New Economic Policy – 1991

Since 1991; Government of India has introduced diverse economic reforms to pull the country out of economic crisis and to accelerate the rate of growth. These reforms are often described as the New economic policy (NEP) or policy of LPG where L for liberalisation; P for privatisation; G for globalisation.

* The reason of launching New economic policy were :-

– Increase in Fiscal deficit.
– Mounting adverse balance of payment.
– Gulf crisis.
– Fall in foreign exchange reserve.
– Rise in prices.
– Poor performance of public sector undertaking.

Thus NEP is launched where “liberalisation” means its freedom from direct physical controls imposed by the government. Except these six industries :- liquor; cigarattes; defence equipments; industrial explosives; dangerous chemicals; drugs and pharmaceuticals.

“Privatisation” is process of involving private sector in the ownership or operation of a state owned enterprise. It may happen in two ways :-

1) Outright sale of the government enterprise to the private entrepreneur or withdrawal of the government ownership and management from the mixed enterprises.

In “Globalisation” integrate the economy of a country with the other economies under condition of persons across borders.

Thus these LPG policies has a positive impact on the economy because now it becomes a vibrant economy. There has been a significant increase in Government revenue; there has been check on the rate of inflation. Large variety of goods and services from diverse global market are not within the easy reach to the buyers.

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