1. T. Y. B. COM. SEMESTER – V Dept. of Economics M. S
T. Y. B. COM. SEMESTER – V Dept. of Economics M. S. College of Arts ,Sci, Comm & BMS Kausa , Mumbra Dist. Thane
BUSINESS ECONOMICS – V

2. Macro Economic Overview of India
NEW ECONOMIC POLICY 199I
*NTRODUCTION
*The year 1991 one of the most significant one in the economic history of India. The economy underwent some major shifts in its policies and functioning .
*The economy was functioning as a mixed economy with government controlling some of the most strategic industrial sectors.

3. THE RATIONALE OF NEW ECONOMIC POLICY (NEP) 1991
*Thus in , India faced economic crisis in the following ways and they provided the reasons for the i,mplementation of the New Economic Policy.
1] Fiscal Crisis: As a consequence the fiscal deficit rose to 7.7 percent of GDP in internal debt 48.6% of GDP in
2] Balance of Payments Crisis: current account deficit 9.7 billion US dollars.

4. 3] High Inflationary Pressure:
wholesale prices – annual rate 8.2 % during the period to
In 1990 – 91 the rate of inflation crossed double digit mark and stood at 10.2.percent
Average annual rates of inflation were quite high between 10 percent and 14 percent till

5. IMPORTANT POLICY CHANGES IN NEP 1991
The policies are popularly termed at LPG policies as they resulted in liberalisation, privatisation and globalisation of the Indian economy.
A MACROECONOMIC STABILISATION ( DEMAND MANAGEMENT)
These measures are short term measures aimed at demand management to return to low and stable inflation and a sustainable fiscal and balance of payments position. The measures consisted of the following :

6. 1] Control of inflation
Fiscal deficit was brought down 7.7% of GDP in
SLR was raised from 38 % to 38.5 % in September 1990
The CRR was raised to 15 % in July
The bank rate was raised to 12 percent in October 1991 to curb excessive liquidity.
Later the RBI started to bring down CRR and SLR in a phased in a manner on the basis of recommendations of the Narasimham Committee.
The inflation rate was brought down to 8 percent in and further to 4.6 percent in

7. 2] Fiscal correction :
Government introduced expenditure reforms to reduce non- productive public expenditure by cutting down subsidies, defence expenditures and administrative expenditures.
Measure were takern to increase tax revenve through tax reforms.

8. 3] High Inflationary Pressure
The wholesale prices in India rose at an annual rate of 8.2 percent during the period to
In the rate of inflation crossed double digit mark and stood at 10.2 percent.
The average annual rates of inflation were quite high between 10 percent and 14 percent till

9. IMPORTANT POLICY CHANGES IN NEP 1991
MACROECONOMICS STABILISATION ( DEMAND MANAGEMENT )
1] Control of inflation
2] Fiscal correction
3] Improvement in balance of payment position

10. B] STRUCRURAL REFORMS ( SUPPLY SIDE MANAGEMENT )
THE MEASURES WERE
1] INDUSTRIAL FEFORMS
2] PUBLIC SECTOR REFORMS AND DISINVESTMENT
TRADE AND CAPITAL FLOWS REFORMS
4] FINANCIAL SECTOR REFORMS