The document provides a SWOT analysis of India's New Economic Policy introduced in 1991 in response to a balance of payments crisis. The three main strengths are: 1) High economic growth increasing GDP and reducing poverty; 2) Increased foreign investment and integration in the global economy; 3) Dismantling of licensing and opening private industry. The key weaknesses are reduced government spending and increased inequality. Main opportunities are foreign investment, technology transfer, and improving competitiveness. Primary threats include increased economic fluctuations, challenges for agriculture and rural populations, and uneven distribution of benefits.

1. FORE SCHOOL OF MANAGEMENT
SWOT ANALYSIS OF NEW
ECONOMIC POLICY
Milan Dhingra
201076
FMG 20 B

2. INTRODUCTION
In response to an unprecedented balance of payments crisis -- which left India with about two weeks of
foreign-exchange reserves -- Singh, with the support of Prime Minister P.V. Narasimha Rao, announced a
host of reforms in his inaugural budget speech on July 24, 1991. His two-hour oration left no one in doubt
that he intended to turn a crisis into an opportunity.
The economic policy thus is called as the New Economic Policy of India or LPG Policy which liberalized,
privatized and globalized our Indian economy to new heights.
SWOT ANALYSIS OF NEW ECONOMIC POLICY OF INDIA
STRENGTHS:
Devaluation of Rupee by around 18 percent as a result forex reserves have increased from $5.8
billion in 1990-91 to $274 billion in 2010-11 hence taking care of BOP issues.
High rate of growth in the economy. Our economy has increased from 10.8 lakh Indian Rupees in
1990-91 to 48.8 lakh Indian Rupees in 2010-11.
Opening up of the Indian economy which led to increase in FDI inflows to $30.3 billion in 2010-
11 from a meager $0.13 billion in 90-91
The number of billionaires of India has risen due to this policy. The combined wealth of the
Indian billionaires marked an increase of 60 per cent from $ 106 billion in 2006 to $ 170 billion
in 2007. The 40 Indian billionaires have assets worth about Rs. 7.50 lakh crores whereas the
cumulative investment in the 91 Public Sector Undertakings by the Central Government of India
is Rs. 3.93 lakh crores only.
Integration of economies of the world through uninhibited trade and financial flows, mutual
exchange of technology and knowledge, free inter-country movement of labor as can be seen
from growth of exports to $245 billion in 10-11 from just $ 18 billion in 90-91.
The per-capita income has increased from Rs. 11,535 in 90-91 to Rs. 41,129 in 10-11 and as a
result poverty rate has dipped from 65% to 35 % during the same period.
Dismantling of The Industrial Licensing Regime
Abolition of the (MRTP) Act, which necessitated prior approval for capacity expansion
The removal of quantitative restrictions on imports.
The reduction of the peak customs tariff from over 300 per cent prior to the 30 per cent rate that
applies now
WEAKNESS:
A sharp reduction in government spending, especially on capital formation development and
social welfare.
The reforms were more under pressure from the world economies and IMF to close the fiscal
deficit and to prevent India from defaulting on loan repayments.
Weakness in Company Act, 1956 regarding safeguards on use of loans and investments in group
companies remained ineffective.

3. A severe cutback in government subsidies for food, fertilizers and power, accompanied by a rise
in the costs of borrowing for government resulting from financial deregulation leading to higher
interest rates.
Deregulation of industry and gradual removal of protective legislation for labour.
Challenges for the SMEs to survive in the new competitive environment.
Exposed workers to competition from imports and technology which threatened their jobs.
Ignored code of conduct for private industrialists to inform about their social obligations.
OPPORTUNITY:
Opening up the economy to foreign direct investment by providing facilities to foreign companies
to invest in different fields of economic activity in India, removing constraints and obstacles to
the entry of MNCs in India and development of advanced means of communication,
Allowing Indian companies to enter into foreign collaborations and also encouraging them to set
up joint ventures abroad
Carrying out massive import liberalization programs by switching over from quantitative
restrictions to tariffs and import duties.
Internationalization of financial markets.
The better technology brought in by the MNCs induce the domestic firms to absorb similar
technology. This improved their competitiveness and expansion.
Asking Indian Corporate to improve their efficiencies in order to compete with the world
competition
THREATS:
Active promotion of stock markets and speculation meant that economy was more prone to
fluctuations than before.
Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive
system and low post-harvest value addition continued to be a drag on the agricultural sector’s
performance. With more than half the population directly depending on this sector, low
agricultural growth had serious implications for the inclusiveness of growth.
Despite the concerted development in manufacturing and service sectors, despite the remarkable
inflow and overflow of foreign reserves, agriculture is still the largest industry providing
employment to about 60 per cent of the workforce in the country.
The lives of the educated and the rich had been enriched by globalization. But the benefits had
not yet reached the majority, and new risks had cropped up for the losers. the socially deprived
and the rural poor. Significant numbers of non-perennial poor, who had worked hard to escape
poverty, were finding their gains reversed.
The FDI inflows have in no way assisted in improving the health and environment conditions of
the people. On the other hand, the financial capital of India and the political capital of India are
set to become the topmost slum cities of the world.
Our progress in education has been slow and superficial, without depth and quality, to compete
the international standards.

4. References:
http://articles.economictimes.indiatimes.com/2011-07-24/news/29807511_1_market-
economy-scooters-india-s-gdp
http://www.bloomberg.com/news/2011-07-26/20-years-later-india-s-transformation-is-
incomplete-world-view.html
http://www.fibre2fashion.com/industry-article/8/738/impact-of-globalization1.asp
http://isid.org.in/pdf/norway.PDF