Question

In July 1991, new industrial policy was introduced in India. Some of the major steps taken under it was that Indian business and industry was freed from all unnecessary controls and restrictions. They signaled the end of the licence-permitquota raj. The new set of reforms aimed at giving greater role to the private sector in the nation building process and a reduced role to the public sector. Also steps were taken for integration of the various economies of the world leading towards the emergence of a cohesive global economy. Overall all these had a positive impact on overall growth of our economy. 

Identify the different concepts introduced through new industrial policy by quoting lines from the above details. Explain any two effect of this changes in policy. 

Answer 1

The concepts referred here are: 

(a) Liberalisation: ‘freed from unnecessary controls and restrictions’ 

(b) Privatisation: ‘greater role to private sector and reduced role to public sector’ 

(c) Globlisation: ‘integration of various economies of the world’ This change in the policy brought many changes. Two of them are: 

(a) All round competition/Increasing competition. Firm now face competition from Indian players (existing one as well as new entrants to the given industry). Competition from multinationals and from imports is the another facet of this new competitive environment. The easier access to better technology is an additional dimension. Finally, competitions will now be global in character, no more confined to the country’s boundaries. For example, Weston, a major player in the early days with over 18 per cent market share lost out heavily to competition from imported products. 

(b) Buyer’s market/More demanding customers. There were shortages practically in every sector-consumer goods, industrials goods and services. As a result, the buyers suffered. A shift from shortage to surplus has been a major development of the liberalized regime. Government removed controls on capacity creation and capacity utilization. Industry has been given total freedom to expand and diversify. Decisions on investments have been left on the entrepreneurs. Control on prices has been removed. Investment now takes place in areas of demand.