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.

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