The Indian Economy and The Licence Raj

The Indian Economy and The authorize RajLicence Raj, refers to the involved variant licenses, ordinations and accompanying red-tape that were required to objurgate up and run businesses in India amongst 1947 and 1990. The Licence Raj was the result of Indian Planned Economy where each and both aspect is keepled by States and Central Goernment. To start an any saucily business, 1 has to w ar approximately 80 licences, that are resultant into disinterested newborn initiatives and not sole(prenominal) that after getting licences businesses are controlled and g overned by the disposal bo authorises that resultant into losses of new business.Government objective is not to control the increase but plan the each every thing and apportion the proper resources but somehow increased corruption wander and frauds has manoeuver to decrease in growth rate.The License Raj-system was in place for just somewhat four decades. The political relation of India initiated a slackening form _or_ system of government chthonic the set up rector-ship of Rajiv Gandhi, though much of the actual progress was made low P.V.Narasimha Rao. loosening resulted in substantial growth in the Indian sparing, which continues today.LiberalisationIndian economy had experienced major policy changes in early 1990s. The new scotch re establish, popularly cognize as, Liberalization, Privatization and Globalization (LPG model) aimed at making the Indian economy as fastest growth economy and glob exclusivelyy competitive. The serial everydayation of reforms undertaken with respect to industrial domain, raft as well as monetary sector aimed at making the economy much efficient.The new neo-liberal policies (economic and affectionate policy) included opening for international flip-flop and enthronement, deregulation, initiation of privatization, tax reforms, and inflation-controlling amounts. The overall direction of liberalization has since remained the same, irrespectiv e of the ruling party, although no party has muchover tried to take on powerful lobbies such as the trade unions and farmers, or con cardinaltious issues such as reforming grate laws and reducing outlandish subsidies.The main objective of the political relation was to reform the economic system from collectivism to capism so as to achieve high economic growth and industrialize the nation for the well- be of Indian citizens. Today India is mainly characterized as a market economy.With the result of that change today about ccc million people-equivalent to the entire population of the United States- hurl escaped extreme poverty. The consequences of liberalisation reached their pinnacle in 2007, when India recorded its highest GDP growth rate of 9%. With this, India became the second fastest growing major economy in the creation, adjoining only to China.The reforms progressed furthest in the areas of opening up to opposed localisement, reforming capital markets, deregulating domestic business, and reforming the trade authorities. Liberalisation has done away with the Licence Raj (investment, industrial and import licensing) and deceaseed many public monopolies, allowing automated sycophancy of foreign direct investment in many sectors.Narsimha Rao governments goals were reducing the pecuniary famine, privatization of the public sector, and increasing investment in al-Qaida. Trade reforms and changes in the regulation of foreign direct investment were introduced to open India to foreign trade opus stabilizing external loans.Accountable changes madeIn the industrial sector, industrial licensing was cut, leaving only 18 industries subject to licensing. Industrial regulation was rationalized.Introducing the SEBI lay out of 1992 and the Security Laws (Amendment) which gave SEBI the legal authority to register and regulate all shelter market intermediaries.Starting in 1994 of the National Stock Exchange as a computer-based trading systemReducing ta riffs from an average of 85 partage to 25 perpennyEncouraging foreign direct investment by increasing the maximum limit on share of foreign capital in joint shipsOpening up in 1992 of Indias equity markets to investment by foreign institutional investors and permitting Indian firms to raise capital on international markets by issuing Global Depository Receipts Privatization below the privatization plan, many of the public sector activities crap been or are shut away being sold to the hole-and-corner(a) sector. Thus the concept of PPP (public clannish partnership) came up. It describes a government good or snobby business venture which is funded and operated through a partnership of government and one or more common soldier sector companies.Privatization, in its wider sense, stands for policies to smother the role of the state or government, assign larger role for the private sector pursuing the system of logic of the market in all economic decisions. The institution of new private sector enterprises could introduce competition where public sector enjoyed monopoly.Each form of privatization has differing implications for the labour, consumers and the economy. Degeneration, for instance, is likely to have little immediate adverse impact on use. Degeneration, because of the removal of instauration barriers, may motivate additional investments and offer increase employment opportunities. It is, however, throw in-at-able that new private sector entrants may baffle in hunt down of senior and experienced employees of the public sector by offering charismatic emoluments.The outgoing public sector employees would carry the expediency and access to business ne cardinalrks and knowledge of the market with them. This phenomenon has already been seen in the atmosphere sector and communications industry. Privatization could lead to a reduction in the custody if the new managements were to opt for modernization and automation. This, in all probability , is unavoidable.Under the Indian cookery system public sector investments are financed through monetary allocations by the government. While there were no administrative restrictions on cottage, hamlet and small scale industries most large investment proposals by the private sector have had to pass through the scrutiny by a multiple of regulatory