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:
- 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.
- 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).
- 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.
Topics: GS-III: Effects of Liberalization On Indian Economy