Question

Answer in detail.

What are the effects of economic reforms on the industrial sector.

Answer 1

The following were some of the major effects of economic reforms on the industrial sector in India:
Positive effects
a. Enhanced growth- Due to liberalisation of the economy, the private sector was set free from government interference. This helped private industries grow and operate efficiently.
b. Increased exports- The reforms allowed integration of the industrial sector with the world markets. This gave entrepreneurs and industrialists a chance to export their goods to overseas markets and reap the benefits of globalisation.
c. Improved trade relations- Globalisation helped India trade and improve its relations with countries like China, Japan and America.
d. Liberalisation of imports: With liberalization of imports the problem of scarcity, thereby, the problem of inflation can be solved to a large extent.

Negative effects
a. Stiff competition: The domestic industrial products faced stiff competition from the cheap imported goods, which were also superior in quality.
b. Lack of investment: Due to lack of investment in infrastructure, such as adequate power and good roads, domestic firms could not compete with their foreign counterparts in terms of cost and quality of goods.
c. Unemployment- Many Indian industries were not able to face the stiff competition from other countries and thus, were forced to shut down due to huge losses. This contributed to the problem of unemployment and poverty in India.
d. Loss of welfare: As the private sector is profit driven, it often leads to loss of overall welfare.