Answer the following questions in not more than 150 words.
What do you understand by liberalisation, privatisation and globalisation? How have they helped industrial development in India?
The leaders of free India, after Independence, recognised the importance of planned growth for India, as centuries of colonial rule had left her in much ruins and regional chaos. The plan was to achieve import-substitution led industrialisation. The Indian economy, thus, followed a socialist mode of growth, with the state controlling and planning the allocation of resources, much until the early 1990s when the economy ran into gross imbalances.
The economy required serious reform measures to correct it and orient it towards the market forces. Thus, was born the New Industrial Policy in 1991. The policy document aimed at reducing the inefficiencies, creating space for private initiatives and attain international competitiveness. The measure initiated were:
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• abolition of industrial licensing
• free entry to foreign technology
• foreign investment policy
• access to capital market
• open trade
• abolition of phased manufacturing programme, and
• liberalised industrial location programme
The policy, thus, had three dimensions: liberalisation, privatisation and globalisation.
The reform process helped industrial development by:
• Abolishing industrial licensing for all except six industries related to security, strategic and environmental concerns.
• Reducing the number of industries reserved for public sector from 17 (in 1956) to 4.
• Decision to offer a part of the shareholding in public enterprises to financial institutions, general public and workers.
• Scrapping of the threshold limits of assets and prior approval for investing in delicensed sector.
• Opened the economy to Foreign Direct Investment, which benefits the domestic industry by providing technological upgradation, access to global managerial skills and practices, optimum use of natural and human resources, etc.
• Introducing changes in the industrial location policies.
• Liberalising industrial policy to attract private investors both domestic and multi-nationals.
• Removing restrictions and obstacles to the entry of multinational companies in India.
• Allowing Indian companies to enter into foreign collaboration in India and encouraging them to set up joint-ventures abroad.
• Carrying out massive import liberalising programmes by switching over from qualitative restrictions to tariffs, and bringing down the level of import duties considerably.
These measures adopted in the 1991, primed the economy to face the challenges of the next century. Since the reforms, the economy grew at an impressive (average) rate of over 6% per annum, an impressive growth in comparison to other economies.