India as an independent union in 1947 had faced many socio-economic setbacks including poverty, hunger, insanitary conditions, etc. Of these, industrial backwardness was one of the main issues that was poised before our young dominion.
But a sincere string of efforts have been made by the government and private organisations to develop this sector. Indian policies for industrial development have expanded the existing industries and gave rise to new industries which led to the uplifting of the Indian Economy.
From 1948, Dr SP Mukherjee accelerated the development by introducing strategic industries which included industries under government control, mixed economic industry and private sector industrial plans. In 1956, major changes were made to this policy which included slight shift in classification of industries, non-discriminatory treatment to private sector, removal of regional disparity and labour welfare.
Throughout the 1970’s, the Industrial Policy Statement characterised industries into household, cottage and small-scale industries as well as large scale industries. The reform policies were based upon this characterisation method.
In 1980, India adopted the Industrial Policy which promoted balanced growth, extension and simplification of automatic expansion, rehabilitating sick industries and regulation of expert productivity conditions.
But the real bloom in Indian industries, and economy overall was to come in 1991. The new economic policies of 1991 were aimed to bail India out of the economic crisis it was plunging into, as well indulge in an industrial bloom by changes in economic and industrial policies.
The three main features of the New Industrial Policies included- liberalisation, deregulation and privatisation of industrial and economic entities. These three reforms formed the pillars of rapid growth of the Indian economy. Today, NEP has yielded positive results as our country has become the fastest growing economy in the world.
Liberalisation of Indian Economy
The driving force of the NEP was liberalisation of the economy. With the license raj still prevalent in the Indian markets and industrial sector, even in the beginning of the final decade of the 20th century, it had made business and trade in Indian markets difficult for both domestic and international traders.
Hence, liberalisation served as their deliverance from the tyranny of License raj. This major economic reform dismantled the excessiveness of the public control framework, saving businessmen from unnecessary harassment in the hands of government officials to legally practice trade in the nation.
Liberalisation came into force when globalisation was peaking. By freeing trade regulations, India also opened its market for wider foreign business opportunities. Therefore, it encouraged growth in the private sector, simplification of policies, enhanced tax regulation, increasing foreign direct investment (FDI) and restructuring public sectors among a variety of other factors.
Much technological advancement in the primary, secondary as well as tertiary sectors of economy helped modernise the Indian industries and gave it an exposure of international competition and thus prevented growth stagnation.
While most of its results had a positive effect on the industries and the Indian market, the sudden implementation of economic liberalisation with precautionary measures in place could have backfired on the government as it was not prepared for the consequences.
But lady luck shined upon our nation and the impact of liberalisation became a largely favourable outcome of the new industrial and economic policies. India recorded a massive growth in GDP and subsequently, a gradual increase of the value of the Indian Rupee.
Increase in employment. Paired with foreign trades, it cemented its identity at a global level which also resulted in increased competition. Finally, the adaptation of new technology and development in infrastructure improved product quality and increased consumption and adaptation of a new lifestyle.
Deregulation of the Indian Economy
Deregulation policy works hand in hand with the liberalisation policy. It limits and in some cases, eliminates the need of regulation in the market and over the industries. The government along with industrial associations formulate many rules and regulations of market.
Industries are bound to comply with these rules which suffocate its growth and hampers industrial development. Deregulation thus helps to ease this pressure and ensure that the government loosens its grip over the private organisations in the various industries of the market.
This economic reform remained as a subject of heated debate between politicians, economics and industrialists. Some have claimed that deregulation acts as an obstacle in proper functioning of private firms. The flexibility that many firms in an industry were guaranteed by this reform could be exploited by them to gain an upper hand in the market, causing unethical and unfair trade practices to flourish and disrupt the industry.
This affects the companies and entrepreneurs at the bottom of the economic ladders who have started out with their ventures in their respective industry and require the protective hand of the government.
