It refers to the policy through which the foreign trade is regulated.

By removing control on the capital market, a huge amount of capital was collected by issuing various new issues in the primary market.

(i) New Industrial Policy (NIP): Under Industrial Policy, keeping in view the priorities of the country and its economic development, the roles of the public and private sectors are clearly decided.

Under the new industrial policy, the industries have been freed to a large extent from the licences and other controls. In order to encourage modernisation, stress has been laid upon the use of high technique. A great reduction has been affected in the role of the public sector.

Efforts have been made to encourage foreign investment. Investment decision by companies has been facilitated by ending restriction imposed by the MRTP Act. Similarly, Foreign Exchange Regulation Act (FERA) has been replaced by Foreign Exchange Management Act (FEMA).

(ii) New Trade Policy: Trade policy means the policy through which the foreign trade is controlled and regulated. As a result of liberalisation, trade policy has undergone tremendous changes. Especially, the foreign trade has been freed from the unnecessary controls. The age old restrictions have been eliminated at one go. Some of the chief characteristics of new trade policy are as follows:

(i) Restrictions on the exports-imports have almost disappeared leaving only a few items.

(ii) Export-import tax on some items has been completely abolished and on some other items, it has been reduced to the minimum level.

(iii) The procedure regarding import-export has been simplified.

(iii) Fiscal Reforms: The government policy regarding the income and expenditure is called fiscal policy. The greatest problem facing the Government of India is that of the fiscal deficits. In the year 1990-91, the fiscal deficit was 8% of the GDP.

In order to handle the problem of fiscal deficit, basic changes were made in the tax system or structure. The following are the major steps taken in this direction:

(a) The rate of the individual and corporate tax has been reduced in order to bring more people in the tax net.

(b) Tax procedure has been simplified.

(c) Heavy reduction in the import duties has been implemented.

(iv) Monetary Reforms: Monetary policy is a sort of control policy through which the central bank controls the supply of money with a view to achieving the objects of the general economic policy. Reforms in this policy are called monetary reforms. The major points with regard to the monetary reforms are given below:

(a) Statutory Liquidity Ratio (SLR) has been lowered.

(b) The banks have been allowed freedom to decide the rate of interest on the amount deposited.

(c) New Standards have been laid down for the income recognition for the banks.

(v) Capital Market Reforms: The market in which securities are sold and bought is known as the capital market. The reforms connected with it are known as capital market reforms. This market is the pivot of the economy of a country. The government has taken the following steps for the development of this market:

(a) Under the Portfolio Investment Scheme, the limit for investment by the NRIs and Foreign Companies in buying the shares and debentures of the Indian companies has been raised. (Portfolio investment scheme means investing in the securities)

(b) In order to control the capital market, the Securities and Exchange Board of India (SEBI) has been constituted.

(c) The restriction in respect of interest on debentures has been lifted. Now, it is decided on the basis of demand and supply.

It refers to the policy of the government connected with the income and expenditure of the country.

It means that the country is spending more than its income.