Q.Critically evaluate the 1991 new industrial policy resolution of India.

The 1991 industrial policy liberalised Indian industry by removing licensing, shrinking the public-sector monopoly, opening the door to foreign investment and technology, relaxing MRTP and starting disinvestment. It boosted competition, efficiency, investment and growth, but also exposed small industry and labour to pressure, raised fears of foreign dominance and regional imbalance, and sidelined the public sector.

This is a 10-mark 'critically evaluate' question in the AP Intermediate 2nd-year Economics industrial unit, so it needs the main features, merits and demerits, and a balanced conclusion.

Main features of the 1991 New Industrial Policy Resolution

1. Abolition of industrial licensing for all but a short list of industries (security, strategic or environmental concern).
2. Reduction of the public-sector reserved list from many industries to only a few core/strategic ones, opening most industries to the private sector.
3. Liberalisation of foreign investment — automatic approval of foreign direct investment up to specified limits and easier foreign technology agreements.
4. Dilution of the MRTP Act, removing the need for prior approval of large firms for expansion and investment.
5. Disinvestment of government equity in selected public-sector undertakings and a policy to revive or close sick units.

Merits (positive evaluation)

1. More competition and efficiency as licensing and monopoly controls were removed.
2. Larger inflow of foreign capital and modern technology, modernising Indian industry.
3. Faster industrial and overall economic growth and a wider choice of better-quality goods for consumers.
4. Encouragement to the private sector and to entrepreneurship and exports.

Demerits (critical side)

1. Neglect of small-scale and cottage industries, which faced tough competition from big and foreign firms.
2. Fears of unemployment and labour insecurity from restructuring and closure of sick units.
3. Growing dominance of multinationals and dependence on foreign capital and technology. …