The new industrial policy, 1991 signalled a marked shift from the features of pre-1991 policies. Discuss.

The economic policies have been product of their times and new industrial policy 1991 was no different.

Pre-1991 policies:

1. Post independence state –
   • Concerns of food insecurity.
   • Absence of strong foundation of industry.
   • Agriculture sector highly impoverished.
   • Socialism with mix of private public sector was adopted as goal of economic policy.
2. 1956 economic policy, also called economic constitution of India –
   • Emphasized on role of state in key sector including heavy industries, infrastructure.
   • Limited role of private sector.
   • Cautious of foreign investment due to historical circumstances (colonialism).
3. 1970’s policies –
   • Shift towards greater role of private sector.
   • Mahalanobis commission raised concern about Licence Raj, concentration of power in few hands and public sector inefficiencies.
   • MRTP act passed.

1991 policy: Marked shift towards privatisation, liberalisation and globalisation.

• • • Background – Gulf crisis, Rupee-Ruble trade crisis, Fall of Soviet Union, High inflation, Low forex reserve.
    • Privatisation – several sectors dereserved and private players allowed except in critical areas like atomic energy, Large-scale disinvestments.
    • Liberalisation – abolition of Licence Raj, banks given freedom to decide interest rates, small-scale industry limit raised.
    • Globalisation – foreign players allowed in several sectors.

1991 policy therefore led to marked shift towards market socialism to unleash dynamism and competition in economy.