Table of Contents
- 1. Introduction & Chapter Overview
- 2. Background of the 1991 Economic Crisis
- 3. New Economic Policy (NEP) 1991
- 4. Liberalisation & Sectoral Reforms
- 5. Privatisation & PSU Categories
- 6. Globalisation, Outsourcing & WTO
- 7. Indian Economy During Reforms (Impact & Criticism)
- 8. Important Topics & Economic Concepts
- 9. Important Practice Questions
- 10. Frequently Asked Questions (FAQs)
- 11. Quick Revision Summary
Introduction
These Liberalisation, Privatisation and Globalisation Class 11 Notes explain the 1991 economic reforms introduced in India after the balance of payments crisis. The chapter discusses liberalisation, privatisation, globalisation, WTO, outsourcing, financial sector reforms, industrial reforms and the impact of reforms on the Indian economy. (NCERT Pages 39–52)
This chapter is highly important for UPSC, SSC, Railways, State PSC, CUET and CBSE examinations because questions related to LPG reforms, IMF, World Bank, WTO, disinvestment, outsourcing and economic reforms are frequently asked in competitive examinations. Exact NCERT page references are included throughout the notes for accurate revision and direct NCERT-based preparation.
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Chapter Overview
This chapter explains the economic crisis faced by India in 1991 and the reforms introduced under the New Economic Policy (NEP). It discusses liberalisation, privatisation and globalisation measures along with their impact on agriculture, industry, foreign trade and employment. (NCERT Pages 39–52)
Major Topics Covered
- 1991 Economic Crisis
- Balance of Payments Crisis
- New Economic Policy (NEP)
- Liberalisation
- Privatisation
- Globalisation
- Industrial sector reforms
- Financial sector reforms
- Tax reforms
- WTO
- Outsourcing
- Disinvestment
- Foreign Direct Investment (FDI)
- Foreign Institutional Investment (FII)
(NCERT Pages 39–52)
NCERT Notes: Introduction to Economic Reforms (NCERT Page 39)
These notes explain the need for economic reforms in India.
Economic Reforms of 1991
Important Facts
- India followed mixed economy after independence.
- Excessive controls and regulations slowed economic growth.
- India faced severe economic crisis in 1991.
Major Problems
| Problem |
|---|
| External debt crisis |
| Falling foreign exchange reserves |
| Rising prices |
| Balance of payments crisis |
Important Fact
Foreign exchange reserves were sufficient for only two weeks of imports.
(NCERT Page 39)
Background of 1991 Crisis (NCERT Pages 39–40)
These notes explain causes of the economic crisis.
Causes of Economic Crisis
Major Causes
| Cause |
|---|
| Excessive government expenditure |
| Large fiscal deficit |
| Growing imports |
| Low export growth |
| Heavy borrowings |
| Inflation |
Important Fact
Government expenditure exceeded government revenue.
Important Institutions
| Institution |
|---|
| International Monetary Fund (IMF) |
| World Bank (IBRD) |
Important Fact
India borrowed 7 billion dollars from IMF and World Bank.
(NCERT Pages 39–40)
New Economic Policy (NEP) 1991 (NCERT Page 40)
These notes explain the New Economic Policy.
NEP 1991
Main Objective
- Create competitive economy.
- Remove barriers to growth.
Two Major Components
| Component | Meaning |
|---|---|
| Stabilisation measures | Short-term corrective measures |
| Structural reforms | Long-term efficiency measures |
Three Main Reform Areas
| Reform |
|---|
| Liberalisation |
| Privatisation |
| Globalisation |
(NCERT Page 40)
Liberalisation (NCERT Pages 41–43)
These notes explain liberalisation policies.
Liberalisation
Meaning
Removal of unnecessary government controls and restrictions on economic activities.
Important Fact
Liberalisation aimed to increase efficiency and competition.
(NCERT Page 41)
Industrial Sector Reforms (NCERT Page 41)
These notes explain industrial reforms under liberalisation.
