At Independence in 1947, India was a typically backward economy: industrialisation was limited and lop-sided, agriculture showed features of feudal and semi-feudal institutions, transport and communications were underdeveloped and social security was virtually non-existent. The country suffered from the twin problems of rampant poverty and widespread unemployment. The year 1991 is an important landmark: facing a severe Balance of Payments crisis, India introduced a set of policies known as Structural Reforms in Industry, Trade, Fiscal and Agriculture sectors. The chapter motto is "Reform, Perform, Transform".
1. Liberalization, Privatization and Globalization (LPG)
The triple pillars of the New Economic Policy are Liberalization, Privatization and Globalization (LPG).
| Term | Meaning | Facets / Measures |
|---|---|---|
| Liberalization | Removal or relaxation of governmental restrictions in all stages in industry | Delicensing, decontrol, deregulation, subsidies (incentives) and greater role for financial institutions |
| Privatization | Transfer of ownership and management of enterprises from public sector to private sector | Denationalization, disinvestment and opening exclusive public sector enterprises to private sector (the "gateways to privatization") |
| Globalization | Integration of the domestic (Indian) economy with the rest of the world | Import liberalization through reduction of tariff and non-tariff barriers; opening the doors to FDI and Foreign Portfolio Investment (FPI) |