New Economic Policy | CUET PG Economics | Notes

Introduction

The New Economic Policy (NEP) of India was launched in the year 1991 under the leadership of P. V. Narasimha Rao. The New Economic Policy was undertaken by Finance Minister Manmohan Singh as an answer to the economy the nation was facing in the 1990s. This was in line with the International Monetary Funds (IMF) regulations to lend to India. The credibility of the country’s economy was decreasing, with no country willing to lend loans. This period also saw a decrease in the foreign exchange reserves of the country. 

• It is a set of policy measures that emphasized liberalization, privatization, and its outcome was globalization.
• It included various policy measures such as stabilization measures (to control inflation and the correct balance of payments) and various structural reform measures (to improve the efficiency of the economy and increase international competitiveness by removing rigidity in various economic segments).
• New economic policy was undertaken in view of the 1991 financial crisis that arose due to reasons like the gulf war that pushed up oil prices and lower remittances from the gulf, foreign reserves at an all-time low, hyperinflation occurring at the same time.

Objectives of New Economic Policy

• To make the entry of the Indian economy into the field of ‘Globalization and to give it a new thrust on market orientation.
• NEP was envisioned to bring down the rate of inflation.
• To increase the economic growth rate and build significant foreign exchange reserves.
• To enable economic stability and to remove market restrictions that are impediments to growth.
• Increase the inflow of international goods, services, capital, human resources, and technology, by removing restrictions.
• Sectors reserved for the government were reduced so as to increase the participation of private players in various sectors of the economy.