Business Studies Part I
Business Studies Part II

Components of New Economic Policy

Three Major Components of New Industrial Policy of 1991:

  1. Liberalisation
  2. Privatisation
  3. Globalisation

Disinvestment: Definition
Disinvestment refers to transfer from public sector enterprises to the private sector through dilution of state of the Government in the public enterprise

The Broad Feature of New Industrial Policy, 1991:

    1. The Government reduced the number of industries under compulsory licensing to six.
    2. Many of the industries reserved for the public sector under the earlier policy, were dereserved. The role of the public sector was limited only to four industries of strategic importance.
    3. Disinvestment was carried out in case of many public sector industrial enterprises.
    4. The share of foreign equity participation was increased and in many activities 100 per cent Foreign Direct Investment (FDI) was permitted.
    5. Automatic permission was now granted for technology agreements with foreign companies.
    6. Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India.

Liberalisation 
These economic reforms signalled the The new set of economic Globalisation means the end of the licence-permit-quota raj reforms aimed at giving integration of the various and were aimed at liberalising the greater role to the private economies of the world Indian business and industry from all sector in the nation building leading towards the unnecessary controls and restrictions and simplifying procedures for imports and exports.
Key initiatives of the government:

      1. Abolishing licensing requirement in most of the industries except a short list .
      2. Freedom in deciding the scale of business activities
      3. Removal of restrictions on the movement of goods and services.
      4. Freedom in fixing the prices of goods and services.
      5. Reduction in tax rates and lifting of unnecessary controls over the economy.
      6. Making it easier to attract foreign capital and technology to India.

Privatisation
The new set of economic Globalisation means the end of the licence-permit-quota raj reforms aimed at giving integration of the various and were aimed at liberalising the greater role to the private economies of the world Indian business and industry from all sector in the nation building leading towards the
unnecessary controls and restrictions. process and a reduced role emergence of a cohesive to the public sector.
Key initiatives of the government:

      1. Adopted the policy of planned disinvestments of the public sector.
      2. Decided to refer the loss making and sick enterprises to the Board of Industrial and Financial Reconstruction.

Globalisation
These economic reforms signalled the The new set of economic Globalisation means the end of the licence-permit-quota raj reforms aimed at giving integration of the various and were aimed at liberalising the greater role to the private economies of the world Indian business and industry from all sector in the nation building leading towards the unnecessary controls and restrictions. process and a reduced role emergence of a cohesive to the public sector. global economy.
Key initiatives of the government:

    1. Import liberalisation and export promotion through rationalisation of the tariff structure and reforms with respect to foreign exchange.
    2. Increased level of interaction and interdependence among the various nations of the global economy.