Question

Which of the following are parts of structural Adjustment Programs of New Economic Policy (NEP) in 1991.

a) Industrial reforms

b) Balance of Payment adjustment

c) Tax reforms

d) Fiscal reforms

Select the correct answer using the code given below.

1. a only
2. b and d only
3. a, b and c
4. a, c and d

Answer 1

Correct Answer - Option 4 : a, c and d

The correct answer is a, c and d.

• Indian economy experienced an economic crisis in 1991.
• The foreign currency assets declined to such an extent that it was barely enough to finance two weeks of imports.
• The annual rate of inflation reached 16.7% in August 1991.
• The government expenditure was greater than its revenue due to defense expenditure, subsidies, interest on loans, etc.
  • The positive effects of the socialistic pattern of society were on the verge of decline.
  • On this ground, it was necessary to bring new changes to the economy. Hence, the Government of India adopted a New Economic Policy (NEP) in 1991.
  • It is also known as Liberalisation, Privatisation, and Globalisation (LPG).
• The process of new economic policy which started in 1985 got momentum in 1991.

• Liberalization:
  • Liberalization refers to 'economic freedom' or 'freedom for economic decision'.
  • It means producers, consumers, and owners of factors of production, are free to take the decision to promote their self-interest.
  • Indian government accepted policies suggested by the IMF for economic liberalization.
    • Macroeconomic Stabilisation :
      • Inflation control
      • Balance of Payment adjustment
      • Currency devaluation
    • Structural Adjustment Programs :
      • Trade and capital inflow reforms
      • Industrial reforms
      • Tax reforms
      • Fiscal reforms
      • Monetary and financial reforms
      • Privatization
• Privatization: 
  • Privatization means the transfer of ownership from the public to the private sector.
  • It refers to a process that reduces the involvement of the public sector and increases that of the private sector in economic activities.
  • Measures :
    • Disinvestment
    • Dereservation policy
    • Establishment of BIFR (Board of Industrial and Financial Reconstruction)
    • Creation of National Renewal Board (NRB)
    • Navratna Status
• Globalization:
  • Globalization means integrating the economy of a country with the world economy.
  • Measures : 
    • Removal of quantitative restrictions
    • Encouragement to Foreign Capital
    • Convertibility of Rupee
    • Foreign collaboration
    • Long term trade Policy
    • Encouragement to Exports