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Question

Explain the economic reform in India in the context of the LPG policy.


Solution

The salient features of economic reform in India i.e. new economic policy are liberalisation, privatisation and globalisation of the economy (LPG policy.)

(i) Liberalisation: Simply speaking liberalisation means to free to economy from the controls imposed by the Govt. Before 1991, Govt. had put many types of controls on the Indian economy. These were as follows : (a) Industrial Licensing System (b) Foreign exchange control-‘ (c) Price control on goods (d ) Import License

(ii) Privatisation: Simply speaking, privatisation means permitting the private sector to set up industries which were previously reserved for the public sector. Under this policy, many PSU’s were sold to the private sector.

(iii) Globalization: Literally speaking globalisation means to make Global or worldwide, otherwise taking into consideration the whole world. Broadly speaking, Globalisation means the establishment of relations of the economy with the world economy in regard to foreign investment, trade, production and financial matters.

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