New Economic Policy Reform Class XII (Economics)

NEW ECONOMIC POLICY:
A new plan in action by the government to influence production and capital
formation of a country is known as NEP.
NEP-New economic policy
It was started in the year 1991. Major effects of NEP were done by
P.V.Narasimhan& Manmohan Singh.
Kishan Lal sharma(BBA,MBA)MLZS 1

Reasons for implementing NEP
Kishan Lal sharma(BBA,MBA)MLZS
2
 There were poor performance of public sector.
 The scope for private sector was limited.
 There were sudden fall in Foreign Exchange Reserves(FER). There were more
expenditure than incoming.
 International investors were not encouraged by government.
 Tax notes were very high so people

Main Features Of Economic Reforms
3
PRIVATISATION
LIBERALISATIO N
GLOBALISATION
ECONOMIC REFORMS

Liberalisation:
4
 Free from direct or physical control by the government in the way of trade is known as
liberalisation.
 Before 1991 the were some controls of Govt. they are: Industrial licensing system was a
rigid process.
 They were controlling the price. Import licensing.
 Restrictions on investment.

Economic reforms under Liberalization:
5
 There were four reforms under liberalization:
 Industrial reforms
 Financial reforms
 Fiscal reforms
 External reforms

Industrial reforms:
6
 Abolition of licensing except some products like cigar etc.
 Contradiction to public sector i.e. number of items produced by public sector were
reduced.
 Govt. given freedom to import capital. Dereservation of production units. Producer's given
freedom to what to produce & how much to produce.

Financial reforms:
7
 R.B.I was turned into felicilitator.
 Due to this dramatically change the banking sector of the country had expanded a lot.
 It also allowed Foreign Institutional Investors(FII)

Fiscal reforms:
8
 It relates to total revenue and total expenditure of government.
 Before liberalisation, the taxes were very high & this encouraged tax evasionby the
people. After Liberalisation, taxes were reduced.
 The procedure for paying taxes was simplified.
 Non-planned expenditure by the Govt. was reduced

External reforms:
9
 Foreign exchange reserves:
 In 1991, Devaluation of rupee so by this foreign countries can buy Indian good.
 This provided good flow of trade.
 At presently, exchange rate is determined by supply & demand in international market.
 Foreign trade policy:
 Abolition of import licensing except for some cases.
 Quantitative restrictions were removed. Tariff restrictions were moderated.
 Export duties has withdrawn.

10
 Advantages of liberalization
 Industrial licensing
 Increase the foreign investment. Increase the foreign exchange reserve.
 Increase in consumption and Control over price. Check on corruption.
 Reduction in dependence on external commercial borrowings
 Disadvantages of Liberalization
 Increase in unemployment.
 Loss to domestic units.
 Increase dependence on foreign nations
 Unbalanced development


Privatisation:
11
Privatisation is defined as the transfer of function, activity or organization from the public
sector to private sector.
 Two ways for Privatisation:
 Sale of public sector units to private sector.
 With drawl of public sector units-joint.
 Objectives of Privatisation
 To increase efficiency & competitive power of the enterprises To strengthen industrial
management.
 To earn more & more Foreign currency.
 To make optimum use of resources To achieve rapid industrial development of the country.

Measures Adopted For Privatisation
12
 Contraction of Public sector
 Disinvestment
 Sale of shares of public enterprises Increase in private sector
 Conversion of loans into shares is not necessary
 Sick industries
 Memorandum of understanding

13
 Advantages of Privatisation:
 Reduction in economic burden • Increase in efficiency
 Reduction in sense of irresponsibility Scientific Management
 Reduction in Political Interference Encouragement of new Inventions

 Disadvantages of Privatization
 Industrial sickness.
 Lack of welfare.
 Class struggle.
 Increase in inequality
 Opposition by employees.
 Problem of financing.
 Increase in unemployment.
 Ignores the weaker sections.
 Ignores the national importance

Public sector reforms
14
The reforms introduced to support public sector units are:
Introduction of some awards like:
 Navaratnas
E.g: BPCL, MTNL, Etc.
 Maharatnas
E.g: CIL, ONGC, Etc.
 Miniratnas
E.g: BSNL, ITDCL, Etc.

