Critically analyze the impact of economic reforms on PE s with special emphasis on atomic energy and railways.

Critically analyze the impact of economic reforms on PE s with special emphasis on atomic energy and railways.

The Industrial Policy Statement of 1991 is a marked shift in PE policy. Even in a few areas reserved for PE, private capital is being allowed. The policy change is due to inadequacy of PE to perform effectively. The policy statement provides a detailed prescription to the situation, but has failed to do so because of its ineffective implementation. Promises and suggestions made in earlier policy statement and in seventh plan document also remain unattended. This has adversely affected the PE performance. PE have gone out of esteem not only in India but the world over, but the private sector can not be their substitute unless it is closely monitored and effectively regulated.

CHANGE IN PE POLICY: JULY 1919 POLICY STATEMENT

The Industrial Policy Statement of the Narasimha Rao government totally reversed the PE policy. Though the statement began with a reverential reference to Pandit Nehru and his contribution and philosophy, it was a clean break from the policy of the socialist pattern. In the words of the VIII plan (1992-97) document, the policy now was of “managing the transition from centrally planned economy to market led economy” The policy aim has been to “roll back” the public sector investment from those sector of the economy where the private sector could move in.

Ridiculing the hypocrisy of the Congress leadership that the Nehruvain module of the economy was intact, Mr. Yaswant Sinha, a former finance minister remarked: “Having turned down the Nehruvian module upside down the Congress party is now trying to stand on its head to prove that it has not departed from the module”. The fact is that the Congress leadership has clinged to Nehru’s name as it did not have adequate congress to have break from the traditional congress idiom. In this regard, it would be of interest to refer to the first Para of the policy statement of 1991, which is reproduced below.

“Pandit Jawaharlal Nehru laid the foundation of modern India. His vision and determination have left a lasting impression on every facet of national endeavor since Independence. It is due to his initiative that India now has a strong and diversified industrial base and in a major industrial nation of the world. The goals and objectives set out for the nation by Pandit Nehru on the eve of Independence, namely, the repaid agriculture and industrial development of our country, repaid expansion of opportunities for gainful employment, progressive self-reliance remain as valid today as the time Pandit Nehru first set them out before the nation.

Any industrial policy must contribute to the realization of these goals and objectives at an accelerated pace. The present statement of industrial policy is inspired by these very concerns, and represents a renewed initiative towards consolidating the gains of national reconstruction at this crucial stage”.


Reasons for Change in Policy

As noted in the policy statement, the government felt that “after the initial exuberance of the public sector entering new areas of industrial and technical competence, a number of problems have begun to manifest themselves”.

Six of these listed in the statement were:

(i) Insufficient growth in productivity,
(ii) Poor project management,
(iii) Over managing (which means employing more persons than necessary for performing a job),
(iv) lack of continuous technological upgration,
(v) Inadequate attention to R & D and human resource development,
(vi) A very low rate of return on the capital employed. According to the policy statement, all these resulted in many PEs becoming “a burden rather than to the government”.


The fact of the matter as that government itself has been responsible for poor management of PEs were never provided adequate autonomy to perform, and an effective and professional board of directors. PEs also lacked a sense of direction the absence of an unambiguous set of mission and objective. Decisions were taken to serve a vague and varying ‘public interest’, ignoring the impact on commercial performance and morale of PE manger.