agencies.Soon after the initiation of development planning in India it became evident that the public sector was an economic necessity for the economy and the private sector.1 Public sector was envisaged as a major instrumental role for pursuance of plan targets. It was universally accepted that the Indian private sector was neither capable of making the necessary large investments nor was it expected to take up projects with long gestation periods and carrying low rates of return.Industrial policy Resolution, 1956 reserved a large sector both for exclusive and antecedence development by the public sector. The government took upon he rself the task of providing essential infrastructure and utilities as overly heavy industries.Public sector in India has two main forms. atomic number 53, the departmentally owned and managed establishments like railways, posts, telecommunication, irrigation, and power projects and two, enterprises established under the Companies Act, 1956 and under special statutes. At the end of 1992, there were 1,one hundred eighty undertakings in which government owned majority equity capital and which were categorized as government companies.Public sector has been an important employer, especially in the nonionised labour market. The sector accounted for 56.84 per centime of the summarise number of 14.3 million employees in the organized sector1 in 1980-81. From about 8.1 million in 1980-81, those employed in public sector manufacturing increased to 9.8 million by 1990-91.Public sector in India follows the same policy of preferences in employment for women and the underprivileged sections of the society as the government. The underprivileged categories are based on socio-economic considerations like membership of plan Castes and Tribes, backward classes, weaker sections, women and the handicapped. some(prenominal) of the public sector enterprises have closed pop out certain of their activities by subcontracting them to private parties. Contractualisation of specific tasks has been assisted by the popular ban imposed by government on new recruitments. The activities privatized and brought under subcontracting include catering message and courier service and security, cleaning and tending of office buildings and office transport (staff cars). Railways appear to have taken to sub-contracting of operate in a big manner.Each form of privatization has differing implications for the labour, consumers and the economy. Dereservation, for instance, is likely to have little immediate adverse impact on employment. Dereservation, because of the removal of entry barriers, may motivate additional investments and offer enlarged employment opportunities. It is, however, possible that new private sector entrants may indulge in poaching of senior and experienced employees of the public sector by offering attractive emoluments.Regulatory bodiesPrivatization of large public enterprises and entry of private sector in erstwhile reserved areas has the potential of giving rise to establishment of private monopolies. The interest of the consumers may therefore have to be protected from the radiation pattern instinct of private monopolies to exploit consumers in order to maximize their profits. One should not stretch the point too far as for the propensity of a public monopoly to be always better.Examples-Security Exchange of Indiaelectrical energy Regulatory Commission,Telecom Regulatory Authority of IndiaInsurance Regulatory cultivation Authority.GlobalizationNow that India is in the process of restructuring her economy, with aspirations of elevating herself fr om her present desolate arrange in the world, the need to speed up her economic development is harbour up more imperative. And having witnessed the positive role that Foreign Direct enthronisation (FDI) has vie in the rapid economic growth of most of the sulphur einsteinium Asiatic countries and most notably China, India has embarked on an ambitious plan to emulate the successes of her neighbours to the east and is trying to sell herself as a safe and profitable finis for FDI.Globalization has many meanings depending on the context and on the person who is public lecture about. The process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalization of fiscal markets, growing richness of MNCs, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution. The term globalization refers to the integration of economies of the world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge. Ideally, it also contains free inter-country movement of labour.In context to India, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms of 1991 in India.Indian economy was in ample crisis in July 1991, when foreign currency reserves had plummeted to almost $1 zillion Inflation had roared to an annual rate of 17 percent fiscal deficit was very high and had reverse uns ustainable foreign investors and NRIs had lost confidence in Indian Economy. Capital was flying out of the country and we were close to defaulting on loans.Major measures initiated as a part of the liberalization and globalization system in the early nineties included the followingDevaluation The first ill-treat towards globalization was taken with the announcement of the devaluation of Indian currency by 18-19 percent against major currencies in the international foreign exchange market. In fact, this measure was taken in order to resolve the BOP crisisDisinvestment-In order to make the process of globalization smooth, privatization and liberalization policies are moving along as well. Under the privatization scheme, most of the public sector undertakings have been/ are being sold to private sector.Dismantling of The Industrial Licensing Regime At present, only six industries are under compulsory licensing mainly on report of environmental safety and strategic considerations. A significantly amended locational policy in tune with the liberalized licensing policy is in place. No industrial acclamation is required from the government for locations not falling within 25 kms of the fringe of cities having a population of more than one million.Allowing Foreign Direct Investment (FDI) across a wide spectrum of industries and encouraging non-debt flows. The Department has put in place a