Criticism on new industrial policy 1991
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Critique of the New Industrial Policy
The keynote of the new industrial policy includes liberalisation and globalisation of the economy. Liberalisation means deregularisation of the industrial sector by cutting down to the minimum administrative interference in its operation so as to allow free competition between market forces. Similarly globalisation means making the Indian economy an integral part of the world economy by breaking down to the maximum feasible the barriers to movement of goods, services, capital and technology between India and the rest of the world.
The new Industrial Policy fulfils a long-felt demand of the industry to remove licensing for all industries except 18 industries (coal, petroleum, sugar, motor cars, cigarettes, hazardous chemicals, pharmaceuticals and luxury items).
It proposes to remove the limit of assets fixed for MRTP Companies and dominant undertakings. Hence business houses intending to float new companies or undertake expansion will not be required to seek clearance from the MRTP Commission. This step will enable MRTP Companies to establish new undertakings, and effect plans of expansions, mergers, amalgamations and takeovers without prior government approval. They shall have the right to appointment of directors.
The new Industrial Policy goes all out to woo foreign capital. It provides 51% foreign equity in high priority industries and may raise the limit to 100% in case the entire output is exported.
This runs counter to the Nehruvian Model. Experts fear that this over-enthusiasm to wlecome foreign capital and to give free hand to multinationals will be detrimental for indigenous industries more so house-hold and small scale industries. This may lead to economic and political crisis in future. It is also alleged that the Policy has been framed at the instance of the IMF and is going to protect the interests of developed Western countries at the cost of national interests. Critics also argue that once foreign capital is permitted free entry the distinction between high and low priority industries will disappear and all lines of production will have to be opened to facilitate foreign investment. This may create Brazil or Mexico like economic crisis.
By opening the gates of the Indian economy wide to the multinationals, the self reliance aspect has been completely ignored. These multinationals with slightest of inconvenience may shift their operations elsewhere leaving the economy in the lurch.
Since multinational and private entrepreneurs would prefer most favourable locations for their industries it would further intensify spatial disparity in economic development. This fact has been well collaborated by the letters of intent so far approved.
While selling out public sector shares and companies to private investors the Government is not only ignoring the interests of the employees but is transferring the assets at throw away prices. These public sector companies could have been handed over to the working class or autonomous organisations to manage their affairs independently.
In the absence of MRTP safeguard private companies may develop monopolistic outlook and may indulge in unfair trade practices.
There is also a risk of growing consumerism rather than strengthening the sinews of the economy. Foreign investors may prefer to invest in low priority consumer sector instead of going for high priority sector.
With the state yielding to the private enterprise the social objectives of equity with growth and protecting the interests of the down trodden and semi-skilled labourers would be thrown to the winds. This will be against the cherished goals of our Constitution and may create socio-economic disparity and tension.
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The keynote of the new industrial policy includes liberalisation and globalisation of the economy. Liberalisation means deregularisation of the industrial sector by cutting down to the minimum administrative interference in its operation so as to allow free competition between market forces. Similarly globalisation means making the Indian economy an integral part of the world economy by breaking down to the maximum feasible the barriers to movement of goods, services, capital and technology between India and the rest of the world.
The new Industrial Policy fulfils a long-felt demand of the industry to remove licensing for all industries except 18 industries (coal, petroleum, sugar, motor cars, cigarettes, hazardous chemicals, pharmaceuticals and luxury items).
It proposes to remove the limit of assets fixed for MRTP Companies and dominant undertakings. Hence business houses intending to float new companies or undertake expansion will not be required to seek clearance from the MRTP Commission. This step will enable MRTP Companies to establish new undertakings, and effect plans of expansions, mergers, amalgamations and takeovers without prior government approval. They shall have the right to appointment of directors.
The new Industrial Policy goes all out to woo foreign capital. It provides 51% foreign equity in high priority industries and may raise the limit to 100% in case the entire output is exported.
This runs counter to the Nehruvian Model. Experts fear that this over-enthusiasm to wlecome foreign capital and to give free hand to multinationals will be detrimental for indigenous industries more so house-hold and small scale industries. This may lead to economic and political crisis in future. It is also alleged that the Policy has been framed at the instance of the IMF and is going to protect the interests of developed Western countries at the cost of national interests. Critics also argue that once foreign capital is permitted free entry the distinction between high and low priority industries will disappear and all lines of production will have to be opened to facilitate foreign investment. This may create Brazil or Mexico like economic crisis.
By opening the gates of the Indian economy wide to the multinationals, the self reliance aspect has been completely ignored. These multinationals with slightest of inconvenience may shift their operations elsewhere leaving the economy in the lurch.
Since multinational and private entrepreneurs would prefer most favourable locations for their industries it would further intensify spatial disparity in economic development. This fact has been well collaborated by the letters of intent so far approved.
While selling out public sector shares and companies to private investors the Government is not only ignoring the interests of the employees but is transferring the assets at throw away prices. These public sector companies could have been handed over to the working class or autonomous organisations to manage their affairs independently.
In the absence of MRTP safeguard private companies may develop monopolistic outlook and may indulge in unfair trade practices.
There is also a risk of growing consumerism rather than strengthening the sinews of the economy. Foreign investors may prefer to invest in low priority consumer sector instead of going for high priority sector.
With the state yielding to the private enterprise the social objectives of equity with growth and protecting the interests of the down trodden and semi-skilled labourers would be thrown to the winds. This will be against the cherished goals of our Constitution and may create socio-economic disparity and tension.
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The New Industrial Policy 1991 has been criticized on the fallowing points.
1. Over emphasis on foreign investment which had a bad impact on indigenous industries.
2. The MNCs mostly produced for World Market and depleted the domestic resources for foreign market.
3. The import of foreign technology and capital incentive decreased employment opportunities and thus increased the unemployment.
4. There was an unhealthy competition as the less advanced indigenous industries could not compete with foreign companies.
5. It reduced the role of Public sector and inflation became very high.
6. The achievements of economy and production of goods was also disappointing.
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