1991 New economic policy of India Explain?

Answer 1

20. Industrial Licensing is governed by the Industries (Development & Regulation) Act, 1951. The Industrial Policy Resolution of 1956 identified the following three categories of industries: those that would be reserved for development in public sector, those that would be permitted for development through private enterprise with or without State participation, and those in which investment initiatives would ordinarily emanate from private entrepreneurs. Over the years, keeping in view the changing industrial scene in the country, the policy has undergone modifications. Industrial licensing policy and procedures have also been liberalised from time to time. A full realisation of the industrial potential of the country calls for a continuation of this process of change.

21. In order to achieve the objectives of the strategy for the industrial sector for the 1990s and beyond it is necessary to make a number of changes in the system of industrial approvals. Major policy initiatives and procedural reforms are called for in order to actively encourage and assist Indian entrepreneurs to exploit and meet the emerging domestic and global opportunities and challenges. The bedrock of any such package of measures must be to let the entrepreneurs make investment decisions on the basis of their own commercial judgement. The attainment of technological dynamism and international competitiveness requires that enterprises must be enabled to swiftly respond to fast changing external conditions that have become characteristic of today's industrial world. Government policy and procedures must be geared to assisting entrepreneurs in their efforts. This can be done only if the role played by the government were to be changed from that of only exercising control to one of providing help and guidance by making essential procedures fully transparent and by eliminating delays.

22. The winds of change have been with us for some time. The industrial licensing system has been gradually moving away from the concept of capacity licensing. The system of reservations for public sector undertakings has been evolving towards an ethos of greater flexibility and private sector enterprise has been gradually allowed to enter into many of these areas on a case by case basis. Further impetus must be provided to these changes which alone can push this country towards the attainment of its entrepreneurial and industrial potential. This calls for bold and imaginative decisions designed to remove restraints on capacity creation, while at the same, ensuring that over-riding national interests are not jeopardised.

23. In the above context, industrial licensing will henceforth be abolished for all industries, except those specified, irrespective of levels of investment. These specified industries (Annex-II), will continue to be subject to compulsory licensing for reasons related to security and strategic concerns, social reasons, problems related to safety and over-riding environmental issues, manufacture of products of hazardous nature and articles of elitist consumption. The exemption from licensing will be particularly helpful to the many dynamic small and medium entrepreneurs who have been unnecessarily hampered by the licensing system. As a whole the Indian economy will benefit by becoming more competitive, more efficient and modern and will take its rightful place in the world of industrial progress.

Answer 2

Critique of the New Industrial Policy

The keynote of the new industrial policy includes liberalisation and globalisation of the economy. Liberalisation means deregularisation of the industrial sector by cutting down to the minimum administrative interference in its operation so as to allow free competition between market forces. Simi­larly globalisation means making the Indian economy an integral part of the world economy by breaking down to the maximum feasible the barriers to move­ment of goods, services, capital and technology between India and the rest of the world.

The new Industrial Policy fulfils a long-felt demand of the industry to remove licensing for all industries except 18 industries (coal, petroleum, sugar, motor cars, cigarettes, hazardous chemicals, pharmaceuticals and luxury items).

It proposes to remove the limit of assets fixed for MRTP Companies and dominant undertakings. Hence business houses intending to float new com­panies or undertake expansion will not be required to seek clearance from the MRTP Commission. This step will enable MRTP Companies to establish new undertakings, and effect plans of expansions, merg­ers, amalgamations and takeovers without prior gov­ernment approval. They shall have the right to ap­pointment of directors.

The new Industrial Policy goes all out to woo foreign capital. It provides 51% foreign equity in high priority industries and may raise the limit to 100% in case the entire output is exported.

This runs counter to the Nehruvian Model. Experts fear that this over-enthusiasm to wlecome foreign capital and to give free hand to multination­als will be detrimental for indigenous industries more so house-hold and small scale industries. This may lead to economic and political crisis in future. It is also alleged that the Policy has been framed at the instance of the IMF and is going to protect the interests of developed Western countries at the cost of national interests. Critics also argue that once foreign capital is permitted free entry the distinction between high and low priority industries will disap­pear and all lines of production will have to be opened to facilitate foreign investment. This may create Brazil or Mexico like economic crisis.

By opening the gates of the Indian economy wide to the multinationals, the self reliance aspect has been completely ignored. These multinationals with slightest of inconvenience may shift their op­erations elsewhere leaving the economy in the lurch.

Since multinational and private entrepreneurs would prefer most favourable locations for their industries it would further intensify spatial disparity in economic development. This fact has been well collaborated by the letters of intent so far approved.

While selling out public sector shares and companies to private investors the Government is not only ignoring the interests of the employees but is transferring the assets at throw away prices. These public sector companies could have been handed over to the working class or autonomous organisa­tions to manage their affairs independently.

In the absence of MRTP safeguard private companies may develop monopolistic outlook and may indulge in unfair trade practices.

There is also a risk of growing consumerism rather than strengthening the sinews of the economy. Foreign investors may prefer to invest in low priority consumer sector instead of going for high priority sector.

With the state yielding to the private enter­prise the social objectives of equity with growth and protecting the interests of the down trodden and semi-skilled labourers would be thrown to the winds. This will be against the cherished goals of our Constitution and may create socio-economic dispar­ity and tension.

Answer 3

the NEP mainly came up with three major strategies

liberalization

privatization

globalization