Economic Reforms Since 1991: New Economic Policy

Critical vocabulary and definitions regarding the New Economic Policy of 1991, covering Liberalisation, Privatisation, Globalisation, and major structural changes in the Indian economy.

Economic Reforms (New Economic Policy)

A set of economic policies directed to accelerate the pace of economic growth and development, initiated in India in the year $1991$.

Stabilisation Measures

Short-term economic measures aimed at correcting the deficit in the balance of payments and controlling inflation.

Structural Reforms

Long-term economic measures aimed at improving the efficiency of the economy and increasing international competitiveness by removing various rigidities.

Liberalisation

The freedom of producing units from direct or physical controls such as licenses, price controls, and restrictions on investment imposed by the government.

Industrial Licensing

A government requirement for permission to start an industry; under NEP, it was abolished except for five industries: liquor, cigarettes, defense equipment, industrial explosives, and dangerous chemicals.

Financial Sector

A sector of the economy that includes banking and non-banking financial institutions, stock exchanges, and the foreign exchange market.

Demonetisation

A policy action that withdraws the status of 'legal tender' from existing currency; famously announced in India on November 8, 2016, for Rs $500$ and Rs $1,000$ notes.

Fiscal Policy

The government policy relating to the principal components of revenue and expenditure.

Direct Taxes

Taxes where the burden cannot be shifted onto others, such as income tax and wealth tax.

Indirect Taxes

Taxes where the burden can be shifted onto others, such as the Goods and Services Tax (GST).

GST (Goods and Services Tax)

A uniform indirect tax introduced on July 1, 2017, across all goods and services with the motive of 'One Nation and One Tax'.

Devaluation

The lowering of the value of the domestic currency (e.g., the Indian rupee) in relation to other currencies to resolve Balance of Payments (BoP) crises by increasing exports.

Privatisation

The process of giving a greater role to the private sector and reducing the role of the public sector, involving the withdrawal of government ownership and management.

Disinvestment

A policy instrument where the government sells a part of the share capital of Public Sector Undertakings (PSUs) to private entrepreneurs.

Sircilla Tragedy

A tragedy in Andhra Pradesh where $50$ powerloom workers committed suicide following the privatisation of power supply, which led to high power-tariffs and wage cuts.

Globalisation

The process of integrating the domestic economy with various economies of the world, characterized by increasing openness and economic interdependence.

Partial Convertibility

The ability to sell and purchase foreign currency at the market price for specific transactions like export/import of goods, services, or payment of interest/dividends.

Outsourcing

A system of hiring business services from the outside world (like call centers or clinical advice), often favoring India due to its low wage rates and growth in the IT industry.

GATT (General Agreement on Tariffs and Trade)

An international trade institution established in $1948$ with $23$ countries as members, later replaced by the WTO.

WTO (World Trade Organisation)

The successor to GATT that commenced operations in $1995$, overseeing global trade rules for its $164$ member nations.

FDI (Foreign Direct Investment)

Investment by foreigners involving ownership and management of business establishments in India, such as Pepsi or Coca-Cola.

FII (Foreign Institutional Investment)

Investment in Indian companies by purchasing their securities or shares by foreign banking or non-banking institutions.