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Economics

Evaluation of New Industrial Policy 1991.

The Government of India announced the new industrial policy (NIP) on


24th July, 1991. The NIP aimed at liberalisation of the Indian Industry, so as to
improve the efficiency and accelerate industrial growth in the country.
The NIP 1991 was evaluated by analysing the failures and achievements.

I. Criticisms / Failures of NIP, 1991

1. No clear evidence of positive impact on Indian Industry:- After the


announcement of NIP (1991), the Indian Industry shown good growth from
1993 to 1996. However, there was sharp decline in Industrial growth since
1996.
2. Problem of Unemployment:- There has been negative growth in
unemployment in the public sector as well as in the organized private
sector since 2001.
Employment in Public sector _
In 1992 ------------------------------------------------- 192 Lakhs
In 2003 ------------------------------------------------- 186 Lakhs 6Lakhs
3. Problem for domestic firms:- The liberalized entry of foreign MNC’s in the
Indian Market can have serious consequences of the domestic industries.
The domestic firms may find it difficult to compete with high tech and
highly professional foreign MNC’s.
4. Problem of De - licensing:- The NIP 1991 recommended the automatic
expansion of production capacities without Government approval in all
industries, except Six Industries. It results into excess supply of gods and
services as compared to their demands.
5. Problem of foreign technology:- There is a possibility of overdependence
of foreign technology rather than developing indigenous technology.
6. Problem of foreign investments:- Now Foreign Direct Investments (FDI) is
allowed in several sectors. However, the MNC’s investment in India results
in outflow of foreign exchange due to payment of dividends and royalties.
7. Problem of De – reservation of public sector:- The NIP 1991 has de –
reserved industries of public sector in favour of Private sector. This has
resulted in expansion of capacities in the private sector, which in turn has
resulted in recession in the industrial sectors.
8. Problem of Disinvestment:- The NIP 1991 advocated disinvestment of
public sector.
• It may be disadvantageous to the customer as the private
companies may charge high prices.
• It may lead to reduction in employment. As private companies
would like to replace the labour intensive method to mechanized
method.