INTRODUCTION

A major shift in the Economic policywas made by the Congress (I) Government led by Mr. P.B. Narasimha Rao on July 24, 1991.The main aim of this policy was to unshackle the country's industrial economy from the cobwebs of unnecessary bureaucratic control, introduce liberalisation with a view to integrate the Indian economy with the world economy, to remove restrictions on direct foreign investment and also to free the domestic entrepreneur from the restrictions of MRTP Act. Besides, the policy aims to shed the load of the public enterprises which have shown a very low rate of return or are incurring losses over the years. The Conventional interpretations of the New Economic Policy introduced in India in 1991 see this program of economic liberalization as transforming the Indian economy and leading to a substantial increase in the rate of Indias economic growth. But in a country like India, growth is not enough. Who benefits from the new growth regime, and can it significantly improve the conditions of livelihood for Indias. The international policy regimes and their national adoption under strategic conditions of economic crisis and coercion, and within longer-term structural changes in the power calculus of global capitalism. The contributors examine long-term growth tendencies, poverty and employment rates at the national, regional and local levels in India; the main growth centers; the areas and people left out; the advantages and deficiencies of the existing policy regime, and alternative economic policies for India.

THE SALIENT FEATURES OF THIS POLICY ARE AS FOLLOWS:

1. Except some specified industries (security and strategic concerns, social reasons, environmental issues, hazardous projects and articles of elitist consumption) industrial licensing would be abolished. 2. Foreign investment would be encouraged in high priority areas up to a limit of 51 per cent equity. 3. Government will encourage foreign trading companies to assist Indian exporters in export activities. 4. With a view to injecting the desired level of technological dynamism in Indian industry, the government will provide automatic approval for technology agreements related to high priority industries. 5. Relaxation of MRTP Act (Monopolies and Restrictive Practices Act) which has almost been rendered non-functional. 6. Dilution of foreign exchange regulation act (FERA) making rupee fully convertible on trade account. 7. Disinvestment of Public Sector Units' shares. 8. Closing of such public sector units which are incurring heavy losses. 9. Abolition of C.C.I, and wealth tax on shares. 10. General reduction in customs duties. 11. Provide strength to those public sector enterprises which fall in reserved areas of operation or in high priority areas. 12. Constitution of special boards to negotiate with foreign firms for large investments in the development of industries and import of technology-

CRITIQUE OF THE NEW ECONOMIC POLICY 1991

The keynote of the new Economic policyincludes liberalisation and globalisation of the economy. Liberalisation means deregularisation of the industrial sector by cutting down to the minimum administrative interference in its operation so as to allow free competition between market forces. Similarly globalisation means making the Indian economy an integral part of the world economy by breaking down to the maximum feasible the barriers to movement of goods, services, capital and technology between India and the rest of the world.The new Economic policyfulfils a long-felt demand of the industry to remove licensing for all industries except 18 industries (coal, petroleum, sugar, motor cars, cigarettes, hazardous chemicals, pharmaceuticals and luxury items).It proposes to remove the limit of assets fixed for MRTP Companies and dominant undertakings. Hence business houses intending to float new companies or undertake expansion will not be required to seek clearance from the MRTP Commission. This step will enable MRTP Companies to establish new undertakings, and effect plans of expansions, mergers, amalgamations and takeovers without prior government approval. They shall have the right to appointment of directors.The new Economic policy goes all out to woo foreign capital. It provides 51% foreign equity in high priority industries and may raise the limit to 100% in case the entire output is exported.

The main Features of New Economic Policy of India

1. Liberalisation: The fundamental feature of the new economic policy is that it provides freedom to the entrepreneurs to establish any industry/trade/ business venture.The entrepreneurs are not required to get prior approval for any new venture. What they need is that they have to fulfill certain conditions to get into a line of one's choice.A new company can now be floated with new issue of shares, debentures etc. In case the entrepreneurs require imported equipment, they are no longer required to approach the central authority for foreign exchange. The area of liberalization is (i) licensing business, (it) Foreign Investment (iii) Foreign Technology (iv) Establishment, Merger, Amalgamation and taken over, and (v) Simple Exit policies. 2. Extension of Privatization: Another feature of the new economic policy is the extension in the scope of privatization. Now, the majority of economic activities will be conducted by the private sector. In the wave of privatization, out of 17 industries reserved for public sector, 11 industries have been given to the private sector. Tendency to expand private sector is evident from the following facts: (i) Number of industries reserved for public sector has been reduced from 17 to 6. Private sector can now set up its units in the field of iron and steel, energy, air transport, etc. (ii) Till the end of 6th Plan, share of public sector in total investment continued to be greater than that of the private sector. It is intended to be reduced to 45% in the 8th Plan. Thus 8th Plan aims at raising the share of private sector investment to 55% of the total. (iii) Shares of public enterprises are to be increasingly sold to the workers and general public, with a view to increasing the participation of private individuals.

3. Globalization of Economy: The new economic policy has made the economy outwardly oriented. Now, its activities are to be governed both by domestic market as also the world market.It means unification of the domestic economy with the world, economy. In fact, this has become possible by various policy initiatives taken by the Govt. For instance, devaluation of rupee in June 1991 was intended to do away with the artificially controlled overvalued exchange rate of the rupee.Now, the rupee has been made fully convertible on current account of the balance of payments. Moreover, elimination of licensing of a large number of import items has enabled the importers to import any where in the world. The reduction in custom duties on imports has also been done to bring them in line with the duties in other countries of the world. 4. New Public Sector Policy: Public sector attracted priority. In the words of Dr. Manmohan Singh, Finance Minister in Congress Govt. that this priority was given to the public enterprises in the hope that it will help to accumulate capital, industrialization, economic growth and removal of poverty.But none of these objectives were achieved. Thus, new economic reforms are trying to shift the emphasis from public to the private sector. 5. Market Friendly State: The role of the state is one that is confined to selected non-market areas and is largely to ensure a smooth functioning of the market economy.As compared to past, the ownership of some selected enterprises has been transferred to private sector. Its activities as owner of resources have been confined to two types of activities.One covers the activities which are badly needed for the operation of the economy and the other pertains to social services such as education, health, etc.However, more importantly, the state is to ensure a smooth functioning of the market. For this, the state has to ensure stability in the market through the use of macro economic policies. The state will also intervene in the market when it fails. 6. Modernization: New economic Policy accorded high priority to modern techniques. It aims at to augment the growth rate of sunrise industries. In order to import technical dynamics to Indian industry, the Govt, decided to clear all foreign collaborations. Private entrepreneurs will be free to settle the terms of such collaborations on their own behalf. Moreover, Govt has also been trying to stimulate private entrepreneurs to establish their own research and development centers by offering them various tax concessions. Efforts are also being made to revive and modernize the sick industrial units both within the public and private sectors.

THE FOLLOWING ARE ECONOMIC CRISIS FACED BY INDIA IN 1990-1991 Fiscal crises ( From Text book pg no. 2 , if required ) Balance of Payment Crises ( From Text book pg no. 3 , if required )