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Indian Economy

Notes because there were no takers for them. Rather, the Government initiated disinvestment of
the highly profit-making PSUs and the openings were used to reduce fiscal deficits.
Therefore, you need to understand that due to several social constraints the Government
could not carry forward its programme of privatisation, though it did prosper in liberalising
the economy to the private sector both domestic and foreign.
2. By allowing the private sector to set up industrial units without taking a licence, the
Government removed certain shackles which were holding back or postponing the process
of private investment.
3. By abolishing the threshold limit of assets with respect of MRTP companies and dominant
undertakings, the Government freed the business houses to commence investment without
any ceiling being prescribed by the MRTP Commission. Apparently, considerations of
encouraging growth were more dominant with the Government and such issues as
concentration of economic power were assigned a back seat.
4. With a perspective to facilitate direct foreign investment, the Government decided to
grant approval for direct foreign investment up to 51% in high priority areas. The
Government could also regard proposals involving more than 51 per cent equity, but such
proposals would need prior clearance of the Government. No permission was needed for
hiring foreign technicians, foreign testing of indigenously developed technologies, etc.

5. Chronically sick public sector enterprises were referred to the Board for Industrial and
Financial Reconstruction (BIFR) for the formulation of revival/rehabilitation schemes. A
social security mechanism was introduced to protect the interests of workers likely to be
affected by such rehabilitation packages.
6. To enhance the performance of public sector enterprises, greater autonomy was given to
PSU managements and the Boards of public sector companies were made more professional.
7. The economy was opened to other nations to motivate more exports. To support the
import of foreign capital and technology and other allied imports, decrease in import
duties and other obstructions were brought about.
You must understand that LPG Model of development focuses a bigger role for the private
sector. It imagines a much larger quantum of foreign direct investment to enhance our growth
process. It intends at a strategy of export resulted growth as against import substitution practised
earlier. It intends at reducing the role of the State substantially and therefore, abandons planning
fundamentalism in support of a more liberal and market driven pattern of development.

Notes The primary aim of the Gandhian plan is the attainment of maximum
self-sufficiency in village communities.

Critics have pointed out certain fundamental weaknesses of the LPG Model of Development.
(a) By permitting free entry of the multinational corporations in the consumer goods sector,
the model has hit the interests of the small and medium sector engaged in the production
of consumer goods. There is danger of labour displacement in the small sector if unbridled
entry of MNCs is continued.
(b) The model bypasses agriculture and agro based industries which are a major source of
generation of employment for the masses. It did not delineate a concrete policy to develop
infrastructure, financial and technological support, particularly the infrastructural needs
of agro-exports.

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