Key features of NEP 1991Fiscal discipline: The government set the target of bringing down the fiscal deficit to 3-4% in the medium term. As a first step, the government set the target of bringing the fiscal deficit target of 1992-93 to 5%, down from 6.2% in the previous year. The target was to be achieved through major cuts in subsidies and non-planned expenditures. Simultaneously, the government announced major tax reforms to boost its tax revenue.Monetary policy reforms: Tighter measures were planned to reduce non-discretionary imports. For that cost of import credit was increased. A tighter monetary and credit policy was envisaged to contain the current account deficit. New monetary tools like 364-day T-bills, and 10 and 15-year securities were introduced for the government to borrow from the market.Banks were freed from regulatory control to decide the deposit rates and maturities.Trade policy reforms: Rupee was devalued 18% to make Indian exports competitive in the international market. Import restrictions for exporters were massively reduced. Import of capital goods was allowed without the need of government permission. Export trading houses were allowed to have 51% foreign equity.Industrial policy reforms: Greater private sector participation was allowed in core and basic industries. Number of industries reserved for the public sector was reduced to 8 from 17. Industrial licensing was abolished for all industries except 18 environmentally risky sectors.The monopolies and Restrictive Trade Practices (MRTP) Act was amended to eliminate the need for permission by large companies for capacity expansion. Small-scale enterprises were allowed to sell 44% equity to large companies.Measures to boost FDI: The limit for foreign equity holding raised from 40% to 51% in priority sector industries. Foreign Investment Promotion Board was established to streamline the process of approval of FDI.
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