian Economy.
Note, The Elements of the New Economic Policy is a part of structural measures.
Elements of The New Economic Policy
So, when we say elements of The New Economic Policy, we mean structural measures. The following are the main elements of New Economic Policy:
- Liberalization: It means liberty or freedom by putting an end to various restrictions on trade with other countries and by opening up various sectors of the economy.
- Privatization: It means reducing the ownership and management of government-owned enterprises. It includes removing strict control over the private sector and giving it the freedom to take necessary decisions.
- Globalization: It is the outcome of the policies of liberalization and privatization, that aimed at transforming the world towards greater interdependence and integration. Among all the three elements, globalization is a complex phenomenon that attempts to establish links between countries, in such a way that if something happens in India or any other country, it also affects the rest of the world. Take a look at the latest example of Covid-19 which started in China and has spread all over the world. One common example of globalization includes Outsourcing; under this, a company hires services from other countries like Business Process Outsourcing (B.P.O. commonly known by call centers in India).
To summarize, New Economic Policy of 1991 means adopting elements of 1.Liberalization: to free trade and removing unnecessary restrictions, 2.Privatization: giving greater freedom to the private sector to perform without government interference and 3.Globalization: creating an interdependence among countries to spread there culture, knowledge, services, etc all over the world.
Check out the below slideshow on new economic policy: