New Economic Policies in India
--> Posted on 2009-08-07 13:12:58 By Monica Arora
Introduction:
During the period of 1990’s Indian politics has witness three M’s i.e. Mandal, Market, Mandir. Our focus is on Market which has transformed the nature and character of the states after the adoption of New Economic Policies (NEP). The question arises here is why India has suddenly adopted New Economic Policies? Was it a historical necessity or pre plan by the government to adopt such policies?
The answer to this question lies in the fact that the adoption of the policies was a necessity rather than a plan by the government. In the year 1990’s there has been crisis in the Indian market like Balance of Payment crisis, high inflation, rising food prices, large current account deficit, huge domestic and foreign debt, Gulf crisis.
In response to such crisis the minority government led by P.V Narsimha Rao decided to introduce economic reforms (NEP). The NEP aimed at making structural changes in the economic system. It also aimed at liberalising government control, emphasized on greater role for the private sector and also integration with the world economy.
Merits:
The adoption of such policies has led to increase in foreign direct investments, free flow of culture, ideas, ideologies, competition with foreign countries. But at the same time such a policy has its own demerits that also impacted the states. It has adopted new policies on trade, foreign exchange, banking, industry, foreign investment. In other words this process has become an open ended process.
Demerits
It has lead to the growth of MNC’s which has posed a danger to indigenous companies.
Increase in unemployment due to increase in computers.
Retreat of the role of the state.
Impact on States:
As said by Lawrence Saez, the adoption of NEP has led to shift in the inter governmental cooperation between the central government and the states to inter jurisdictional competition among the latter.
The policies of economic reforms has widened regional inequalities with the states having higher levels of income and better infrastructure outpacing others and providing services at the higher level. These states have been magnets for the private investments including the FDI. If we look at the rates of economic growth across Indian states, states which have gained significantly are Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh. The growth has actually registered decline in Bihar, U.P, Orissa, Punjab, Rajasthan and some states of North East. The reasons for growth acceleration in some states is because they have been able to attract new private investment, both domestic and foreign and deceleration in others is because they are unable to readily attract new private investments and are amongst India’s poorer states.
The rise of the regional parties and presence of coalition government have brought the states into national arena as the new economic policies are being influenced by state level leadership.
Despite its merits and demerits and impact on the States, the question that is worth asking is the centre’s role has been diminished? Earlier states being dependent on the centre have not shown any initiative to develop on their own. The people complained that they have become colonized by such kind of patronage economy. It has also resulted into crony capitalism under which the economic decisions are taken on the basis of political considerations. Are these states developing with the adoption of NEP? Are the regional disparities increasing or decreasing? The question will become a debatable issue of transformation of Centre- State conflict to State- State conflict?
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