INDIA - NEW ECONOMIC POLICIES

The new economic policies were on two levels

 1  Liberalization measures which is further divided into

a. New Industrial Policy
b. New Trade Policy

2. Macroeconomic reforms and structural adjustments

I   LIBERALIZATION MEASURES

1. New Industrial Policy (NIP) - Under the New Industrial Policy there was:
       a.  Liberalization of industrial licensing which resulted in
            -licensing
            -decontrol
            -deregulation
            -broad banding
            -abolition of registration

       b.  FERA liberalization. The Foreign Exchange Regulation Act liberalized foreign                    
            investments and technology imports
      
       c.   MRTP liberalization  The Monopolies Restrictive Trade Practices was removed and                           threshold asset limit was abolished and clearance for expansions, mergers were not needed                                                                                                
       d.  Curtailment of public sector.
            Several industries previously reserved for public sector opened up to the private sector. Only               eight core industries remain reserved for the public sector

2.    New Trade Policy (NTP)
       Under this policy there were seven reforms as follows:

       a. Lowering of import tariffs
       b. Import licences were abolished
       c. The exim regime was more open
       d. The rupee was made convertible
       e.  Exports were encouraged
       f.   India’s economy was to be integrated with global economy


II      MACROECONOMIC REFORMS AND STRUCTURAL ADJUSTMENTS

1    Macroeconomic reforms: There were three types of reforms:

      a.   fiscal and monetary reforms which included
            -reduction of fiscal deficits
            -reform of tax systems
            -interest rate reforms
            -inflation control

      b.   banking sector reforms included the following
            -banks to operate as commercial institutions
            -priority sector lending to be phased out
            -deposit interest rates deregulation
            -operational freedom in lending rates
            -norms on capital adequacy to be kept up
            -disinvestment in public sector banks
            -permission for new private sector banks

       c.   capital market reforms were;
            -abolition of CCI (Controller of Capital Issues)
            -strengthening of SEBI (Securities and Exchange Board of India)
            -opening of Indian capital markets of FII (Foreign Institutional Investors)
            -allowing foreign brokers in Indian capital markets
            -private sectors allowed into mutual funds
            -allowing Indian firms to raise capital abroad

2.    Structural adjustments were

       a.   market driven price and dismantling of price controls
             -phasing out of subsidies
             -dismantling price controls
             -abolishing fertilizer, sugar, export and petro-product subsidy
             -partial decontrol & parallel marketing of kerosene and LPG
             - steel price decontrol

        b   public sector restructuring and disinvestment  
             -no new public sector units or expansion with government equity
             -budgetary support for PSU to be phased out
             -disinvestment of government equity in PSUs

        c.   exit policy
             -support to VRS
             -creation of NRF(National Retail Federation)