Page 111 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 10: Critique of Indian Economy Policies—Pre and Post Reforms
Pavitar Parkash Singh, Lovely Professional University

Unit 10: Critique of Indian Economy Policies— Notes
Pre and Post Reforms

CONTENTS
Objective
Introduction
10.1 Critique of Indian Economy Policies — Pre and Post Reforms
10.2 Need for Economic Policy in India
10.3 Process of Economic Policy Formulation
10.4 Summary
10.5 Key-Words
10.6 Review Questions
10.7 Further Readings

Objectives

After reading this Unit students will be able to:
• Explain the Critique of Indian Economy Policies — Pre and Post Reforms.
• Discuss need and the Process of Economic Policy.
Introduction

The economic reforms in India were ushered in 1991 before which it was a highly regulated economy.
At that time, a number of sanctions had to be acquired before starting a unit of production in any
industry which may take over three years. It gave way to corruption in which the principal beneficiary
was the bureaucracy. Earlier, the country relied heavily on the public sector which was considered as
the engine of development. However, over a period of four decades, the private sector did acquire
sufficient resources to undertake heavy investment and also wanted to enter areas hitherto reserved
for the public sector. There was disenchantment with the functioning of the public sector which was
plagued by inefficiencies and high cost of operation. Moreover, soon after independence, to help the
growth of industry, the infant industry argument was used to protect Indian industry in hitherto
unknown and newly emerging areas by using various trade barriers. This resulted in the growth of
sheltered markets for Indian businessmen. Therefore, every time, the Government thought of reducing
trade barriers, the damage to national industrial interest’s argument was used to stall them. Finally,
it was in 1991 that the Government under pressure from World Bank/IMF was forced to reduce
trade barriers. The objective was to expose Indian industry to face world competition. The main aim
of economic reforms was to enter an era of globalisation where there was free flow of goods and
services, free flow of technology, free flow of capital, and free movement of human beings. This
means economic reforms needed integrating the Indian economy with world economy. Therefore,
the emphasis in economic reforms was shifted to export-led growth strategy, instead of depending
on import-substitution strategy of growth. In this way, economic reforms constitute three fundamental
policy changes, namely, Liberalisation, Privatisation and Globalisation (LPG) model of development
in India.
10.1 Critique of Indian Economy Policies — Pre and Post Reforms

The Industrial Policy, 1991 provided the rationale of economic reforms. The major objectives of the
policy are given below :

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