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Licence Raj

The Licence Raj or Permit Raj (rāj, meaning "rule" in Hindi)[1] is a pejorative for the system of strict government control and regulation of the Indian economy that was in place from the 1950s to the early 1990s. Under this system, businesses in India were required to obtain licences from the government in order to operate, and these licences were often difficult to obtain.[2][3][4]

The Licence Raj was intended to protect Indian industry, promote self-reliance and ensure regional equality.[5] Up to 80 government agencies had to be satisfied before private companies could produce something and, if granted, the government would regulate production.[6]

The term "Licence Raj" is a play on the "British Raj" which refers to the period of British rule in India. It was coined by Indian independence activist and statesman Chakravarti Rajagopalachari, who was strongly opposed to the system of strict government control and regulation of the economy that it represented. Rajagopalachari believed that the Licence Raj had the potential for political corruption and economic stagnation, and founded the Swatantra Party to oppose these practices.[7]

Reforms started in 1991 have significantly reduced regulation. However, Indian labor laws continue to protect workers in the formal sector from being laid off by employers and place significant restrictions on the ability of businesses to reduce their workforce without incurring significant costs and burdens. This is viewed by some as a barrier to economic growth and development as it may create a disincentive for businesses to hire workers and can make it difficult for them to respond to changing market conditions or economic challenges.[8] It is also to be noted that majority of Indian workers are employed in the informal sector where much of the labour protections do not apply.[9][10]

History edit

Following the Russian Revolution, socialist thinkers in India began drawing parallels between the pre-revolution Russian proletariat and the Indian masses under colonial rule, seeing socialism as a way to empower poor Indian farmers.[11] Following Indian independence these socialist factions, most importantly Jawaharlal Nehru's conception of democratic socialism, influenced the policies of the Licence Raj.[12]

Nehru studied at Trinity College, Cambridge and was exposed to socialist ideas during his time there. He also visited the Soviet Union in 1927, and this experience may have further influenced his views on socialism. However, Nehru's own political views and the policies he implemented as Prime Minister were often more pragmatic and centrist than strictly socialist. He believed in the need for a strong, centralized government and a planned economy, but he also recognized the importance of private enterprise and the market in driving economic growth and development.[13] Nehru also believed that protecting domestic industries would help to promote industrialization and economic development in India, and he implemented a number of protectionist policies during his time in office.[14]

He saw such government intervention as a way to modernize the Indian economy which had been left impoverished by decades of colonial rule.[15] However, Nehru did not seek to eliminate the private sector entirely, as was the case in the Soviet Union. Rather, he pursued a policy of creating a mixed economy in India, with strategic industries under state control and public sector corporations guiding investment, while also allowing for a significant role for the private sector and market forces.[16]

The economic centralization and controls required for the war effort during World War II helped create the bureaucratic and manufacturing infrastructure necessary to institute Nehru's plans,[17] and so following independence and his election as prime minister, he had the opportunity to put his ideas into action. In his speech to the Constituent Assembly of India, he declared, "The service of India means the service of the millions who suffer. It means the ending of poverty and ignorance and disease and inequality of opportunity."[18]

By the late 1950s, the Swatantra Party, the country's first market-friendly political party, had formed in opposition to Nehru's policies. This party, which was made up of ex-landlords, businessmen, and rich peasants, argued that Nehru's centralized economic policies were incompatible with democracy. In a memorandum to party officials, they claimed that "the best guarantee of speed in progress is a maximum of individual freedom and a minimum of governmental interference." They argued that Nehru's policies were stifling individual initiative and freedom and slowing economic progress.[19]

Chakravarti Rajagopalachari, a founder of the Swatantra Party, coined the term “Permit-Licence Raj” to encapsulate the party's frustrations with Nehru's policies, writing in his right-wing magazine Swarajya:[20]

I want the corruptions of the Permit/Licence Raj to go... I want real, equal opportunities for all and no private monopolies created by the Permit/Licence Raj.

