Policies prior to 1991 reforms
State interventions Large business regulations License Raj Closure of Indian economy to the outside world Import Substitution

Impact of such policies Stagnation of economic growth Huge public sector emerged Poor infrastructure investment License owners built up huge powerful empires Major crisis of 1991 .


LIBERALISATION liberating industry from unnecessary controls and restrictions giving freedom to entrepreneurs to take economic decisions .

g. . closure of sick PSEs. 5) Foreign direct investments and technology agreements. coal. 2) Reservation of industries for public sector reduced.Key Features 1) Abolition of industrial licensing except in some strategic industries e. drugs etc. 3) Public sector policy disinvestment. greater autonomy. 4) Amendment of MPTP Act.


Benefits of Liberalisation 1) Huge employment opportunities 2) More economic growth 3) Inflow of FDI 4) Wider choice to consumers 5) BOP deficit is reduced .

Shortcomings 1)Threat for small industries 2)Economy has become sensitive to ups and downs abroad 3)Growth in some important sectors has slowed down 4)FDI has been not up to the target .

PRIVATISATION It is the process of transferring ownership of a business or an enterprise from the public sector to the private sector opening up of hitherto closed areas to private sector .

 Disinvestment refers to the transfer of a part of government s shareholding. Thus privatisation involves disinvestment of PSUs.  Disinvestment can be done in following ways:  Strategic sale  Public Offer  Equity auction .

BALCO was a public sector enterprise owned 100% by Government of India. GOI divested 51% equity and management control in favour of Sterlite Industries Limited. In the year 2001. .For example : Till 2001.


Benefits of Privatisation  Improvement in quality of management  Reduction in budgetary deficit  Recovery of Government fund  PSUs can diversify and become more competitive .

Shortcomings  Private sector may ignore the needs of economy  Monopoly power in the hands of big business houses  Private enterprises may not be interested in buying loss making units  Lop sided development .

capital flows. migration and the spread of technology. foreign direct investment. .GLOBALISATION Globalisation refers to the integration of national economies into the international economy through trade.


In context to India. allowing Indian companies to enter into foreign collaborations carrying out massive import liberalization programs . this implies opening up the economy to foreign direct investment removing constraints and obstacles to the entry of MNCs in India.

electronics from South Korea . E. Vodafone from Britain or L.It is due to globalisation that many MNCs have entered into the Indian economy.g.G.

Due to globalisation all type of goods are available in India today .

Benefits of Globalisation  Increased flow of foreign market capital  Increased level of interdependence and competitiveness  Induce domestic firms to improve technology  New opportunities for growth .

.Shortcomings  Ruin of traditional crafts and industries  More beneficial for developed economies  Takeover of national firms  Brings instability Threat of MNCs with immense power ruling the globe.

Conclusion The New Economic Policy of 1991 (LPG) has undoubtedly made significant contributions to the Indian economy. The LPG model had not only led to an increase in the GDP of the country but it has also benefitted the economy as a whole. It was a catalyst in the transformation of India from an underdeveloped nation to a developing country and would further help in the economic development of the country. .

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