LPG: An Appraisal — Part 1: The 1991 Crisis and the New Economic Policy: visual lesson, CBSE Class 12 Economics

Lesson

Liberalisation, Privatisation and Globalisation

Part 1 — why India changed course in 1991, and what the New Economic Policy changed.

In this lesson you will

Explain the causes of the 1991 economic crisis and why India turned to the IMF and World Bank
Distinguish stabilisation measures from structural reform measures
Describe the reforms under liberalisation in industry, finance, tax, foreign exchange and trade
Explain privatisation (disinvestment, ratna status) and globalisation (outsourcing, the WTO)

Part 1 at a glance

Concept

For four decades, the government controlled much of economic life to pursue planned goals.

The controlled economy that the reforms set out to change.
Area	Typical rule before 1991
Starting or expanding a factory	Government licence needed
Many large industries	Reserved for the public sector
Imports	Quotas and very high tariffs
Foreign investment	Tightly limited
Interest rates, bank lending	Largely set by the RBI

Diagram

How the crisis built up