New Economic Policy

New Economic Policy

Q1.  Describe the needs of economic reforms in India in 1991 ?      OR       
        Why was new economic policy (NEP) adopted in 1991?          OR                 
        What was the crises in Indian economy in 1991? 
Ans. (i) Burden of foreign debts = Accumulation of foreign debts and consistent rise in debt made  the service payment further we weakened our balance payment (BOP) position.   
(ii) Fall in foreign exchange reserve = In 1991 India’s foreign exchange reserve fall to such a low level that there were no enough money to pay our import bill even for 15 days.       
(iii) Gulf crisis = On account of Iraq war in 1990-1991 prices of petrol shot up. Remittance form NRIs stopped due to gulf war.   
(iv) Inward looking policy = Our inward looking policy focused on industrialization: excessive protection to our domestic industries through licence and import tariff discouraged the competition.               
(v) Poor performance of public sector under taking.                                 
(vi) Rise in price.                               

Q2.  What is meant by new economic policy .write the objective of NEP?       
Ans. The policies which were adopted to control the economic crisis of 1990-1991 is called new economic policies.                             
Objective of NEP               
(i) to reduce fiscal deficit and to have relative price stability.                               
(ii) to reduce domestic inflation rate.                     
(iii) to improve efficiency and productivity of the economy.                           
(iv) to input economy back on the path of sustainable growth with social justice.                     
(v) to improve balance of payment situation.                             
(vi) to liberalize industrial policy like to abolish industrial licensing policy for private sector industry.                             

Q3.  Difference between direct taxes and indirect taxes.                                   
Ans.    Direct taxes.                     
(i) Direct taxes consist of taxes on income of individuals as well as profits of business enterprises.                       
(ii) Direct taxes are the taxes in which the burden of tax cannot be shifted to other.                       
(iii) Income tax, wealth tax, etc. are direct tax.               
Indirect taxes                       
(i) Indirect  taxes are imposed on commodities in order to help the formation of common national market for goods and commodities.                   
(ii) Indirect taxes are taxes in which the burden of tax can be shifted to others.               
(iii) Sales tax, exercise duty ,etc.                               

Q4.  Distinguish between the strategic and minority sale.                       
Ans.     Strategic sale.       
(i) It refer to the sale of 51% or more stock of a PSUs. (public sector undertakings) to the private sector.                 
(ii) the ownership of PSUs is handed over to the private sector.               
Minority sale.                       
(i) It refer to sales less than 49% stock of a PSUs to the private sector.                               
(ii) The ownership of PSUs still remains  with government as it hold 51% of stocks.                           

Q5. Distinguish between the bilateral trade and multilateral trade.               
Ans.     Bilateral trade.           
(i) It means exchange of commodity services between two countries.         
(ii) It is an agreement that provides equal opportunities to both the countries.                           
Multilateral trade.               
(i) It means trade by a country with more than two countries.                             
(ii) It is an agreement that provide opportunities   to all the member country in the international market.     

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