Liberalisation of the economy forms one of the pillars of the New Economic Policy announced by the government in 1991-92. Liberalisation means freeing the economy from direct or physical controls imposed by the government such as industrial licensing, price and distribution controls on products, import licensing, foreign exchange control, control of capital issues by companies (i.e. collection of funds by sale of their shares and debentures, or funds), direct control of credit (laying down the limit on credit that the financial institutions might grant), restriction on investment by large business houses, and the like, so that development and operation of the economy is increasingly guided by the freely operating market forces. The new economic policy was built on the assumption that too many government controls gave room for widespread corruption and retarded the growth of the economy. Accordingly, India has been consistently trying since 1991-92 not only to liberalise its economy but to integrate it with world economy (globalisation).
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