What Is LPG Policy/Model In India?

Reforms LPG Policy/Model In India

In this article, we discussed about the Reforms of LPG Policy/Model in India & its Features and impact on Indian economy.

After Independence in 1957 Indian Government faced a significant problem to develop the economy and to solve the issues considering the difficulties at that time the government decided to follow the LPG Model to grow.

The economic condition of India at that time was not very good. This was because it didn’t have proper resources for the development, not regarding natural resources but financial and industrial labour and at that time India needed the path of economic planning and for that used a five year plan concept of which was taken from Russia.

The economy of India had undergone a significant policy shift in the beginning of the 1990’s. These new models of economy refer to the LPG Model.

The primary objective of these models was to make the economy of India would be the fastest developing economy in the world with capabilities that help it match up with the biggest economy in the world.

India’s new economic policy was introduced on 24th July, 1991 which was known as the LPG policy or LPG Model. LPG refers to Liberalisation, Privatisation & Globalisation.

Features Of LPG Policy

Some of the most important features of LPG policy reforms are pointed or highlighted below:

  • It reduces the import tariffs.
  • It helps to remove the industrial Raj.
  • It reduces the burden of taxes.
  • It introduces free entry to foreign investment and technology.
  • It creates or starts privatisation.
  • Dilution the role of the public sector.
  • It aimed to build foreign reserves and move towards the economic growth rate.
  • It converts the Indian economy to a market economy.
  • It works with 3 concepts: Liberalisation, Privatisation & Globalisation.

Impact Of LPG Model/Policy In Indian Economy

LPG Model or Policy’s impact on Indian economy both positive & negative manner. Here we pointed out some positive or negative impacts of the LPG Model.

Positive Impact Of LPG Model In Indian Economy

India’s GDP growth rate increased:

In the year 1990-91 India’s GDP growth rate was only 1.1% but after reforms of LPG policy in 1991 GDP growth increased. IMF estimated the GDP rate in 2015-16 was 7.5%

Strong flow Of FDIs:

After reform of LPG Model in India, India has firmly established itself as a lucrative foreign investment destination & FDI equity inflow in India. In the year between 2019 to 2020 August the FDI equity inflows in India stood at USD 19.33 billion.

Generate Employment:

Before reforms of LPG Model the unemployment rate was high in the country but after reform of LPG policy in 1991, basically privatisation created more employment. And Foreign companies and liberalisation make many entrepreneurs start their own companies.

Exports Increased:

By the help of LPG policy in India exports have increased and stood at USD 26.38 billion as of October, 2019.

Per Capita Income Increased:

After reforms of LPG policy in India employment increased, which was laid to increase per capita income.

Negative Impact Of LPG Policy/Model in Indian Economy

  • LPG policies have led to widening income gaps within the country.
  • Globalisation further affects the health of people by destroying the environment.
  • By introducing the Indian Economy to foreign competition more MNCs are competing with local companies and businesses are facing problems due to the lack of technology and production inefficiencies.
  • Share of Agriculture in the GDP has gone down drastically to 18% after reforms of LPG policy in the year 1991

In conclusion, the LPG model is intended to create a more competitive and efficient Indian economy, promote economic growth and development, and integrate the economy into the world market.

The LPG model is widely used to transform the Indian economy to become one of the fastest-growing major economies in the world. However, the reforms have also been criticised for exacerbating income inequality and neglecting social and environmental concerns.

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