Presented by: 118905(Ch.Karuna) 118906(D.

Meena)

New economic policy

The process of economic reforms was started by the

government of India in 1991 for taking the country out of economic difficulty and speeding up the development of the country. The NEP mainly came up with three major strategies are: liberalisation,

privatisation and

globalisation.

Liberalization:
Liberalization means to unshackle the economy from bureaucratic cobweb to make it more competitive. Following are its chief features:
To do away with the necessity of having a license for most of the industries. Freedom in determining the scale of business activities. Removing restrictions for the movement of goods and services from one place to another .

Contd..
Freedom to fix the price of goods and services. Reduction in the rate of taxes. Freedom from unnecessary control over economy. Simplifying import-export procedure. Simplifying the process of attracting foreign capital and technology.

Privatization:
In brief, privatization means such an economic

process through which some public sector undertaking is brought either partially or completely under private ownership.
Broadly speaking, establishing in private sector

instead of a public sector is also privatization earlier reserved for it or transferring its production, without depriving it, to the. Not only this, depriving public sector of the job of production which was private sector also amounts to privatization.

Its chief features are given below:

1-Reducing the role of public sector and increasing the role of private sector. 2-Reducing fiscal burden of the government. 3-Reducing the size of the government machinery. 4-Speeding up economic development. 5-Improving management of enterprises. 6-Increase in government treasury. 7-Increasing competition by opening industries reserved for the public sector to the private sector

Globalization:
Globalization means integrating the economy with the rest of the world. Following are its chief features: 1-Free flow of goods and services in all the countries. 2-Free flow of capital in all the countries. 3-Free flow of information and technology in all the countries. 4-Free movement of people in all the countries. 5-The same conflict solving technique in all the countries.

Objectives Of Economic Reforms:

Following are the objectives of Economic reforms:
1-Modernisation of the industrial system of the country. 2-Encouraging private investment. 3-Attracting foreign investment. 4-Eliminating unproductive controls. 5-Connecting India Economy with the world economy. 6-Increasing foreign exchange reserves. 7-Controlling unprofitable industrial units in the public sector

Industrial Policy Revolution

Industrial Policy Resolution of 1948 Industrial Policy Resolution of 1956 Industrial Policy Resolution of 1973 Industrial Policy Resolution of 1977 Industrial Policy Resolution of 1980 New Economic Policy of 1991

Why NEP 1991??????

To overcome Reservation of Industries To overcome Entry & Growth Restrictions To overcome Restriction on Foreign Capital & Tech.

New Economic Policy 1991

Announced by Narasimha Rao in July, 1991
Aim of New Industrial Policy (NIP) of 1991:

Unshackling the Indian Industrial Economy from the cobwebs of unnecessary bureaucratic control, Introducing liberalization with a view to integrate the Indian Economy with the world economy, Removing restriction on direct foreign investment as also to free the domestic entrepreneur from the restriction of MRTP Act, and Shedding the load of Public Enterprises, which have shown a very low rate of return or were incurring losses over the years.

Initiatives Taken in New Economic Policy

New Economic Policy (1991)

Industrial Sector Reforms

Public Sector Policy Industrial Licensing Policy MRTP Act

External Trade Reforms

Foreign Investment Foreign Technology Agreements

Public Sector Policy

Public enterprises producing a very low rate of return on the

capital invested resulting in a burden rather than being an asset to the government NEP 1991 adopted a new approach to public enterprises, with a priority in following areas:
Essential infrastructure goods and services Exploration and exploitation of oil and mineral resources Technology development and building of manufacturing

capabilities in areas, which are crucial in the long term development of the economy and where private sector investment is inadequate Manufacture of the products where strategic considerations predominate such as defence equipment

Industrial Licensing Policy

Role of the government changed from that of only exercising control to

one of providing help and guidance by making essential procedures fully transparent and by eliminating delays
Industrial licensing to be abolished for all projects except for a short list of

industries related to securities and strategic concerns

Areas where security and strategic concerns predominate will continue to be

reserved for the public sector

In projects where imported capital goods are required, automatic clearance

will be given in cases where foreign exchange availability is ensured through foreign equity
Location other than cities of more than 1 million population, there will be

no requirement of obtaining industrial approvals from the central Government except for industries subject to compulsory licensing

MRTP ACT
Need for achieving economies of scale for ensuring higher

productivity and competitive advantage in the international market, the interference of the government through the MRTP Act has to be restricted:
Removal of pre-entry scrutinity of investment decisions by so-

called MRTP companies

Emphasis to be on controlling and regulating monopolistic,

restrictive and unfair trade practices

Thrust of policy to be on controlling unfair or restrictive

business practices

Foreign Investment
Aimed at encouraging foreign trading companies to assist

Indian exporters in export activities:

Approval would be given for direct foreign investment

upto 51% foreign equity in high priority industries

Import of the components, raw materials and intermediate

goods, and payment of know how fees and royalties would be governed by the general policy applicable to other domestic units, the payment of dividends would be monitored through the Reserve Bank of India allowed for trading companies primarily engaged in export activities

Majority foreign equity holding upto 51% equity would be

Positive Aspects:
Fulfilled

a long-felt demand of the corporate sector for declaring in very clear terms that licensing was abolished for all industries except 18 industries which included coal, petroleum, sugar, motor cars, cigarettes, hazardous, chemicals, pharmaceuticals and some luxury items created by the bureaucracy were struck down by this singular decision of the Government of the provisions, which acted as brakes on the growth of large private corporate sector relief in the dismantling of industrial licensing and regime of controls

Bottlenecks

NIP unshackled many

Overall

Negative Aspects:
Policy

regarding Foreign Capital:

Assertions

by critics assert that the welcome foreign capital may lead us to selling of our sovereignty to multinationals Prudence demanded that utmost care to be taken to invite foreign capital in high priority industries only Monitoring of payment of dividends by RBI
Public

Sector Policy:

The

govt. should concentrate on improving the performance of the redeemable and surplus generating public sector enterprises which constitute 85% of the investment

 Social

Security Policy

Industrial Policy sidetracked issues and generated a fear in the mind of the workers that the govt. was not sincere in protecting the interests of the workers Govt. of India could successfully go in for shedding its load of loss-making enterprises and help the working class to assume the ownership role and nurse these enterprises to health

MRTP

Policy

Failure of MRTP to break the monopolistic or Oligopolistic character of the Indian market

THANK YOU

REFERENCES:
Textbook-Indian economy,Author-Ruddardatt & K.P.M

Sundharam. http://www.authorstream.com/Presentation/sudhans hukhatri-237029-new-economic-policy-1991-businessfinance-ppt-powerpoint/