Q.Write a short note on New Economic Policy.

The New Economic Policy of 1991 was launched in response to a deep economic crisis and shifted India from a controlled economy to a market-oriented one through Liberalisation, Privatisation and Globalisation (LPG).

In the Tamil Nadu HSC Class-12 Commerce course, the New Economic Policy (NEP) is studied as the background to the 1991 reforms. Key points:

• Background/cause — by 1991 India faced a serious balance-of-payments crisis: foreign-exchange reserves had fallen to a few weeks' imports, the fiscal deficit was high, inflation was rising and there was heavy foreign debt.
• Response — in July 1991 the government announced the NEP to stabilise the economy and make it more open, competitive and market-driven.
• Three pillars (LPG):
  • Liberalisation — reducing licences, controls and restrictions on industry and trade. …