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New economic policy,1991. Its aspect and effect on business
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New economic policy,1991. Its aspect and effect on business

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Business Environment

Business Environment

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  • 1. ASPECTS AND ITS EFFECT ON BUSINESS
  • 2.  UNDERTAKEN SICE JULY 1991  VIEW TO INCREASE THE PRODUCTIVITY AND EFFICIENCY OF THE ECONOMY.  REDUCED COMPETITION  CREATING MORE COMPETITIVE ENVIRONMENT NEED OF NEW ECONOMIC POLICY  DUE TO ECONOMIC CRISIS 1991  LOW FOREIGN EXCHANGE RESERVE  INCREASED IN NATIONAL DEBT(FISCAL DEFICIT)  PRICE RISING
  • 3. 1.LIBERALISATION • Liberalising the economy against unnecessary controls and regulation • Abolished the system of industrial licensing except 8 industries 2. PRIVATISATION  Widening the scope and role of private sector  Introduction of private ownership in public owned units  Greater participation of private individuals  55% contribution by private sector for the development of economy
  • 4.  Credit support to private sector from financial institutions. 3.GLOBALISATION OF THE ECONOMY  FDI is allowed in high technology and high investment priority sector  No permission was required for hiring foreign technician  Rupee has been devalued, so export was increased and import was restricted (outflow of foreign capital)  NEW EXIM POLICY 1992-97 was introduced. Improve trade (export –import) practices  Custom duty was has been reduced from 250% to 35%
  • 5. 4. NEW PUBLIC SECTOR POLICY  Emphasis to shift public to private sector  Reduction in list of reserved industries to 17 to 8  Sick PSE (public sector enterprises) policy were redesigned.  Disinvestment of shares in PSE and encourage the investment to private sector(general public) 5. MODERNISATION  Introduction of modern techniques in production system  Growth of electronic and computer industries in economy
  • 6.  Corporate merger and collaborations is allowed to face new challenges  Modernisation of sick units (public and private both) 6.FINANCIAL REFORMS  Reduction in liquidity ratio( CRR, SLR is reduced so people have more money and boom in society)  Reconstitution of Banking sector  Giving more freedom to banks and ending dual control of RBI and Finance Ministry.  Introducing capital market change  Liberal treatment to foreign Banks
  • 7.  For recovery of loans special speedy machinery were established 7. FISCAL REFORMS  To reduce fiscal deficit  Initiative was taken to reduce public expenditure by increasing Taxes.
  • 8.  ALLOW ENTRY OF PLAYERS  ECONOMICAL BENEFITS  CONTROL INFLATION  INCREASED IN FDI  INCREASE IN TOTAL PROFITS  EXPLOITATION OF WORKERS  LACK OF LONG TERM VISION
  • 9.  EFFICIENT UTILISATION OF RESOURCES  HIGH QUALITY OF SERVICES  MINIMISING THE LOSS  REDUCE MALPRACTICES  LESS POLITICAL INTERFERENCE  REDUCE IN PERSONNEL PROBLEM  EXPLOITATION OF CONSUMERS  NO CHECK ON MONOPOLIES  UNECONOMIC SERVICES
  • 10.  HUGE AMOUNT OF FORIGN INVESTMENT  UPDATED TECHNOLOGY  FREE FLOW OF CAITAL  LOWER PRICES WITH HIGH QUALITY  INCREASE IN INDUSTRIALISATION  PROVIDE EMPLOYMENT  REDUCES JOBS AND INCOMES  POOR LABOUR PRACTICES  RISK AND UNCERTAINITIES