New Economic Policy ( 1991)

Fundamental changes were introduced in India's economic policy from 1991 onwards. Till then, the government had been following an economic policy that protected the public sector and controlled the private sector. In 1991 , the government announced a new package of economic reforms. The New Economic Policy included economic decisions that opened the Indian economy to the world market. This marked the end of India's old economic policy. It had implemented many laws to protect the Indian market and business from competition from foreign countries. Narasimha Rao was the Prime Minister when the New Economic Policy was implemented. Manmohan Singh was the Finance Minister. Liberalization , privatization , and globalization were the main objectives of the New Economic Policy.

Liberalization  : Liberalization refers to the process of reducing government control and influence over the economic activities of a nation. Under this, the government encouraged investment by private companies , especially foreign companies . Private companies were allowed to invest in sectors such as telecom , civil aviation , and energy that were previously reserved for the government. Licensing requirements were simplified or eliminated. Restrictions on imports were removed. As a result of liberalization, many Indian companies were acquired by foreign companies and many Indian companies became multinational corporations.

Privatization  : Privatization is a policy aimed at reducing the direct involvement of the government in the industrial, trade and commercial sectors. Through privatization, the government sells shares of government-controlled public sector enterprises to private companies. The government sells shares mainly when public sector enterprises are operating at a loss.

Globalization : Globalization is the uncontrolled flow of capital , technology , and products from one country to another. Through globalization, domestic economies are integrated with the world economy. The main driving force behind globalization are multinational corporations. Multinational corporations are companies that produce goods or provide services to markets in more than one country. Through globalization, some Indian corporations are also becoming multinational corporations. Through the electronic economy, banks and corporations can send money to any part of the world in an instant. The revolution in information technology has led to the globalization of finance.