Liberalization
Liberalization refers to the process of reducing government restrictions and regulations in an economy to promote free trade, competition, and economic growth. It involves removing barriers to the entry of new businesses, reducing state control over industries, and allowing foreign investment.

Steps taken by the government to liberate the Indian economy

1. Industrial Policy of 1991:
In response to a balance of payment crisis, the Indian government introduced the New Industrial Policy in 1991. This policy aimed to liberalize and deregulate various sectors of the economy. Key measures included:

- Abolishment of industrial licensing: The need for government approval and licenses for most industries was eliminated, except for a few sectors related to security and strategic concerns.
- Foreign investment: Restrictions on foreign direct investment (FDI) were eased, allowing greater participation of foreign companies in various industries.
- Public sector reforms: The government initiated the privatization of public sector enterprises and reduced its role in running businesses.

2. Trade Liberalization:
The Indian government implemented several measures to liberalize trade and promote exports:

- Reduction of import tariffs: Tariffs on many goods were significantly reduced to encourage imports and promote competition.
- Export promotion: Incentives such as tax exemptions, subsidies, and special economic zones were introduced to boost exports.
- Foreign trade policy reforms: The government formulated export-import policies to facilitate trade, simplify procedures, and provide support to exporters.

3. Financial Sector Reforms:
To liberalize the financial sector, the government took several steps:

- Dismantling the License Raj: The licensing requirements for opening new banks and financial institutions were relaxed, leading to the entry of private players.
- Foreign investment in banking sector: The government allowed foreign banks to operate in India and permitted foreign direct investment in the banking sector.
- Capital market reforms: Measures like the establishment of SEBI (Securities and Exchange Board of India) and the introduction of electronic trading platforms were undertaken to improve transparency and efficiency in the capital markets.

4. Tax Reforms:
To simplify the tax structure and promote investment, the government implemented the following reforms:

- Introduction of Goods and Services Tax (GST): The GST subsumed various indirect taxes, reducing the complexity of the tax system and promoting a unified market across states.
- Rationalization of tax rates: The government reduced corporate tax rates to attract investment and improve the ease of doing business in India.

5. Devaluation and Exchange Rate Reforms:
To make the Indian rupee more competitive and boost exports, the government implemented devaluation and exchange rate reforms. These measures aimed to align the exchange rate with market forces and reduce restrictions on foreign exchange transactions.

Overall, these steps taken by the Indian government helped liberalize the economy, attract foreign investment, promote competition, and stimulate economic growth.