New Economic Policy of India

Aug 30 • economics, SSC Exam • 1703 Views • No Comments on New Economic Policy of India

New Economic Policy of India

Economic liberalisation started in India in 1991

PM: P.v Narshima Rao

Finance Minister: Dr Manmohan Singh

Goal: To increase Private investment and Foreign Investment.

Shift in economics Policy: From centrally governed economy to Market oriented.

China liberalised economy in 1978


Steps taken for Liberalisation (Upto 80 papers required for establishment of a firm)

  1. 1966
  2. 1985
  3. 1991

India paid 20 tonnes of Gold to UBS (Union Bank of switzerland)

India paid 47 tonnes of Gold to Bank of England

What is Economic Liberalisation

Economic liberalisation is opening up economy for private sector & increase global competitors to bring down inflation and increase competition.

Targets and objectives of NEP- 1991

  1. Bring down rate of Inflation.
  2. Increase Foreign exchange reserve.
  3. Increase rate of Economic growth.
  4. Change economy from centrally governed economy to Market economy.
  5. Increase in participation of Private investors and International Investors in economy.

Measures adopted during New Economic Policy.

  1. Restriction on MRTP (Monopolistic restrictive trade Practice Act )
  2. Commercial banks were allowed to determine their own rate of interest under guideline of RBI.
  3. SSI limits were increased to 1cr.
  4. Import of capital goods were allowed.
  5. Expansion of industries were freed upon: forward integration and backward integration were allowed to reduce cost

Removal of Licensing

Licensing was limited to


  • Cigarettes
  • Chemicals
  • Liquor
  • Defence equipments
  • Explosives
  • Drugs


Steps taken for Privatisation

To increase capital inflow, privatisation of PSU was done. Most of PSU’s were running in losses because of political motives or political interventions.


  1. Disinvestment in PSU through sales of shares
  2. Minimisation of Public sector and limiting to 3 sectors
    1. Railway
    2. Atomic Minerals mining
    3. Atomic energy


  1. Globalization
  1. Tariffs were reduced.
  2. Long term trade policies.
  1. Policies were liberalised.
  2. Control on foreign trades were removed.
  3. Competition was open and genuine for Indian companies or foreign companies.

Best SSC books

UPSC study material & Notes
5 Year Plan

1st time 5 year plan was introduced by Joseph stalin in Russia in 1920. 5 year Plans are basically structure of communist economy , which was well absorbed in Indian economic system.

3 Major countries who work on 5 year plan are



  • Russia
  • China
  • India

Best SSC coaching of Delhi


5 year Plans in India

1 First Plan (1951–1956): With Growth rate of 2.1% and total capital of  2069 cr which was later revised to 2378 cr , focus of 1 st 5year plan was on primary sector. Agriculture and Minning. 27.2% was invested on agriculture and Energy requirements of country while transportation and communication 24%. 5 Year Plan saw many changes from successive governments after New Economic Policy.

3 Second Plan (1956–1961):
4 Third Plan (1961–1966)
5 Fourth Plan (1969–1974)
6 Fifth Plan (1974–1979)
7 Rolling Plan (1978–1980)
8 Sixth Plan (1980–1985)
9 Seventh Plan (1985–1990)
10 Annual Plans (1990–1992)
11 Eighth Plan (1992–1997)
12 Ninth Plan (1997–2002)
13 Tenth Plan (2002–2007)
14 Eleventh Plan (2007–2012)
15 Twelfth Plan (2012–2017)


Suresh D Tendulkar: In economic advisory council from 2004-08

Chairman from 2008-09

Poverty line: 972 in rural India and 1407 in urban India

Targeted growth rate was 9%

Montek singh Ahluwalia re structured to 8%


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