Impact of New Economic Policy 1991

Topics: Economics, Industry, Agriculture Pages: 5 (1712 words) Published: January 18, 2013

1.Increases Production

2.Diversification of Cropping Pattern

3.Better Price

4.Increased Exports

1.Lack of Self-Sufficiency

2.Price Stability

3.Affects Poor Farmers

4.Entry of MNCs
Industrialization through import substitution and public sector production with emphasis on heavy industry has been a very important objective of our planning for development. In particular an important distinction was made among industries to be developed exclusively by the public sector, those reserved for the private sector, and those open to development by either or both sectors. The reforms of 1991 abolished industrial licensing, except in a few industries for locational reasons or for environmental considerations, and import licensing, except in the case of most consumer goods. Restrictions under the Monopolies and Restrictive Trade Practices Act were eased. Entry requirements (including limits on equity participation) for foreign direct investment were relaxed, private (domestic and foreign) investment were allowed into sectors such as power which had been reserved for public sector investment only. Disinvestment of equity in the public sector was also initiated. The reforms, by focusing primarily on the private sector and not addressing the problems of PSEs, have exacerbated them. Industry accounts for 28% of the GDP and employ 14% of the total workforce.[20] In absolute terms, India is 12th in the world in terms of nominal factory output.[77] The Indian industrial sector underwent significant changes as a result of the economic reforms of 1991, which removed import restrictions, brought in foreign competition, led to privatization of certain public sector industries, liberalized the FDI regime, improved infrastructure and led to an expansion in the production of fast moving consumer goods.[78] Post-liberalization, the Indian private sector was faced with increasing domestic as well as foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, and relying on cheap labour and new technology. However, this has also reduced employment generation even by smaller manufacturers who earlier relied on relatively labour-intensive processes.[

Over the decades. the Indian model of development has created what is called the dual economy. On the one hand an enclave of large urban industries based on modem technology was created both in the private and public sectors. uhich rernain tied to foreign aid and technology. On the other hand, there was the rest of the economy of the poor which was left to fend for itself. I'he fiscal and trade systems were also designed to enclave the economy. rhe new economic policy will certainly strengthen this duality and do something wasteful also, which is obviously anti-poor. On behalf of the new industrial policy it is claimed that it will release the Indian industry from unnecessary bureaucratic shackles by reducing the n~lmber of clearances required from the Government. Mainly, there are two concession~s: The proposed policy allows foreign investment up to 1 per cent to 100 per cent equity on automatic basis subject to some restrictions on imports of capital goods. This concession is meant only for the foreigners or those who collaborate with Indian counterparts. In other words this provision will strengthen the hold of the foreign companies on Indian Industry. I h e second concession is for the Indian entrepreneurs and relates to technological imports. The policy provides no defense against adverse impact on the domestic capital goods industry. There is no selectivity in the policy i n the sense that import should not be allowed in those cases where domestic market is in a position to supply capital goods in adequate...
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