New Economic Policy

Presented by
Prof. Ashish Bhalla

New Economic Policy

The new economic policy of India is expected to encourage

foreign investments by Indian companies. The curbs on
growth, even by mergers and acquisition, have been removed,
financing restriction has been based, areas of business opened
to private companies have been substantially enlarged and
foreign tie up policies have been liberalized.

Advantages of new economic policy

Increase in GDP growth rate
Increase in foreign direct investment
Increase in foreign exchange
Outsourcing

Disadvantages of new economic policy

Growing unemployment
Neglect of agriculture
Growing personal disparities
Infrastructural inadequacies
Wide spread poverty.
Demonstration effect (luxury goods)

Outcome of New Economic policy

Liberalization
Privatization
Globalization

Liberalization
It means to free the economy from the direct control of the Govt. before the
year 1991, Govt. Had imposed its control on the majority of the Indian
Economy like:
Industrial Licensing System
Price Control
Financial control on goods
Import License
Foreign Exchange control
Restrictions on heavy Investments
After the year 1991, the decision was made to lift up the control of Govt. In
order to liberalize the economy for the purpose of increasing the growth
rate of Indian Economy and to be capable to compete with world economy.

Privatization
Privatization means allowing the private sector to set up more and more industries that were
previously reserved only for public sector. Under this economy policy many of the existing
enterprises of public sector are either wholly or partially sold to private sector.
Privatisation is the general process of involving the private sectors in the ownership or
operation of the state owned enterprises.
Need for Privatization
Inefficiency of the public sectors.
Most of the public sectors enterprises were making losses.
Managers were not free to take the decisions regarding business.
Biasness of ministers in taking the business decisions.
Production capacity remained under utilized.
To compete with the other economies in the world.
To enhance the quality of production.
To provide maximum benefits to the consumers.

Globalisation
It means the expansion of business into other countries. In this,
the economy of one country integrates with the economy of
other country under the condition of unrestricted free flow of
the trade of goods and services, technology, capital, and
movement of persons across the borders.
Globalisation may be defined as a process associated with
increasing openness, growing economic independence and
deepening economic integration in the world economy.

Advantages of Globalization
The advantage of this trade is every country gets
several goods and services cheaper from other
countries.
As a result of which instead of paying more for the
same goods and services in their own country.
Now they pay less for the same goods and get them
from other countries.
This results in a higher standard of living.

Disadvantages of Globalization
Certain industries within a country may not be able to
produce those goods and services cheaper than other
countries.
As a result it cannot compete with the foreign market
and eventually will have a sudden death.
Many people within the country may lose jobs and be
reduced to destitution.
Alternative jobs may not be there. As a result their
services are lost once and for all.

Thank You