Industrial Reforms
Major Reforms
| Reform |
|---|
| Industrial licensing abolished |
| Private sector entry increased |
| Small-scale industry dereservation |
| Market-based pricing introduced |
Industries Still Requiring Licensing
| Industry |
|---|
| Alcohol |
| Cigarettes |
| Hazardous chemicals |
| Aerospace |
| Drugs and pharmaceuticals |
Important Fact
Only atomic energy and railway core activities remained reserved for public sector.
(NCERT Page 41)
Financial Sector Reforms (NCERT Pages 41–42)
These notes explain reforms in banking and financial institutions.
Financial Sector
Important Institution
| Institution | Function |
|---|---|
| RBI | Regulates banking system |
Major Reforms
| Reform |
|---|
| Private banks allowed |
| Foreign investment increased |
| Reduced RBI control |
| FIIs allowed in Indian markets |
Important Fact
RBI’s role changed from regulator to facilitator.
Important Concept
| Concept | Meaning |
|---|---|
| FII | Foreign Institutional Investment |
(NCERT Pages 41–42)
Tax Reforms (NCERT Page 42)
These notes explain tax policy reforms.
Tax Reforms
Types of Taxes
| Tax Type |
|---|
| Direct taxes |
| Indirect taxes |
Major Changes
| Reform |
|---|
| Reduced income tax rates |
| Lower corporation tax |
| Simplified tax procedures |
| GST introduction |
Important Fact
GST introduced “One Nation, One Tax”.
Important Year
| Event | Year |
|---|---|
| GST Constitutional Amendment | 2016 |
(NCERT Page 42)
Foreign Exchange Reforms (NCERT Page 42)
These notes explain exchange rate reforms.
Foreign Exchange Reforms
Important Measures
| Measure |
|---|
| Rupee devaluation |
| Market-determined exchange rate |
Important Fact
Rupee was devalued in 1991 to increase foreign exchange inflow.
(NCERT Page 42)
Trade and Investment Reforms (NCERT Pages 42–43)
These notes explain reforms in foreign trade.
Trade Policy Reforms
Major Measures
| Measure |
|---|
| Removal of quantitative restrictions |
| Reduction in tariffs |
| Removal of import licensing |
Important Fact
Quantitative restrictions removed fully in April 2001.
Important Terms
| Term | Meaning |
|---|---|
| Tariff | Tax on imports |
| Quantitative restriction | Limit on imports |
(NCERT Pages 42–43)
Privatisation (NCERT Pages 44–45)
These notes explain privatisation and disinvestment.
Privatisation
Meaning
Transfer of ownership or management from public sector to private sector.
Methods
| Method |
|---|
| Sale of public enterprises |
| Withdrawal of government ownership |
Important Concept
| Concept | Meaning |
|---|---|
| Disinvestment | Sale of part of government equity |
Main Objectives
| Objective |
|---|
| Improve efficiency |
| Increase competition |
| Attract private investment |
(NCERT Pages 44–45)
Navratna, Maharatna and Miniratna Companies (NCERT Page 44)
These notes explain special status given to PSUs.
PSU Categories
| Category | Example |
|---|---|
| Maharatna | Indian Oil Corporation |
| Navratna | Hindustan Aeronautics Limited |
| Miniratna | Airport Authority of India |
Important Fact
These PSUs received operational and managerial autonomy.
(NCERT Page 44)
Globalisation (NCERT Pages 45–47)
These notes explain globalisation and its impact.
Globalisation
Meaning
Integration of Indian economy with world economy.
Features
| Feature |
|---|
| International interdependence |
| Free movement of goods |
| Cross-border investments |
| Global trade expansion |
Important Fact
Globalisation creates a borderless world economy.
(NCERT Pages 45–47)
Outsourcing (NCERT Pages 45–46)
These notes explain outsourcing and BPO services.
Outsourcing
Meaning
Hiring external services from other countries.
