Features of New Economic reforms 1991

There are three major components or elements of new economic policy (LPG) i.e. Liberalization, Privatization, Globalization.

1)- Liberalization:

• The economic reforms that were introduced were aimed at Liberalizing the Indian business and industry from all unnecessary controls and restrictions. 
• They signaled the end of the licence-pemit-quota raj.
• Liberalization of the Indian industry has taken place with respect to:

1. Abolishing licensing requirement in most of the industries except a short list.
2. Freedom in deciding the scale of business activities i.e., no restrictions on expansion or contraction of business activities.
3. Removal of restrictions on the movement of goods and services.
4. Freedom in fixing the prices of goods services.
5. Reduction in tax rates and lifting of unnecessary controls over the economy.
6. Simplifying procedures for imports and exports.
7. Making it easier to attract foreign capital and technology to India.
8. Abolish the ownership of government in the management of public enterprises.

2)- Privatization:

• The new set of economic reforms aimed at giving a greater role to the private sector in the nation building process and a reduced role to the public sector. 
• This was a reversal of the development strategy pursued so far by Indian planners.
• To achieve this, the government redefined the role of the public sector in the New Industrial Policy of 1991, adopted the policy of planned disinvestments of the public sector and decided to refer the loss making and sick enterprises to the Board of Industrial and Financial Reconstruction. 
• The term disinvestments used here means transfer in the public sector enterprises to the private sector.
• It results in dilution of the stake of the Government in the public enterprise.
• If there is dilution of Government ownership beyond 51 percent, it would result in transfer of ownership and management of the enterprise to the private sector.
• Objectives of Privatization:
1. Raising funds from Disinvestment.
2. Improving the financial condition of the government.
3. Bringing healthy competition within an economy.
4. Making Way for Foreign Direct Investment.

3)- Globalization:

• Globalization means the integration of the various economies of the world leading towards the emergence of a coordinated global economy. 
• Till 1991, the Government of India had followed a policy of strictly regulating imports in value and volume terms.
• These regulations were with respect to:
1. Licensing of imports. 
2. Tariff restrictions.
3. Quantitative restrictions.
• After new policy government adopted policy of globalization by taking following measures:
1. Import liberalization. Government removed many restrictions from import of capital  goods.
2. Foreign exchange regulation act (FERA) was replaced by foreign exchange management act (FEMA).
3. Rationalization of tariff structure. 
4. Abolition of export duty. 
5. Reduction of import duty.
• The new economic reforms aimed at trade Liberalization were directed towards import liberalization, export promotion through rationalization of the tariff structure and reforms with respect to foreign exchange so that the country does not remain isolated from the rest of the world.
• Globalization involves an increased level of interaction and interdependence among the various nations of the global economy.
• Physical geographical gaps or political boundaries no longer remain barriers for a business enterprise to serve a customer in a distant geographical market.
• This has been made possible by the rapid advancement in technology and liberal trade policies by Governments. 
• Through the policy of 1991, the government of India moved the country to this globalization pattern.
• Whole world becomes a global village.