explain the changing role of public sector in the indian economy after the formulation of new economic policy 1991
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Pre Liberalization Era
This era began at the time of independence in 1947 and lasted till the
introduction of New Economic Policy in 1991 by Dr. Manmohan Singh,
the then Union finance minister of India.
This era is marked by the emergence and growth of popular 'Nehru
Model' of development. Pandit Jawahar Lal Nehru is popularly known as
chief architect of Indian planning because of his great contributions in this
field. His doctrine of 'Democratic Socialism' formed the base of new model
Of development he envisaged for India.
He took over the reigns of governance of a big nation in 1947 as first
Prime Minister of free India. India was till then being ruled by foreign
invaders for centuries and her people fought a long battle of freedom.
People were sick of exposits by the British Colonial rule and wanted socio
economic development on their own terms. The general perception at that
time was to oppose all the policies of suppression and any foreign interference in domestic matters. "Inevitably, there was a reaction against
the laissez-faire policies that the colonial government had followed for
most of its life, and great caution at first about continued contact with
foreign governments and business interests."4
Pandit Jawahar Lal Nehru opted for 'Mixed Economy' where both
public and private sector would perform their role but with certainly a
bigger role for the public sector. The private sector in India at that time was
infact incapable of handling big affairs and the long term gestation period
investment policies could be implemented only by booking the public
sector. Such intentions were made clear even before independence.
The Indian National Congress, under the inspiration of Pandit Jawahar
Lal Nehru, set up the National Planning Committee (NPC) towards the end
of 1938, which opined that 'State should own or control all key industries
and services, mineral resources and railways, waterways, shipping and
other public utilities and in fact all those large-scale industries which were
likely to become monopolistic in character.Pandit Nehru was very cautious about choosing the model of
'Democratic Socialism' in a Mixed Economy because he was well averse to
the pravelant socio-economic conditions of the nation. He had the popular
Soviet Russia's 'Socialist Model' and the other equally popular Capitalist
Model being followed by a number of developed western countries
including USA. He was known to the fact that India at the time of
independence had a big population of downtrodden, poor, underprivileged
sections, a large number of illiterate and unskilled labour class, a weak
industrial base and a needy agrarian society. He "greatly admired the
achievements of Soviet planning and so borrowed the concept of socialism
from Russians but, he also regarded the democratic values of the capitalist
society as indispensable for the full growth of a just society. Thus, in his
endeavour to take advantage of the virtues of the two extreme
societies which were themselves also undergoing a transformation, Nehru's
vision of the new India was described as "democratic socialism." 6
The doctrine of 'Democratic Socialism' envisaged by Pandit Jawahar
Lal Nehru infact a mix of some qualities of both socialist and capitalist
models. This view was a kind of holistic view of the society. It implied
This era began at the time of independence in 1947 and lasted till the
introduction of New Economic Policy in 1991 by Dr. Manmohan Singh,
the then Union finance minister of India.
This era is marked by the emergence and growth of popular 'Nehru
Model' of development. Pandit Jawahar Lal Nehru is popularly known as
chief architect of Indian planning because of his great contributions in this
field. His doctrine of 'Democratic Socialism' formed the base of new model
Of development he envisaged for India.
He took over the reigns of governance of a big nation in 1947 as first
Prime Minister of free India. India was till then being ruled by foreign
invaders for centuries and her people fought a long battle of freedom.
People were sick of exposits by the British Colonial rule and wanted socio
economic development on their own terms. The general perception at that
time was to oppose all the policies of suppression and any foreign interference in domestic matters. "Inevitably, there was a reaction against
the laissez-faire policies that the colonial government had followed for
most of its life, and great caution at first about continued contact with
foreign governments and business interests."4
Pandit Jawahar Lal Nehru opted for 'Mixed Economy' where both
public and private sector would perform their role but with certainly a
bigger role for the public sector. The private sector in India at that time was
infact incapable of handling big affairs and the long term gestation period
investment policies could be implemented only by booking the public
sector. Such intentions were made clear even before independence.
The Indian National Congress, under the inspiration of Pandit Jawahar
Lal Nehru, set up the National Planning Committee (NPC) towards the end
of 1938, which opined that 'State should own or control all key industries
and services, mineral resources and railways, waterways, shipping and
other public utilities and in fact all those large-scale industries which were
likely to become monopolistic in character.Pandit Nehru was very cautious about choosing the model of
'Democratic Socialism' in a Mixed Economy because he was well averse to
the pravelant socio-economic conditions of the nation. He had the popular
Soviet Russia's 'Socialist Model' and the other equally popular Capitalist
Model being followed by a number of developed western countries
including USA. He was known to the fact that India at the time of
independence had a big population of downtrodden, poor, underprivileged
sections, a large number of illiterate and unskilled labour class, a weak
industrial base and a needy agrarian society. He "greatly admired the
achievements of Soviet planning and so borrowed the concept of socialism
from Russians but, he also regarded the democratic values of the capitalist
society as indispensable for the full growth of a just society. Thus, in his
endeavour to take advantage of the virtues of the two extreme
societies which were themselves also undergoing a transformation, Nehru's
vision of the new India was described as "democratic socialism." 6
The doctrine of 'Democratic Socialism' envisaged by Pandit Jawahar
Lal Nehru infact a mix of some qualities of both socialist and capitalist
models. This view was a kind of holistic view of the society. It implied
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