Common Outsourced Services
| Service |
|---|
| Call centres |
| Banking services |
| Accounting |
| Software services |
| Medical transcription |
Important Fact
India became major outsourcing destination because of:
• Skilled manpower
• Low wage costs
• IT growth
(NCERT Pages 45–46)
World Trade Organisation (WTO) (NCERT Pages 46–47)
These notes explain WTO and its role.
WTO
Important Facts
| Feature | Details |
|---|---|
| WTO Established | 1995 |
| Predecessor | GATT |
| GATT Established | 1948 |
Main Objectives
| Objective |
|---|
| Promote free trade |
| Remove trade barriers |
| Ensure rule-based trade |
Important Fact
India is an important member of WTO.
(NCERT Pages 46–47)
Indian Economy During Reforms (NCERT Pages 48–52)
These notes explain the impact of reforms.
Economic Performance After Reforms
GDP Growth
| Period | GDP Growth |
|---|---|
| 1980–91 | 5.6% |
| 2021–22 | 9.4% |
Important Fact
Service sector became major growth driver.
(NCERT Page 48)
Growth of Foreign Investment (NCERT Page 48)
These notes explain increase in FDI and reserves.
Foreign Investment
Important Facts
| Indicator | Growth |
|---|---|
| FDI and FII | US $100 million to US $23 billion |
| Forex reserves | US $6 billion to US $646 billion |
Important Fact
India became one of the largest holders of foreign exchange reserves.
(NCERT Page 48)
Positive Impact of Reforms (NCERT Pages 48–52)
These notes explain advantages of LPG reforms.
Major Benefits
| Benefit |
|---|
| Higher GDP growth |
| Increase in exports |
| Growth of IT sector |
| Rise in foreign exchange reserves |
| Increased competition |
| Better technology |
Important Fact
India became major exporter of:
• IT software
• Auto parts
• Pharmaceuticals
• Engineering goods
(NCERT Pages 48–52)
Criticism of Reforms (NCERT Pages 49–52)
These notes explain criticisms of economic reforms.
Major Criticisms
| Problem |
|---|
| Slow employment growth |
| Agricultural slowdown |
| Industrial slowdown |
| Regional inequality |
| Public investment decline |
| Increased inequality |
Agriculture Problems
| Issue |
|---|
| Reduced subsidies |
| Increased import competition |
| Decline in public investment |
Industrial Problems
| Issue |
|---|
| Cheap imports |
| Inadequate infrastructure |
| Competition from foreign goods |
(NCERT Pages 49–52)
Conclusion (NCERT Pages 51–52)
These notes explain final assessment of reforms.
Overall Assessment
Positive Outcomes
| Outcome |
|---|
| Faster economic growth |
| Global integration |
| Better foreign investment |
| Service sector growth |
Negative Outcomes
| Outcome |
|---|
| Agriculture neglected |
| Employment concerns |
| Regional disparities |
| Rising inequality |
Important Fact
LPG reforms produced both positive and negative effects.
(NCERT Pages 51–52)
Looking for other chapters notes ?
Class 11 Economics Chapter 1: Indian Economy on the Eve of Independence Notes
Class 11 Economics Chapter 2 Notes: Indian Economy 1950–1990
Class 11 Economics Chapter 4 Notes – Human Capital Formation in India
Class 11 Economics Chapter 5 Notes – Rural Development
Class 11 Economics Chapter 6 Notes – Employment: Growth, Informalisation and Other Issues
Class 11 Economics Chapter 7 Notes – Environment and Sustainable Development
Class 11 Economics Chapter 8 Notes – Comparative Development Experiences of India and Its Neighbours
Important Topics
These topics are highly important for UPSC, SSC, Railways, CUET and State PSC examinations.
| Important Topic | NCERT Page |
|---|---|
| 1991 Economic Crisis | 39–40 |
| New Economic Policy | 40 |
| Liberalisation | 41–43 |
| Financial sector reforms | 41–42 |
| Tax reforms | 42 |
| Privatisation | 44–45 |
| Disinvestment | 44 |
| Globalisation | 45–47 |
| Outsourcing | 45–46 |
| WTO | 46–47 |
| Impact of reforms | 48–52 |
Important Economic Concepts and Terms
These concepts are frequently asked in examinations.
