3.4. Liberalisation, Privatisation, Globalisation (LPG) and Industrial Development in India

After the new Industrial Policy was announced in 1991, the major objectives of the policy were to build on the gains already made, correct the distortions or weaknesses that have crept in, to maintain a sustained growth in productivity and gainful employment and attain international competitiveness. Within this policy, measures initiated are: (1) abolition of industrial licensing,

(2) free entry to foreign technology, (3) foreign investment policy, (4) access to capital market,

(5) open trade, (6) abolition of phased manufacturing programme, and (7) liberalised industrial location programme. The industrial licensing system was abolished for all except six industries related to security, strategic or environmental concerns.

The government also decided to offer a part of the shareholdings in the public enterprises to financial institutions, general public and workers. The threshold limits of assets have been scrapped and no industry requires prior approval for investing in the delicensed sector. In the new industrial policy, Foreign Direct Investment (FDI) has been seen as a supplement to the domestic investment for achieving a higher level of economic development. Government has permitted access to automatic route for Foreign Direct Investment under various sectors and respective limits have been setup for various fields. Besides, the industrial policy has been liberalised to attract private investor both domestic and multi-nationals. New sectors like, mining, telecommunications, highway construction and management have been thrown open to private companies. Still there has been a big gap between approved and actual foreign direct investment, even though the numbers of foreign collaborations are increasing. The thrust of globalisation has been to increase the domestic and external competition through extensive application of market mechanism and facilitating dynamic relationship with the foreign investors and suppliers of technology.

On the whole, it has been seen that the major share went to core, priority sectors while infrastructural sector was untouched. Further, the gap between developed and developing states has become wider. Major share of both domestic investment as well as foreign direct investment went to already developed states. In fact, economically weaker states could not compete with the developed states in open market in attracting industrial investment proposals and hence they are likely to suffer from these processes. Thus, we need to look ahead at balancing the act and provide initiatives for the weaker states to reap benefits of the policies of liberalisation, privatisation and globalisation.