Question

Why privatisation is encouraged in New Economomic Policy?

Answer 1

The year 1991 is an important landmark in the economic history of post-Independent India. The country went through a severe economic crisis triggered by a serious Balance of Payments situation. The crisis was converted into an opportunity to introduce some fundamental changes in the content and approach to economic policy.

The response to the crisis was to put in place a set of policies aimed at stabilisation and structural reform. While the stabilisation policies were aimed at correcting the weaknesses that had developed on the fiscal and the Balance of Payments fronts, the structural reforms sought to remove the rigidities that had entered into the various segments of the Indian economy. Former Prime Minister Manmohan Singh is considered to be the father of New Economic Policy of India.

Answer 2

The reason why privatisation is encouraged in New Economomic Policy is as follows:

• The term privatisation defines the process with which the government  transfers business or property to the private sector.
• Increment of objectivity and efficiency of the company, is the matter of concern for private sector more than government.
• Towards the middle of 1991, Government lays down The New Economic Policy.
• It gives liberty to trading and industrial activities and also global linkage is provided to the economy.