Prior to 1991, India followed mixed economy and the control of critical industries such as coal mining; steel, power and roads were under the control of the govt. The private sectors were allowed to establish certain industries again under the rules and regulations of the govt. In case of the public sector, the Govt invested a large amount and the purpose behind this strategy was to remove poverty, reduce inequalities in the distribution of income and wealth and to achieve economic growth and social justice. POSITIVE ASPECTS:
This strategy has created
-A large industrial base and increase in industrial production. -The proportion of population living below poverty line has declined. -India has become self sufficient in food grains
-A base for export-oriented industries has been created.
-India has mobilized savings and created their own resources. -Educational institutions have produced large number of scientists and technically skilled working people. -This has helped in industrial and technological growth and self-reliance. NEGATIVE ASPECTS:
-Industrialisation did not take place as per the expectation. -The growth rate of industrial production declined from 8% to 4%. -The laws that were framed to regulate the private sector were responsible for slow growth of Industrial sector. -These laws have also failed to reduce the concentration of economic power in the private sector. -Corruption, lack of efficiency in work and ineffective management became the common features of the public sector. -Many public sector companies were making losses.
-Official machinery became a major hindrance to the development. NEED FOR REFORMS: Not only the negative aspects but also several problems like rising prices, shortage of adequate capital, slow economic development and technological backwardness contributed to the increase in govt’s expenditure than the revenue. India’s borrowings (1991) from abroad had increased to...