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Following are some of the important features of New Economic policies under economic reforms.
(1) Liberalization: The policy has made provision for liberalizing the economy against unnecessary controls and regulations. It means liberating the economy trade and industry from unwanted restrictions. It has abolished the system of industrial licensing for all industrial undertaking except for a shortlist of 8 industries.
(2) Privatization: The word privatization means the introduction of private ownership in public-owned units and public-managed enterprises and also signifies the introduction of public control and management in public sector enterprises. The privatization program involves :
(i)reducing the number of reserved industries from 17 to 8.
(ii) raising the share of the private sector to a total investment of 55 percent at the end of the ninth plan.
(iii) Greater participation of private individuals.
(iv) Institutional credit support to private sector enterprises from the national and financial institutions.
(3) Globalisation of the Economy: It simply means opening up the economy for the world market by attaining international competitiveness. It offers both challenges and opportunities to developing countries.
It has made the following changes:-
(i) the new economic policy has prepared a specified list of high technology and high investment priority sectors in which automatic permission will be available for Direct Foreign investment.
(ii) No permission is now required for hiring foreign technicians or for testing indigenously developed technology abroad.
(iii) Rupee has been devalued in IVth phase by nearly 20 percent to increase exports, discourage imports, and raise influx of foreign capital.
(iv) The rupee has been made fully convertible.
(v) New Exim policy 1997-2002 has been announced which has simplified the trade practices further fore improving our competitiveness in the Global Market.
(vi) In order to bring the Indian economy within the ambit of Global competition, the Government has modified the custom duty to a considerable extent. The peak rate of customs duty has been reduced from 250 percent to 35 percent.
(5) Modernisation: The policy has been providing high priority to the introduction of modern techniques in the production system. The policy facilitates the growth of sunrise industries i.e., electronics and computers. The government has made special provisions for tax initiatives to facilitate corporate mergers and collaborations to face new challenges ahead. Steps have been taken for the revival and modernization of sick industrial units established both under private and public sectors.
(6) Financial Reforms: Following reforms are undertaken in this sector:
(i) Reduction in liquidity ratio.
(ii) Abolition of direct credit program.
(iii) Free determination of interest rates.
(iv) Making provision for Non-performing assets (NPAs).
(v) Establishment of speedy machinery for recovery of loans by special tribunals.
(vi) Reconstitution of the banking system.
(vii) Liberal treatment to foreign banks.
(viii) Giving more freedom to banks and ending dual control of RBI and Finance Ministry.
(ix) Introducing capital market reforms.
(7) Fiscal Reforms: Another important feature of the policy is to introduce fiscal policy reforms. The government initiated various measures to reduce the fiscal deficit.
Arguments in Favour of Economic Policy
The following are some arguments in favor of such reforms :
(i) The rate of growth has remarkably increased and is now at par with other Asian countries.
Arguments against Economic Policy
(1) It has started the policy of liberalization and globalization of the economy under the pressure of the World Bank and IMF which had led to the complete surrender of the economy to these international bodies.
(2) It has aggravated the problem of unemployment by introducing an exit policy without making any adequate provision for alternative scope for employment.
(3) It has failed to control the rising trend in prices, check fiscal deficit control subsidies & non-plan expenditure.
(4) It has neglected the agricultural sector as compared to industry, trade, and service sectors.
(5) This policy is encouraging a dangerous trend of consumerism by encouraging the production of luxury items for the consumption of the upper class of society.
(6) It has increased the dependence of the economy on foreign technology and has failed to import technology.
(7) It has led to the loss of economic sovereignty by allowing the sale of equities of Indian Companies to foreign investors.
(8) It has multiplied the volume of external debts.
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BA LLB 2nd semester economics notes pdf:Discuss the important features of New Economic Policies under Economic reforms
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