But at the same time, deregulation has offered higher number of merits than demerits. With more and more firms joining an industry, the competition is bound to rise and so is the quality of the commodity. But most importantly, the prices of the products and services fall too, making high quality but cheaper products available for the common citizens to buy.
Additionally, the companies can also explore new fields of opportunity which it was not able to when the government had severely bracketed its activities and options. The businesses can freely decide their process of operations as well as implement strategic policies without the government’s meddling.
Privatisation of the Indian Economy
This is another of the industrial and economic reforms that is closely related to liberalisation and also finds its roots in the globalisation phenomenon. Privatisation deals with the emergence of privately owned industrial organisations, corporate and firms as well as transfer of ownership from public to private sector undertakings.
It is one of the main factors which checks upon the interference of the government with the industry. Privatisation has goals to achieve amongst which the foremost is to empower the private sector and change the role of government in the markets from ‘owner manager’ to a much inferior criteria of ‘controller’ or ‘regular’.
This in a way also reduced the burden of running industries and businesses from the government’s shoulder so that it can focus on some burning socio-economic issues like hunger, insanitary conditions, etc.
Many scholars have called out that profitability alone does not count as the sole yardstick to measure efficiency. They have also claimed that in a bid to promote the private sectors, we have ostensibly overlooked the socio-economic angle of the public sectors.
Innovativeness, infrastructure, R&D and accountability have been provided by privatisation of industries. It revitalises the state owned enterprises and readies them for global competition. It efficiently utilises and invests in its resources which also increase regional employment.
Millennium Industrial Reforms in India
The Union government led by Atal Bihari Vajpayee continued with the reforms. In the late 1990’s, they privatised under-performing government undertakings like VSNL, Maruti Suzuki and a handful of airports. India also saw reduction in taxes and eliminating debts and deficits for the whole fiscal year and finally, increase initiatives for public works.
By the end of 2012, an increase of 51% FDI in retail sector, which was proposed by the Congress led government in 2011, was finally approved as India saw a steep rise in foreign investment. With the return of BJP in power, the government under Narendra Modi in 2015 promoted the insurance sector by allowing 49% FDI. It was the first time that this sector was opened to foreign investment in sixteen years.
With the passing of Coal Mines (special provisions) bill in 2015, the Union Government ended its years of enjoying long monopoly over coal fields. This resulted in billions of dollars of FDI coming to India. Further improvements and economic reforms in 2015 through 2016 include pushing for the insolvency and bankruptcy law.
The moment insolvency law is enacted; the properties and assets of every fugitive economic offender can be usurped and sold to reclaim the lost price. This also drastically manages to ease up business in India.
Finally, July 2017, brought out the uniform Goods and Services Tax approved by the parliament after seventeen years. While it has been in the centre of controversies for many problems, but at the same time had also been touted to solve an equal number of problems. GST replaced a slew of indirect taxes with a unified tax structure and was therefore showcased as dramatically reshaping the country’s 2.5 trillion dollar economy.
As of 2019, interim budget held by Piyush Goyal highlighted some of the basic policy reforms to improve the industry. His main areas of focus were the agricultural sector, the unorganised sector and the fiscal deficit.
To summarise, the holistic approach to industrial and economic reforms framework has taken the story of our industrialisation to a whole new level. The balanced and ever-increasing state of industrial growth has caused an astonishing rise in the growth of industries from 1.9% in the 1990’s to 9.2% in 2007-08. Industries definitely depend upon the infrastructure and technology; hence it becomes a point of importance in the development of industries.
Liberalisation, deregulation and privatisation have been well-implemented and accepted by our society and served as the befitting end to the predominant license Raj. They opened a sea of trade and market opportunities to the domestic as well as foreign travellers.
Undoubtedly, the new industrial reforms have made the firms work with better efficiencies and produced quality commodities and services at a cheaper rate. This trend is important to be continued over the course of the next few decades by which India has a possible chance of turning into the next super power nation.