Q.Explain the meaning and main measures of Liberalisation undertaken under the New Economic Policy 1991.

Liberalisation touched industrial licensing, large-firm expansion rules, the financial sector, fiscal policy, and trade policy together.

Define Liberalisation, then explain each major measure.

Liberalisation refers to the process of freeing the domestic economy from excessive government rules, regulations, and controls, allowing market forces a greater role in economic decisions. The main measures undertaken under the New Economic Policy 1991 include:

1. Abolition of industrial licensing for almost all industries, retained only for a short strategic list (security, hazardous chemicals, a few environmentally sensitive products).
2. Removal of MRTP Act restrictions that had earlier required large companies above a defined asset size to seek government permission before expanding or merging.
3. De-reservation of the public sector's exclusive domains, opening most industries earlier reserved solely for the public sector to private (including foreign) investment, retaining exclusivity mainly for a few strategic sectors.
4. Financial-sector reforms — entry of private banks, gradual reduction of CRR/SLR, progressive deregulation of interest rates, and an empowered SEBI to regulate capital markets.
5. Fiscal reforms — rationalised, generally lower tax rates, a simplified tax structure, and better-targeted subsidies.
6. External-sector/trade reforms — devaluation of the rupee, movement toward a market-determined exchange rate, reduced import tariffs, and dismantling of import/export licensing and quantitative restrictions.

Together, these measures shifted the basic presumption of Indian economic policy from requiring government permission for most activity to allowing free private enterprise unless specifically restricted.