Q2. What are the different steps taken by the government of India to develop economy.
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Answer:
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(1) New Industrial Policy
Under Industrial Policy, keeping in view the priorities of the country and its economic development, the roles of the public and private sectors are clearly decided.
economic reforms
Under the New Industrial Policy, the industries have been freed to a large extent from the licenses and other controls. In order to encourage modernisation, stress has been laid upon the use of latest technology. A great reduction has been effected in the role of the public sector.
Efforts have been made to encourage foreign investment. Investment decision by companies has been facilitated by ending restrictions imposed by the MRTP Act. Similarly, Foreign Exchange Regulation Act (FERA) has been replaced with Foreign Exchange Management Act (FEMA).
Some important points of the New Industrial Policy have been highlighted here
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(i) Abolition of Licensing:
Before the advent of the New Industrial Policy, the Indian industries were operating under strict licensing system. Now, most industries have been freed from licensing and other restrictions.
(ii) Freedom to Import Technology:
The use of latest technology has been given prominence in the New Industrial Policy. Therefore, foreign technological collaboration has been allowed.
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(iii) Contraction of Public Sector:
A policy of not expanding unprofitable industrial units in the public sector has been adopted. Apart from this, the government is following the course of disinvestment in such public sector undertaking. (Selling some shares of public sector enterprises to private sector entrepreneurs is called disinvestment. This is a medium of privatisation.)
(iv) Free Entry of Foreign Investment:
Many steps have been taken to attract foreign investment. Some of these are as follows:
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(a) In 1991, 51% of foreign investment in 34 high priority industries was allowed without seeking government permission.
(b) Non-Resident Indians (NRIs) were allowed to invest 100% in the export houses, hospitals, hotels, etc.
(c) Foreign Investment Promotion Board (FIPB) was established with a view to speedily clear foreign investment proposals.
(d) Restrictions which were previously in operation to regulate dividends repatriation by the foreign investors have been removed. They can now take dividends to their native countries.
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(v) MRTP Restrictions Removed:
Monopolies and Restrictive Trade Practices Act has been done away with. Now the companies do not need to seek government permission to issue shares, extend their area of operation and establish a new unit.
(vi) FERA Restrictions Removed:
Foreign Exchange Regulation Act (FERA) has been replaced by Foreign Exchange Management Act (FEMA). It regulates the foreign transactions. These transactions have now become simpler.
(vii) Increase in the Importance of Small Industries:
Efforts have been made to give importance to the small industries in the economic development of the country.
(2) New Trade Policy
Trade policy means the policy through which the foreign trade is controlled and regulated. As a result of liberalisation, trade policy has undergone tremendous changes. Especially the foreign trade has been freed from the unnecessary controls.
The age-old restrictions have been eliminated at one go. Some of the chief characteristics of the New Trade Policy are as follows:
(i) Reduction in Restrictions of Export-Import:
Restrictions on the exports-imports have almost disappeared leaving only a few items.
(ii) Reduction in Export-Import Tax:
Export-import tax on some items has been completely abolished and on some other items it has been reduced to the minimum level.
(iii) Easy Procedure of Export-Import: