Why and how was private sector regulated under the IPR 1956?
Why and how was private sector regulated under the IPR 1956?
According to the IPR, 1956, the private sector was kept under state control through a system of licenses. No new industry was allowed unless a license was obtained from the government. Even an existing industry had to obtain a license for expanding output or for diversifying or expanding production.
The objective behind regulating the private sector through licenses was to promote equitable development in the country. It was easier to obtain a license if the industrial unit was to be established in backward areas.
(i) A stimulant to industrial production: These policies have stimulated the process of industrial production, leading to increased productivity. The Information Technology (IT) sector has registered huge success.
(ii) A check on fiscal deficit: Fiscal deficit, which was as high as 8.5% of GDP has now come down to 5%.
(iii) Check on inflation: The rate of inflation is now at about 4-5% per annum which is not a cause for concern.
(iv) Consumer's sovereignty: Consumers have access to more variety and better quality of goods and services.
(v) A substantial increase in foreign exchange reserves: Foreign exchange reserves have risen from about USD 6 billion in 1990-91 to about USD 304 billion in 2013-14. India is presently one of the largest foreign exchange reserve holder in the world. This encourages international confidence in our country.
(vi) Flow of private foreign investment: Private foreign investment has increased considerably with the introduction of LPG policies, both in the form of FDI and portfolio investment. Foreign investment which includes Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) has increased from about USD 100 million in 1990-91 to USD 264 billion in 2013-14.
(vii) Recognition of India as an emerging economic power: India is now considered as an emerging economic power. India's economic ranking is also improved and the global investors view India as a sound investment destination.
(viii) A shift from a monopoly market to competitive market: Indian markets are now becoming more competitive in nature. The monopoly structure, which sometimes exploited the consumers is now losing its relevance.
Negative Effects of LPG Policies:
(i) Neglect of Agriculture: There has been a decline in agricultural growth rate. This decline is the root cause of the problem of rural distress that reached a crisis in some parts of the country.
Public investment in agriculture sector, especially in infrastructure which includes irrigation power, roads, market linkages and research and development, has been reduced in the reform period. The removal of fertiliser subsidy has led to increase in the cost of production which has severely affected the small and marginal farmers.
(ii) Uneven Growth in Industrial: Sector industrial sector registered uneven growth during this period. Cheaper imports have decreased the demand for domestic industrial goods. There was inadequate investment in infrastructural facilities such as power supply
(iii) Few Employment opportunities: Though the GDP growth rate has increased in the reform period, yet this growth has not generated sufficient employment opportunities in the country.
(iv) Failure of Disinvestment Policies: The disinvestment policy initiated by the government was not successful. The government was not able to achieve the targets set for disinvestment.
(v) Failure of Fiscal Policies: The reforms introduced in fiscal policies have also not been able to yield the desired results. Tax evasion is still high. Tariff reduction has curtailed the scope of raising revenue through custom duty. Tax incentives given to foreign investors further reduced the scope for raising tax revenues.
(vi) Concentration of Growth Process: Growth has been concentrated only in selected areas in the service sector such as telecommunication, IT. finance, entertainment, travel and hospitality services, real estate and trade rather than vital sectors such as agriculture and industry.
According to the IPR, 1956, the private sector was kept under state control through a system of licenses. No new industry was allowed unless a license was obtained from the government. Even an existing industry had to obtain a license for expanding output or for diversifying or expanding production.
The objective behind regulating the private sector through licenses was to promote equitable development in the country. It was easier to obtain a license if the industrial unit was to be established in backward areas.
(i) A stimulant to industrial production: These policies have stimulated the process of industrial production, leading to increased productivity. The Information Technology (IT) sector has registered huge success.
(ii) A check on fiscal deficit: Fiscal deficit, which was as high as 8.5% of GDP has now come down to 5%.
(iii) Check on inflation: The rate of inflation is now at about 4-5% per annum which is not a cause for concern.
(iv) Consumer's sovereignty: Consumers have access to more variety and better quality of goods and services.
(v) A substantial increase in foreign exchange reserves: Foreign exchange reserves have risen from about USD 6 billion in 1990-91 to about USD 304 billion in 2013-14. India is presently one of the largest foreign exchange reserve holder in the world. This encourages international confidence in our country.
(vi) Flow of private foreign investment: Private foreign investment has increased considerably with the introduction of LPG policies, both in the form of FDI and portfolio investment. Foreign investment which includes Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) has increased from about USD 100 million in 1990-91 to USD 264 billion in 2013-14.
(vii) Recognition of India as an emerging economic power: India is now considered as an emerging economic power. India's economic ranking is also improved and the global investors view India as a sound investment destination.
(viii) A shift from a monopoly market to competitive market: Indian markets are now becoming more competitive in nature. The monopoly structure, which sometimes exploited the consumers is now losing its relevance.
Negative Effects of LPG Policies:
(i) Neglect of Agriculture: There has been a decline in agricultural growth rate. This decline is the root cause of the problem of rural distress that reached a crisis in some parts of the country.
Public investment in agriculture sector, especially in infrastructure which includes irrigation power, roads, market linkages and research and development, has been reduced in the reform period. The removal of fertiliser subsidy has led to increase in the cost of production which has severely affected the small and marginal farmers.
(ii) Uneven Growth in Industrial: Sector industrial sector registered uneven growth during this period. Cheaper imports have decreased the demand for domestic industrial goods. There was inadequate investment in infrastructural facilities such as power supply
(iii) Few Employment opportunities: Though the GDP growth rate has increased in the reform period, yet this growth has not generated sufficient employment opportunities in the country.
(iv) Failure of Disinvestment Policies: The disinvestment policy initiated by the government was not successful. The government was not able to achieve the targets set for disinvestment.
(v) Failure of Fiscal Policies: The reforms introduced in fiscal policies have also not been able to yield the desired results. Tax evasion is still high. Tariff reduction has curtailed the scope of raising revenue through custom duty. Tax incentives given to foreign investors further reduced the scope for raising tax revenues.
(vi) Concentration of Growth Process: Growth has been concentrated only in selected areas in the service sector such as telecommunication, IT. finance, entertainment, travel and hospitality services, real estate and trade rather than vital sectors such as agriculture and industry.
