Economic Reforms since 1991 [AHSEC Class 12 Economics Notes 2024 New Syllabus]

Economic Reforms since 1991 
[AHSEC Class 12 Economics Notes 2024 New Syllabus]

Q.1.What is economic reforms?

Ans: The new economic policy started by the government since 1991 in order solve the Economic crisis and to accelerate the rate of economic growth is called Economic Reforms. It is also known as new economic policy which consists of Liberalization, Privatization and Globalization (LPG).

Q.2.Why there was need for economic reforms or factors responsible for economic reforms?  2015, 2016

Ans: 1. Increase in fiscal deficit, 2. Adverse balance of payment, 3. Poor performances of PSU’s, 4 .Rise in price, 5.Fall in foreign exchange reserves

Q.3. what is New Economic Policy’ 1991? Briefly explain it.

Ans: New Economic Policy refers to adoption of Liberalisation, Privatisation and Globalization (LPG) which aims at the rendering the economy more efficient, competitive and developed.

Q.4. Mention the positive impact of LPG polices.

Ans: 1. a vibrant Economy, 2. Increase in Industrial production, 3. Check on fiscal deficit, 4. Check on inflation, 5. Flow of private foreign investment.

Q.5. Mention the negative impact or weakness of LPG polices.                 2015, 2017

Ans: 1. Neglect of agriculture, 2. Urban concentration of growth process, 3. Economic colonialism, 3. Cultural erosion

Q.6. What is liberalization? Mention its merits and demerits.                   2016

Ans: Liberalization: It means to free the economy from the direct and physical control imposed by the government.

Measures adopted for Liberalization:

1. Abolition of industrial licensing.
2. De-reservation of production areas
3. Expansion of production capacity
4. Freedom to import capital goods

Advantages of Liberalization

1. Industrial licensing
2. Increase in the foreign investment
3. Increase in the foreign exchange reserve
4. Increase in the consumption and control over price
5. Check on corruption

Disadvantages of liberalization

1. Increase in unemployment
2. Loss of domestic units
3. Increase dependence on foreign nations
4. Unbalanced development

Q.7. What is Privatization? Mention its merits and demerits.    2015, 2016, 2017

Ans: Privation: It refers to general process of involving the private sector in the ownership or management of state owned enterprises. It implies partial or full ownership and management of public sector enterprises by the private sector.

Measures adopted for Privatization:

1. Contraction of public sector
2. Disinvestment of public sector undertaking
3. Selling of shares of public enterprises

Merits of Privatization:

1. Improved Efficiency and minimised cost
2. Lack of Political Interference
3. Increased Competition
4. Government will raise revenue from the sale.

Disadvantages of Privatization

1. Privatization would create a private monopoly.
2. Government loses out on potential dividend
3. Problem of regulating private monopolies
4. Short-Term view of Firms

Q.8. What is Globalisation? Mention its merits and demerits.                   2017

Ans:  Globalisation means ‘integrating’ the economy of a country with the world economy. This implies free flow of goods and services, capital, technology and labour across national boundaries.

Measures adopted by the government for globalization:

1. Reduction in custom duties.
2. Removal of quantitative restrictions on exports and imports.
3. Facilitating foreign investment and
4. Encouragement of foreign technology.

The Merits of Globalization are as follows:

1. There is an International market for companies.
2. For consumers, there is a wider range of products to choose from.
3. Increase in flow of investments from developed countries to developing countries.
4. Greater and faster flow of information between countries.
5. Technological development has resulted in reverse brain drain in developing countries.

The Demerits of Globalization are as follows:

1. The outsourcing of jobs to developing countries has resulted in loss of jobs in developed countries.
2. There is a greater threat of spread of communicable diseases.
3. There is a threat of monopoly from multinational corporations.