What economic changes were initiated by the Government under the Industrial Policy, 1991? What impact have these changes made on business and industry?
Answers
SOLUTION :
Economic changes initiated by the Government under the industrial policy ,1991 were :
- 1.Under compulsory licensing the Government reduce the number of industries to six.
- 2. Dereservation of a large number of industries under the public sector.
- 3. Disinvestment of many public sector enterprises. Disinvestment refers to the process of sale of public sector enterprises to the private sector or dilution of government ownership beyond 51% in public enterprises.
- 4. Increases in the share of foreign equity participation and FDI upto 100%.
- 5. Automatic permission granted for technology agreements with foreign companies.
- 6. FIPB (Foreign Investment Promotion Board)was set up to promote foreign investment in India.
The Impact of government policy changes on business and industry are :
(i) INCREASING COMPETITION :
Changes in the rules of licensing and entry of foreign firms has increased the competition for Indian firms in many industries like banking and communication.
(ii) MORE DEMANDING CUSTOMERS :
Due to increase in competition and availability of large number of products, customers are becoming more choosy. He is not regarded as the king of the market.
(iii) MARKET ORIENTATION :
Earlier, firms used to produce first and then sell the goods in the market, but now producers have become market oriented , where they analyse the market first and then produce goods accordingly.
(iv) RAPIDLY CHANGING TECHNOLOGICAL ENVIRONMENT :
Increase competition in market forces the firms to develop new ways to survive and grow in market. Due to this, smaller firm face tough challenges for transformation in processes, technology machines and products.
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Answer:
Economic changes initiated by the government under the Industrial Policy, 1991 (i) The government reduced the number of industries under compulsory licensing to six. (ii) The role of public sector was reduced. It was now limited only to tom industries of strategic importance.