The private sector was not allowed to invest in a number of sectors thought to be critical for development.
“Commanding heights” were reserved for the public sector despite its lacklustre performance.
Private sector could invest only after getting an industrial licence, and that was especially hard to get for “large” industrial houses.
Over 860 items were reserved exclusively for small-scale producers, including many that had very high export potential.
Imports were more strictly controlled than in almost any other developing country because it was felt necessary to conserve scarce foreign exchange.
Consumer goods simply could not be imported so domestic producers faced no import competition.
The import of technology was controlled and Foreign Direct Investment (FDI) was discouraged.
Challenges in bringing out the reforms:
Right and the Left political parties opposed the reforms.
Government itself had many who were not convinced.
Indian businesses liked domestic liberalisation, but were unhappy at the entry of foreign competition, both through imports and FDI.
Objective of Reforms:
The reforms were aimed at unleashing the energies of the private sector to accelerate economic growth.
Ensure an adequate flow of benefits to the poor.
Success of 1991 Liberalisation:
The GDP growth averaged 7% in the 25 years from 1992 to 2017, compared with an average of 5% in the preceding ten years
Between 2004-05 and 2011-12, the last year for which official data on poverty are available, about 140 million people were pulled above the poverty line.
In 1991 the unemployment rate was high but after India adopted new LPG policy more employment got generated as new foreign companies came to India and due to liberalisation many new entrepreneurs started companies.
Per Capita income increased due to an increase in employment.
Exports have increased and stood at USD 26.38 billion as of October, 2019.
Challenges:
We have not done as much as we should have in the health and education sectors;
Environmental concerns have not been adequately built into our development strategy.
We are still at the lower end of the middle-income group of countries.
Indian industry has complaints about poor infrastructure, poor logistics and time-consuming trade procedures, which reduce its competitiveness.
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