Characteristics edit

A key characteristic of the Licence Raj was a Planning Commission that centrally administered the economy of the country. Like a command economy, India had Five-Year Plans on the lines of the five-year plans in the Soviet Union. However, unlike Soviet Union, private sector also played a significant role. The Planning Commission was set up in 1950 to survey the available resources in the country and formulate plans to raise the standard of living.[21]

Planning Commission enacted the First Five Year Plan in 1951, aimed at developing the agricultural sector amid severe food shortages and an influx of refugees from the Partition, and that plan led to a 4% increase in GDP, higher than the projected 2%.[22] Nehru's government hoped to build on the success of the First Five Year Plan with their more ambitious Second Five Year Plan aimed at continuing agricultural and infrastructure investment while developing heavy industry and increasing employment.[23] But this plan failed to reach its goal of 5% growth[24] and the heavy spending in the plan depleted the country's foreign currency reserves as the country did not have sufficient domestic resources to fund these projects and therefore had to rely on imported capital and technology.[23]

Another main characteristic of the Licence Raj was heavy regulation on industry. Legislation to regulate industry started with the Industrial Development Regulation Act of 1951, which laid out licensing restrictions on industries it designated as Schedule I which included industrial machinery, telecommunications, and chemical manufacturing.[25] Next, the Industrial Policy Resolution of 1956 extended these restrictions by designating certain industries known as Schedule A to be exclusively under state control, and certain other industries under Schedule B to be majority state-owned.[26] Industries in Schedule A included defense production, metallurgy, mining, and transportation.[27]

During the 1960s, the Indian banking sector came under criticism for being controlled by a few big industrialists in large cities, and thus failing to meet the needs of rural Indians and small-scale industry. In response, the government of Indira Gandhi began pursuing "social control" of banking institutions, with Deputy Prime Minister Morarji Desai spearheading the Banking Laws (Amendment) Bill in 1968 to regulate the commercial banks' leadership. The bill stipulated that at least 51% of the directors should not be directly connected monopolies and big business, that industrialist chairmen had to be replaced by professional bankers, and that banks could not form relationships with companies tied to their own directors. Additionally, Desai forged the National Credit Council (NCC) to regulate credit allocations in order to bring more credit to rural areas and small industry.[28][29] However, many of these changes were rendered moot when Indira Gandhi decided to fully nationalize 14 major banks in 1969, with 6 additional banks coming under state control in 1980.[30]

Indian capital controls started as wartime restrictions imposed by the British on cross-border transactions during World War II, eventually growing into a complex framework of restrictions on the current account and capital account.[31] After independence the Indian government introduced restrictions on the flow of foreign exchange reserves, and following a balance of payments crisis from 1956 to 1957, the government became more concerned with carefully allocating foreign exchange between different sectors of the economy.[32] After a failed attempt at liberalization in 1966, the Foreign Investments Board was established in 1968 to scrutinize companies investing in India with more than 40% foreign equity participation. Foreign investment that did not involve technology transfers was severely restricted, and foreign collaboration with local companies was conditioned on export quotas.[33] This tight control over foreign investment became a core part of a broader policy of import substitution industrialisation, the belief that countries like India needed to rely on internal markets for development, not international trade. To achieve this goal, the Indian government erected strict import restrictions and a complex system of tariffs that featured high rates which varied by industry.[34]

One consequence of the Licence Raj was that it benefited large corporations at the expense of smaller businesses. Because large corporations were often better able to navigate the complex bureaucracy of the Licence Raj and secure the necessary licences, they were able to dominate many sectors of the economy. This made it difficult for small businesses to compete, and contributed to a concentration of economic power in the hands of a few large corporations.[35]

Another criticism of the licensing system in India was that it was prone to corruption, as businesses and individuals had to navigate a complex bureaucracy in order to obtain licences and permissions, and may have had to pay bribes or engage in other forms of corruption in order to obtain the necessary approvals.This corruption was fueled by a broader environment of corruption in India, which was characterized by a lack of transparency and accountability in the government, a weak legal system, and a culture of corruption that had been allowed to persist for many years.[36]

Fall of the Licence Raj edit

The Licence Raj system was in place for four decades. Many members of the Congress, including Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh, were strong supporters of liberalisation and played key roles in implementing these changes. In 1991, Prime Minister Narasimha Rao, who was also the Minister of Industries, initiated a policy of liberalisation in India. This policy aimed to reduce government intervention in the economy and promote market-based solutions to economic problems.[37]

The Licence Raj was believed by some to be hindering economic growth and preventing the Indian economy from reaching its full potential. This belief was based on the idea that the government's heavy intervention in the market was stifling economic activity and hampering the ability of the economy to grow and develop.[38]

Liberalisation resulted in substantial growth in the Indian economy, which continues today.[39] The Licence Raj is considered to have been significantly reduced in 1991 when India had only two weeks of foreign reserves left. In return for an IMF bailout, India transferred gold bullion to London as collateral, devalued the rupee and accepted economic reforms.[40] The federal government, with Manmohan Singh as finance minister, reduced licensing regulations; lowered tariffs, duties and taxes and opened up to international trade and investment.[40]

The reform policies introduced after 1991 removed many economic restrictions. Industrial licensing was abolished for almost all product categories, except for alcohol, tobacco, hazardous chemicals, industrial explosives, electronics, aerospace and pharmaceuticals.

Arguing that the Planning Commission had outlived its utility, the Modi government disbanded it in 2014.[41] On 6 August 2014, the Indian Parliament raised the limit on foreign direct investment in the defence sector to 49%[42] and removed the limit for certain classes of infrastructure projects: high speed railways, including construction, operation and maintenance of high-speed train projects;[43] suburban corridor projects through PPP; dedicated freight lines; rolling stock including train sets; locomotives manufacturing and maintenance facilities; railway electrification and signalling systems; freight and passenger terminals; infrastructure in industrial parks pertaining to railway lines and mass rapid transport systems.

Consequences of the fall of Licence Raj edit

The fall of the Licence Raj and the implementation of economic liberalization policies have contributed to increased regional inequality in India. Some experts argue that these policies benefited certain regions of the country, such as the major cities and industrial centers, at the expense of others, leading to a widening gap between rural and urban areas.[44]

It has contributed to mass migration from rural areas to cities, as people sought to take advantage of new economic opportunities and improved living standards in urban areas. This mass migration can place a burden on cities, as they may struggle to accommodate the influx of new residents and provide them with adequate housing, education, and other basic services. Slums in India are a common sight in many cities and are often found in areas that are vulnerable to flooding or other natural disasters. They are often home to marginalized communities, including migrant workers, informal sector workers, and other groups that may be excluded from mainstream society.[45]

The scaling back of public sector enterprises may also have led to a reduction in the ability of the government to direct investment and resources towards priority areas and to protect the interests of workers, minorities and other stakeholders.[44]

