New economic policy is related to economic reforms. Its aim is to bring about reforms in production pattern, to obtain new technology, and to use full capacity expeditiously and in tote.
The new economic policy was devised and implemented for the first time in the year 1985 during the period of Prime Minister Rajiv Gandhi.
The second wave of new economic reforms came in the year 1991 during the period of P. V. Narasimha Rao's government.
The main reason to start the new economic policy (1991) was Gulf War and problem of balance of payment in India.
Three main objectives of new economic policy were privatisation, liberalisation, and globalisation. > Main sectors of new economic reform policy, 1991 were: Fiscal Policy, Monetary Policy, Value Fixation Policy, Foreign Policy, Industrial Policy, Foreign Investment Policy, Business Policy, and Public Sector Policy.
The following four main steps were taken under the Fiscal Policy 1991: (i) To control public expenditure strictly (ii) To expand tax net (iii) To observe discipline in management of funds of central and slate governments
Under the Monetary Policy, steps were taken to control inflation.
Measures implemented under the Industrial Reforms Policy, 1991 were : (i) De-licensing of industries except the list of eighteen industries
(ii) M. R. T. P. norms were relaxed for disinvestment (iii) The areas reserved for public sector were opened to private sector
The Objectives fixed for reforms in the Foreign Investment Policy, 1991 were: (i) Direct foreign investment up to 50% was given automatic approval, in many industries (ii) Foreign companies, involved in export activities were allowed to invest up to 51% capital (iii) The government gave automatic approval for technology agreement in the industries of high priorities
Under the Trade Policy 1991, steps were taken to abolish the excessive protection given to many industries, for the promotion of international integration of economy
The measures implemented to bring efficiency and market discipline under the Public Sector Policy 1991 were as under: (i) Number of reserved industries decreased to eight. Presently these are only four. (ii) The work of rehabilitation of sick industries handed over to Board for Industrial and Financial Reconstruction (iii) Industries were made powerful with the help of Memorandum of Understandings (MOU) (iv) Voluntary Retirement Scheme started to cut down the size of work force