liberal and transparent foreign investment regime where most activities are opened to foreign investment on automatic route without any limit on the extent of foreign ownership. Some of the recent initiatives taken to further liberalize the FDI regimeNon Resident Indian Scheme the general policy and facilities for foreign direct investment as available to foreign investors/ Companies are fully applicable to NRIs as well. In addition, Government has extended some concessions especially for NRIs and overseas corporate bodies having more than 60% stake by NRIsAbolition of the (MRTP ) Act, which necessitated prior approval for subject expansionThe removal of quantitative restrictions on imports.The reduction of the peak impost tariff from over 300 per cent prior to the 30 per cent rate that applies now.Wide-ranging financial sector reforms in the banking, capital markets, and indemnity sectors, including the deregulation of interest rates, strong regulation and supervisory systems, and the introduction of foreign/private sector competitionThe Bright Side of GlobalizationThe rate of growth of the Gross Domestic Product of India has been on the increase from 5.6 per cent during 1980-90 to seven per cent in the 1993-2001 periods. Today Indian Economy is growing at 9% annually. Prime Minister Manmohan Singh is confident of having a 10 per cent growth in the GDP in the Eleventh quintet Year Plan period.The foreign exchange reserves (as at the end of the financial year) were $ 39 billion (2000-01), $ 107 billion (2003-04), $ 145 billion (2005-06) and $ 180 billio n (in February 2007). Today (4th Nov 2010) India has $ 300 billion foreign exchange reserves and ranking at 6 number on world chart.The total cumulative amount of FDI inflows in India were Rs 563,656 million, about US$129,656 million over a decade from 1991 to January 2010. The sectors attracting highest FDI inflows are electrical equipments including computer software and electronics (18 per cent), service sector (13 per cent), telecommunications (10 per cent), transportation industry (nine per cent), etc. In the inflow of FDI, India has surpassed South Korea to become the fourth largest recipient.Dark Side of GlobalisationEvery funds has two sides globalisation is also not out of it. There are many disadvantages of Globalisations as well. The main disadvantage of globalisation is in cultivation field. In 1951, agriculture provided employment to 72 per cent of the population and contributed 59 per cent of the gross domestic product. However, by 2001 the population depending upon agriculture came to 58 per cent whereas the share of agriculture in the GDP went down drastically to 24 per cent and further to 22 per cent in 2006-07. This has resulted in a lowering the per capita income of the farmers and increasing the inelegant indebtedness.The number of rural landless families increased from 35 per cent in 1987 to 45 per cent in 1999, further to 55 per cent in 2005. The farmers are destined to die of starvation or suicide. Replying to the Short Duration Discussion on moment of Wheat and Agrarian Distress on May 18, 2006, Agriculture Minister Sharad Pawar informed the Rajya Sabha that roughly 1,00,000 farmers committed suicide during the period 1993-2003 mainly imputable to indebtedness.In his interview to The Indian Express on November 15, 2005, Sharad Pawar said The soil community has been ignored in this country and especially so over the last eight to ten years. The total investment in the agriculture sector is going down. In the last few years, the ave rage budgetary provision from the Indian Government for irrigation is less than 0.35 percent.Globalisation also leads to unemployment in labour class people according to Minister for Labour and work informed the Lok Sabha on March 19, 2007, that the enrolment of the unemployed in the profession Exchanges in 2006-07 was 79 lakhs against the average of 58 lakhs in the past ten years.The lives of the educated and the rich had been enriched by globalization. The information technology (IT) sector was a particular beneficiary. But the benefits had not yet reached the majority, and new risks had cropped up for the losers-the socially deprived and the rural poor.Growth of Slum CapitalsIn his 2007-08 Budget Speech, pay Minister Chidambaram put forth a proposal to promote Mumbai as a world class financial centre and to make financial services the next growth engine of India. Of its 13 million populations, Mumbai city has 54 per cent in slums. It is estimated that 100 to 300 new families come to Mumbai every day and most land up in a slum colony. Prof R. N. Sharma of the TATA Institute of Social Science says that Mumbai is disintegrating into slums. From being known as the slum capital of India and the biggest slum of Asia, Mumbai is all set to become the slum capital of the world.The population of Delhi is about 14 million of which nearly 45 per cent population lives in slums, unauthorized colonies, JJ clusters and undeveloped rural parts. During dry weather these slum dwellers use open areas around their units for defecation and the entire human waste generated from the slums along with the additional wastewater from their households is dismissed untreated into the river Yamuna.To make Globalization WorkIndia should pay immediate tending to ensure rapid development in education, health, water and sanitation, labour and employment so that under time-bound programmes the targets are completed without delay. A strong metrical unit of human development of all peop le is essential for the social, political and economic development of the country.The government should take immediate steps to increase outlandish production and create additional employment opportunities in the rural parts, to reduce the growing inequality between urban and rural areas and to decentralize powers and resources to the panchayati raj institutions for implementing all works of rural development.At the present, we can also say about the tale of two Indias We have the best of times we have the whisk of times. There is sparkling prosperity, there is stinking poverty. We have dazzling flipper star hotels side by side with darkened ill-starred hovels. We have everything by globalization, we have nothing by globalization.