Liberalisation, Privatisation And Globalisation : An Appraisal

The main components of new economic policy are as follows:

(i) New Industrial Policy : Following steps have been taken in the new industrial policy:

(a) Concession from Monopolies Act.

(b) Liberalisation.

(c) Expansion of Private Sector.

(d) Contraction of Public Sector.

(e) Foreign technology agreements.

(f) Foreign direct investment.

(ii) New Trade Policy : The objective of new trade policy is to liberate foreign trade from several restrictions to make it more competitive. The main features of this policy is globalisation of Indian economy and free interaction of the economy with developed countries of the world in the field of production, trade and finance. It is to encourage foreign trade and investment by removing all restrictions.

(iii) New Fiscal Policy : The objective of the new fiscal policy is to bring down fiscal deficit. Taxation system has been made more scientific and rational. Maximum rate of income tax has been reduced from 50 percent to 30 percent.

(iv) New Monetary Policy : On the recommendations of Narasimham Committee, significant monetary reforms has been introduced. Liquidity ratio have been reduced. Banking system has been reformed and more freedom has been given to the banks. There was a focus of financial reforms to make available credit to the producers at low rate of interest.

(i) Decreasing Role of Public Sector : In the new industrial policy only four industries are reserved for public sector. They are defence equipment, atomic energy, mining, minerals and railway transport.

(ii) Expansion of Private Sector : In New Industrial Policy, the role of public sector is reduced and the private sector is allowed to increase capacity. As a result of expansion of privatisation, productivity and efficiency are likely to increase.

(iii) Liberalisation : In new industrial policy, liberalisation policy has been adopted in place of controlled economy. Except six industries, all other kinds of industrial licenses have been abolished. Producers are now free to decide what goods are to be produced, on the basis of market demand.

(iv) Concessions from Monopolies Act : Companies included in Monopolies Act have been given large scale concessions. In respect of MRTP Companies, the capital investment limit, fixed earlier, has been removed.

(v) Foreign Direct Investment : Foreign direct investment limit has been increased from 40 percent to 51 percent.

(vi) Foreign Technology Agreement : In the new industrial policy high priority industries need not seek approval to enter into foreign technology agreement.

1. As a result of economic reforms, the growth rate of the economy has also gone up. Production of both agricultural and industrial sector has increased.  

2. Indian economy is marked by a number of inefficiences. The new economic policy will improve the efficioncy. New economic policy will create pressures of competition which help in improving efficiency level.               

3. As a result of new economic policy, export growth rate has increased, foreign direct investment has risen, and the ratio of external debt to GDP has also fallen. 

4. It is expected that fiscal deficit will come down and inflation rate will remain under control. 

5. The new economic policy has helped to tide over the immediate balance of payment crisis. 

1. The main criticism of this policy is that it has neglected agriculture sector. It is wrong to think that Indian economy can be developed entirely on the basis of industrialisation.

2. It is said that Indian government has stressed on liberalisation and globalisation under the pressure from international monetary fund and World Bank who are trying to impose their own conditions of lending.

3. More dependence on foreign debt will put India into debt trap.

4. New economic policy has given more importance to foreign technology. The govenrment has allowed the imports of technology. Superior technology is the monopoly of multinationals. It is the capital intensive technology. It will hurt the indegenious know-how.

5. The new policy has encouraged the production of comforts and luxuries. Demonstration effect would multiply the demand of luxury goods.

6. Essential commodities will be in shortage. Unemployment will increase because of new economic policy.