Question

New economic policy 1991 advantages and disadvantages upsc ias

Answer 1

Strengths of New Industrial Policy, 1991:

The process of liberalisation got a strong push with the announcement of the New Industrial Policy, 1991. It entered a new phase of whatŕ has been described as ‘reform by storm’ supplanting the approach of ‘reform by stealth’ of the later half of the 1970s and ‘reform with reluctance’ during the second half of the 1980s.


i. The New Industrial Policy made a bonfire of the industrial licensing system through various provisions. There has been a move away from extensive physical controls and an increase in the role of financial incentives in channelling investments in the desired direction. This, plus the lowering of the tax rates combined with better administration of the revenue collection system, is expected to attract more economic enterprise and investment.

ii. There is considerable internal deregulation aimed at strengthening the more efficient domestic firms and encouraging them to invest and expand. This is expected to inject much more competition into the system, creating incentives for reducing costs.

iii. Measures have also been taken to improve the legal framework. The Securitisation, Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 gives powers to banks and financial institutions to enforce their claims on collateral for delinquent secured credit, without going through a long and cumbersome judicial process.