World Trade Organization:
15
 The World Trade Organization (WTO) is a large international organization to regulate trade
that was established in 1995.
 As of 15 December, 2005, there were 153 member countries. In the WTO, agreements are
made on trade between countries.Established: 1st January 1995.
 Created by: Uruguay Round negotiations (1986 94).
 Budget: 185 million Swiss francs for 2008. Secretariat staff: 625
 Head: Pascal Lamy (Director-General Membership: Countries on map. 153 countries (on
23 July 2008). New member: Ukraine

16
 Objectives of WTO:
 The primary aim of WTO is to implement the new world trade agreement.
 To promote multilateral trade
 To promote free trade by abolishing tariff & non-tariff barriers.
 To enhance competitiveness among all trading partners so as to benefit consumers.
 To increase the level of production & productivity with a view to increase the level of
employment in the world.
 To expand & utilize world resources in the most optimum manner.
 To improve the level of living for the global population & speed up economic development
of the member nations.

17
 Advantages of WTO:
 Freer trade cuts the cost of living
 It gives consumers more choice, a broader range of qualities to choose from. Trade raises
incomes.
 Trade stimulates economic growth, that can be good news for employment
 The basic principles make the system economically efficient, I they cut costs.
 The system allows disputes to be handled constructively
 A system based on rules rather than power makes life casier for aft

 Disadvantages of WTO
 The WTO dictates policy
 The WTO is for free trade at any cost
 The WTO destroys jobs, worsens poverty
 Small countries are powerless in the WTO
 Weaker countries are forced to join the WTO
 The WTO is the tool of powerful lobbies
 Non-tariff barriers
 Competition

Globalisation:
18
 It is defined as a process associated with increasing openness, growing economic
independence and Deeping economic integration in the world
 economy.
 Reduction of trade barriers
 Free flow of capital
 Free flow of technology
 Free movement of technology

Outsourcing:
19
It is a system of hiring business services from the outside world is known as Outsourcing.
 Advantages of outsourcing:
 Easy availability of cheap labour
 Reasonable degree of skill Virgin market
 Lack of competitive competitors
 Cheap and abundant availability of raw material
 Revolutionary growth of I. T industry in India

20
 Positive Effects of Globalisation:
 Adoption of new & flexible production methods.
 Reconstruction of production & Trade patterns.
 Raise of Foreign capital.
 Qualitative improvement in the country.
 Rise in the generation of employment. Rise in Banking and Foreign sector
 efficiency.
 Increase in the technology.

 Negative Effects of Globalisation
 Loss of domestic industries
 Exploits Human resource Decline in income
 Unemployment Transfer of natural resources
 Lead to commercial and political colonism
 Widening gap between rich and poor
 Dominance of foreignInstitutions

21
 Positive Effects Of NEP:
 Impressive increase in growth rate of GDP.
 I. T industry has achieved global recognition.
 Increase in the Govt. revenue i.e. increase in national income.
 Increase in foreign exchange reserves
 Flow of private & foreign investment.
 Recognition of India as an emerging power.
 Shift from monopoly market to competitive market.
 Decline in poverty
 Negative Effects Of NEP:
 Neglect to agriculture.
 Urban concentration of growth was high but neglected rural.
 Preference for handicraft were low.
 There is cultural erosion in the country.
 It is like economic colonization.

22
Thank You!

New Economic Policy Reform Class XII (Economics)

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to New Economic Policy Reform Class XII (Economics)

Similar to New Economic Policy Reform Class XII (Economics) (20)

More from Kishan Sharma

More from Kishan Sharma (14)

Recently uploaded

Recently uploaded (20)

New Economic Policy Reform Class XII (Economics)