Describe the economic reforms adopted under the new economic policy.

The new economic policy was introduced in 1991 to solve the economic crisis and to increase the rate of economic growth in India. There were two types of reforms introduced under the new economic policy. Stabilization measures and structural reforms. Stabilization measures are short-term measures to correct the balance of payment situation and to bring inflation under control. Structural reforms are long-term measures to increase the efficiency of the economy. It was also called the LPG policy- liberalization, privatization and globalization.

LIBERALIZATION: It means removing all the unnecessary control and restriction like license, quota. This allowed the private sector companies to operate with fewer restrictions. The main objectives of liberalization:
1. To increase foreign capital formation
2. To increase competition in the international market
3. To decrease the debt burden of the country
4. To increase export and import of goods and services
5. To expand the market size
The Economic reforms under liberalization included:
1. INDUSTRIAL SECTOR REFORMS:
A) Abolition of industrial licensing government except for Liquor, Cigarettes,• Defence equipment, Industrial explosives, Dangerous chemicals, and pharmaceuticals.
B). Contraction of the public sector from 17 to 8. Reservation of railway, defense, and atomic energy sector.
C). De-reservation of production areas, Expansion of production capacity, Freedom to import capital goods
2. Financial sector reforms including a reduction in SLR from 38.5 % to 25% and CRR from 15.5% to 4.1%, change in the role of RBI from the regulator to facilitator and deregulation of interest rate.
3. Fiscal Reform or tax reform including simplification of the tax structure and lowering the rate of taxation.
4. Foreign exchange Reform or external Reform including devaluation of rupee abolishing of import quota, reduction in import duty, complete withdrawal of export duty and policy of import licensing.
PRIVATISATION : It is the process of involving the private sector in the ownership or operation of a state-owned Enterprise. The main objective of privatization are:
1, Raising funds from Disinvestment
2. Improving the financial condition of the govt.
3. Bringing healthy competition within an economy
4. Making Way for Foreign Direct Investment
Government company is converted into a private company either through disinvestment or by the withdrawal of the government from ownership and management of the public sector companies.

Globalization is the process by which a business or any organization can develop International influence or can start operating on an international level. It has many advantages such as the following:
1. It helps to increase the trade and services of a country with that of the world. Many investors can invest their money in both developed and developing countries. For example, Japanese and European companies such as Kawasaki and Siemens started their work in China.
2. Information can easily be transferred from one part of the world to other. Information can be shared between individuals and corporations at a very fast rate.
3. The consumer now has access to the best goods and services throughout the world. The companies produce a better quality of goods and services, and the consumers have the liberty of choosing whichever product he thinks is the best.
4. Due to the increased competition in the market, the producers must also keep their prices at a competitive level to survive in the market.
5. As products and information can easily move between countries, this has led to the reduction of barriers between cultures. This has also had to facilitate communication between different nations.
6. People now have access to the best educational facilities across the globe. People from underdeveloped and developing countries often move to developed countries for better education.
7. With the increase in the globalization more and more companies have set up business in different countries. This has helped the people to gain more employment opportunities.