Q.Critically evaluate the 1991 New Industrial Policy Resolution of India.

The 1991 New Industrial Policy Resolution was the turning point of Liberalisation, Privatisation and Globalisation (LPG). It dismantled the licence-permit system, reduced the public-sector monopoly, and welcomed private and foreign investment. On the positive side it raised industrial growth, efficiency and competitiveness; on the critical side it led to jobless growth, hurt small-scale industry, widened regional and income disparities and increased reliance on foreign capital. This is a central AP Intermediate 2nd-year Economics topic under industrial policy.

Main provisions of the 1991 policy (LPG framework):

1. Abolition of industrial licensing for all but a few industries connected with security, strategic and environmental concerns.
2. Reduction of the public sector's reserved list — the number of industries reserved exclusively for the public sector was cut sharply, opening more areas to private enterprise.
3. Liberalised foreign investment and technology — automatic approval of foreign direct investment up to specified limits and easier import of foreign technology.
4. Amendment of the MRTP Act — removal of the ceiling on assets of large firms, allowing them to expand without prior approval.
5. Disinvestment in public-sector undertakings and a plan to refer sick public units for revival or closure.
6. Encouragement of competition by reducing government controls and allowing market forces a bigger role.

Merits (favourable evaluation):

1. Higher industrial growth and investment, as freeing of controls encouraged new private and foreign investment.
2. Greater efficiency and competitiveness because firms had to compete in open markets.
3. Inflow of foreign capital and technology modernised Indian industry.
4. Wider consumer choice and better quality as competition increased.
5. Growth of new industries, especially information technology and services.

Demerits (critical evaluation):

1. Jobless growth — output rose but employment generation in organised industry lagged behind.
2. Neglect of the public sector, which was earlier the 'commanding height' of the economy.
3. Harm to small-scale and cottage industries, which could not withstand competition from large and foreign firms.
4. Widening regional imbalances, as investment flowed to already-developed regions with better infrastructure. …