MAJOR POLICIES OF 1991 REFORMS

Major Policies of 1991 Reforms

THE NEW ECONOMIC POLICY

The New Economic Policy (NEP) was announced in July 1991. It consisted of a wide range of economic reforms. The main aim of the policy was to create a more competitive environment in the economy and remove the barriers to entry and growth of firms. The New Economic Policy can be broadly classified into two kinds of measures:

1. Stabilisation Measures: They refer to short-term measures which aim at:

• Correcting weaknesses of the balance of payments by maintaining sufficient foreign exchange reserves; and
• Controlling inflation by keeping the rising prices under control.

2. Structural Reform Measures: They refer to long-term measures, which aim at:

• Improving the efficiency of the economy; and
• Increasing international competitiveness by removing the rigidities in various segments of the Indian economy.

Main Policies of New Economic Policy

The government initiated a variety of policies, which fall under three heads:

• Liberalization
• Privatization
• Globalization

Liberalization, Privatisation and Globalisation or 'LPG' are the supporting pillars, on which the structure of the new economic policy of our Government has been erected and implemented since 1991.