| Concept | Explanation | NCERT Page |
|---|---|---|
| Liberalisation | Removal of restrictions | 41 |
| Privatisation | Transfer to private sector | 44 |
| Globalisation | Integration with world economy | 45 |
| Disinvestment | Sale of PSU shares | 44 |
| FDI | Foreign Direct Investment | 48 |
| FII | Foreign Institutional Investment | 42 |
| Tariff | Tax on imports | 43 |
| Quantitative Restriction | Import limit | 43 |
| Outsourcing | External hiring of services | 45–46 |
| WTO | International trade organisation | 46 |
Important Questions
These questions are useful for Boards, UPSC, SSC, CUET and State PSC exams.
Very Short Answer Questions
- Why were reforms introduced in India in 1991? (NCERT Pages 39–40)
- What is liberalisation? (NCERT Page 41)
- What is privatisation? (NCERT Page 44)
- What is globalisation? (NCERT Page 45)
- What is disinvestment? (NCERT Page 44)
- What is outsourcing? (NCERT Pages 45–46)
- When was WTO established? (NCERT Page 46)
- What is tariff? (NCERT Page 43)
- What is FDI? (NCERT Page 48)
- What is devaluation of rupee? (NCERT Page 42)
Short Answer Questions
- Explain the causes of 1991 economic crisis. (NCERT Pages 39–40)
- Explain the New Economic Policy of 1991. (NCERT Page 40)
- Describe industrial sector reforms under liberalisation. (NCERT Page 41)
- Explain financial sector reforms in India. (NCERT Pages 41–42)
- Explain privatisation and disinvestment. (NCERT Pages 44–45)
- Describe outsourcing and its importance for India. (NCERT Pages 45–46)
- Explain the role of WTO. (NCERT Pages 46–47)
Long Answer Questions
- Discuss the 1991 economic crisis and reforms introduced by India. (NCERT Pages 39–43)
- Explain liberalisation, privatisation and globalisation in detail. (NCERT Pages 41–47)
- Analyse the impact of LPG reforms on Indian economy. (NCERT Pages 48–52)
- Explain the role of WTO in global trade. (NCERT Pages 46–47)
- Discuss criticisms of economic reforms in India. (NCERT Pages 49–52)
FAQs
These FAQs help in quick conceptual revision.
1. Why did India introduce economic reforms in 1991?
India introduced reforms due to balance of payments crisis, low forex reserves and rising inflation. (NCERT Pages 39–40)
2. What is LPG policy?
LPG stands for Liberalisation, Privatisation and Globalisation. (NCERT Page 40)
3. What is disinvestment?
Disinvestment means selling shares of public sector enterprises to private investors. (NCERT Page 44)
4. Why is India a major outsourcing destination?
India has skilled manpower, low wages and strong IT services. (NCERT Pages 45–46)
5. What is the role of WTO?
WTO promotes international trade through rule-based trading system. (NCERT Pages 46–47)
Quick Revision Summary
These quick revision notes help in last-minute preparation.
- India faced severe economic crisis in 1991.
- Forex reserves were enough for only two weeks of imports.
- India borrowed from IMF and World Bank.
- NEP 1991 introduced stabilisation and structural reforms.
- LPG stands for Liberalisation, Privatisation and Globalisation.
- Liberalisation removed industrial restrictions.
- RBI role shifted from regulator to facilitator.
- GST introduced “One Nation, One Tax”.
- Rupee was devalued in 1991.
- Quantitative restrictions removed in 2001.
- Privatisation reduced government ownership.
- WTO established in 1995.
- India became major outsourcing destination.
- Service sector became growth engine after reforms.
- Forex reserves increased significantly after reforms.
- Reforms increased growth but also widened inequalities.