New Economic Policy

What Is Economic Policy?

The economic policy is a set of ways that helps to impact or govern the nation’s economic behaviour. The state is usually in charge of implementing and enforcing economic strategy. Economic plans encompass choices on taxation and government spending, wealth transfer between surplus to deficit units, and investment capital, to name a few. Conceptual and practical economics are two approaches to monitoring the efficiency of economic plans.

Conceptual and practical

Practical Economics or Positive Economics: 

Practical economics tries to explain how well the market and policy operate while making assumptions on whether outcomes are optimum. Practical economic hypotheses are distinguished by the fact that they’re being evaluated and then either affirmed or dismissed. The assumption that an oversupply of currency leads to increased prices pertains to practical economics, for example, since it can be verified by analysing data on money supply and market price.

Conceptual or normative economics:

The application of moral judgements to evaluate the growth of the business and monetary reforms is referred to as conceptual economics. As a result, normative ideas cannot be tested because they are founded on a moral claim and hence cannot be investigated, validated, or disputed. For example, the assumption that inflation is too low falls under conceptual economics. The majority of debates among academics, predictably, revolve over normative economic theories.

Economic policy objectives are made up of normative judgments on what industrial policies must aim for and hence fall within normative or conceptual economics. Although there is much dispute about what economic-political objectives are suitable, quite a few have seemed to be widespread, if not of worldwide acceptance. 

The objectives are as follows:

High employment: 

High employment aims to ensure that every person of the working population can seek employment.

Stability of price: 

Price stability tries to stop rises in prices, also known as inflation and drops within the general level of prices, known as deflation.

Growth: 

After factoring in inflation, economic growth indicates that all consumers’ and businesses’ earnings rise with time.

Features of Economic policy:

Economic Policy delivers comprehensive and reliable evaluations of officials’ decisions. The topics covered vary from how markets might and should function to the most fundamental forces inside the global economy. Features of Economic Policy are as follows:

• As new issues arise, the policy will analyse them.
• Frontier thinking without technical jargon
• Global policy debates are covered in depth.
• Top worldwide economists’ perspectives

New Economic Policy

The Soviet Union’s state’s economic policy from 1921 to 1928 was known as the New Economic Policy (NEP), and it represented a brief pullback from the prior program of extreme centralised socialism.

The NEP ended with this dramatic shift in policy, which resulted in the abolition of many thousands of the nation’s best productive individual farmers. Moreover, by 1931, the government had reinstituted state intervention across all manufacturing enterprises in the country.

New Economic Policy of India

Indian economic policy after independence was influenced by the colonial experience. The Nehru government adopted a socialist model for the country.  with a strong public sector but also with private property and democracy. It had many drawbacks such as licence raj, import substitution. By 1990 the Indian government was having cash troubles and the Indian economy was about to crash. With the guidance of P. V. Narasimha Rao, India’s New Economic Policy was introduced in 1991. For the first time, the policy allowed the Indian market to be exposed to the rest of the world. P. V. Narasimha Rao’s Economic Reform cut import levies, expanded the reserved industry to private firms, and weakened the Exchange rate to boost exports. The LPG Model of Growth is another name for this.

Economic liberalisation or tariff reductions, market reform or presenting a valuable market to private and foreign actors, and lower tax rates are all examples of new economic plans used to spread the country’s economic capabilities.

The primary goals of the Union Finance Minister’s launch of the New Economic Policy (NEP) in 1991:

• It aimed to establish financial stability and boost the economy by eliminating all barriers and obstacles.
• It aimed to boost private industry engagement in all areas of the economy. As a result, the amount of government-reserved industries has decreased.
• The policy intended to allow unrestricted, worldwide trade in products, commodities, finance, human resources, and innovation.

Features of New economic policy India

• Liberalisation: The reform calls for the economy to be liberalised to avoid superfluous controls and restrictions.
• Privatisation: The term privatisation includes adding remote control and ownership into government-owned and operated corporations. It also refers to remote monitoring and administration’s involvement in public sector businesses.
• Globalisation: The term “globalisation of the economy” refers specifically to a nation’s engagement with established industrial nations in terms of manufacturing, trade, and investment dealings.
• Fiscal reforms: To meet the goal, the government has implemented various regulations on public spending and taken steps to increase overall tax and non-tax collections.
• Modernisation: Emerging sectors, such as computers and electronics, benefit from the approach. The government allows all international partnership suggestions relating to the importation of advanced equipment to provide enhanced quality technologies.

Conclusion

The above article talks about Economic policy and its definition. The article further talks about the New Economic Policy of the Soviet Union in 1921 and the New Economic Policy of India 1991. The new economic policy of India was a great help for the country’s growth as it helped in globalisation, privatisation and modernisation of the previous economic standards.