See also edit

References edit

  1. ^ Oxford English Dictionary, 2nd edition, 1989: from Skr. rāj: to reign, rule; cognate with L. rēx, rēg-is, OIr. , rīg king (see RICH).
  2. ^ Mathew, George Eby (2010). India's Innovation Blueprint: How the Largest Democracy is Becoming an innovation Super Power. Oxford: Chandos Publishing. pp. 13 ff. ISBN 978-1-78063-224-7. OCLC 867050270.
  3. ^ Nehru, S., ed. (2019). Economic Reforms in India: Achievements and Challenges. Chennai: MJP Publisher. p. 271. ISBN 978-81-8094-251-8. OCLC 913733544.
  4. ^ Street Hawking Promise Jobs in Future March 29, 2008, at the Wayback Machine, The Times of India, 2001-11-25
  5. ^ Aghion, Philippe; Burgess, Robin; Redding, Stephen; Zilibotti, F. (2005). "The Unequal Effects of Liberalization: Evidence fromDismantling the License Raj in India". STICERD - Development Economics Papers - from 2008 This Series Has Been Superseded by Economic Organisation and Public Policy Discussion Papers.
  6. ^ "India: the economy". BBC. 1998.
  7. ^ The Swatantra Party and Indian Conservatism. Cambridge University Press. 2007. p. 131. ISBN 978-0-521-04980-1.
  8. ^ "Impact of labour regulations on Indian manufacturing sector". www.ideasforindia.in. Retrieved 2022-03-20.
  9. ^ "India's Unorganised Sector Is Being Engulfed, Further Marginalised". The Wire. Retrieved 2023-04-23.
  10. ^ "Informal economy in South Asia (ILO in India)". www.ilo.org. Retrieved 2023-04-23.
  11. ^ Saxena, Chandni (2011). "Emergence of Socialism in Early 20". Proceedings of the Indian History Congress. 72: 1515–1516. JSTOR 44145782.
  12. ^ Kaushik, P.D. (1985). "Economic Creed of the Post Independence Congress: The Nehru-Indira Phase". The Indian Journal of Political Science. 46 (4): 474–486. JSTOR 41855200.
  13. ^ Sharma, Brij Kishore (2012). "Jawaharlal Nehru's Model of Development". Proceedings of the Indian History Congress. 73: 1292–1302. JSTOR 44156330.
  14. ^ Singh, Kuldip. "Nehru's Model of Economic Growth and Globalisation of the Indian Economy" (PDF).
  15. ^ Ahanger, Javid Ahmad (2018). "Revisiting Nehru: The politics of nonalignment and secularism". World Affairs: The Journal of International Issues. 22 (2): 24–33. JSTOR 48520062.
  16. ^ Thakur, Ramesh (January 1993). "Restoring India's economic health". Third World Quarterly. 14 (1): 137–157. doi:10.1080/01436599308420317. JSTOR 3992587.
  17. ^ Kamtekar, Indivar (2016). "The Wartime Paternity of India's 'Licence-Permit Raj'". Proceedings of the Indian History Congress. 77: 403–409. JSTOR 26552665.
  18. ^ "Jawaharlal Nehru - Freedom at Midnight (Tryst with Destiny) Speech to the Assembly of India". www.americanrhetoric.com. Retrieved 2020-11-01.
  19. ^ Balasubramanian, Aditya (26 April 2021). "Contesting 'Permit-and-Licence Raj ': Economic Conservatism and the Idea of Democracy in 1950s India". Past & Present. 251 (1): 189–227. doi:10.1093/pastj/gtaa013.
  20. ^ Katiyar, Prerna. "ET@50: Entrepreneurship no longer an aberration". The Economic Times. Retrieved 2020-11-01.
  21. ^ Bhawan, Yojana (October 19, 2019). "Government of India Planning Commission: History". Retrieved November 1, 2020.
  22. ^ Krishnan, Revathi (2020-07-09). "All about the First Five-Year Plan that was presented by Nehru nearly 70 years ago today". ThePrint. Retrieved 2020-11-02.
  23. ^ a b TYSON, GEOFFREY (1958). "The Second Indian Five Year Plan". Journal of the Royal Society of Arts. 106 (5024): 609–621. JSTOR 41368676.
  24. ^ L. N. Dash (2000). World bank and economic development of India. APH Publishing. p. 375. ISBN 81-7648-121-1.
  25. ^ "THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951" (PDF). New Delhi: Parliament of India. October 31, 1951.
  26. ^ Sivadasan, Jagadeesh (2006). (PDF). The B.E. Journal of Economic Analysis & Policy. 9. Archived from the original (PDF) on 2020-11-24. Retrieved 2020-09-28 – via University of Michigan.
  27. ^ (PDF). Archived from the original (PDF) on 28 May 2015. Retrieved 29 March 2013.{{cite web}}: CS1 maint: archived copy as title (link)
  28. ^ Torri, Michelguglielmo (1 December 1975). "Factional Politics and Economic Policy: The Case of India's Bank Nationalization". Asian Survey. 15 (12): 1077–1096. doi:10.2307/2643585. JSTOR 2643585.
  29. ^ Central Office, Reserve Bank of India. (2005). Chapter 2: Banking Expands. In The Reserve Bank of India, 1967-1981 (pp. 54–59).
  30. ^ Ketkar, Kusum W.; Ketkar, Suhas L. (1992). "Bank Nationalization, Financial Savings, and Economic Development: A Case Study of India". The Journal of Developing Areas. 27 (1): 69–84. JSTOR 4192167.
  31. ^ PATNAIK, ILA; SHAH, AJAY (2012). "POLICY CORNER: Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy?". IMF Economic Review. 60 (3): 439–464. doi:10.1057/imfer.2012.16. JSTOR 23279077. S2CID 17865492.
  32. ^ Panagariya, Arvind (2004). "India's Trade Reform". In Bery, Suman; Bosworth, Barry P.; Panagariya, Arvind (eds.). The India Policy Forum 2004: Volume 1. Brookings Institution Press. pp. 1–68. ISBN 978-0-8157-9762-3.
  33. ^ Mukherji, Rahul (2000). "India's Aborted Liberalization-1966". Pacific Affairs. 73 (3): 375–392. doi:10.2307/2672025. JSTOR 2672025.
  34. ^ Callen, Timothy; Cashin, Paul (January 2002). "Capital controls, capital flows and external crises: evidence from India". The Journal of International Trade & Economic Development. 11 (1): 77–98. doi:10.1080/09638190110093172. S2CID 154055604.
  35. ^ Kapparashetty, Sri B. V. (2018-04-01). "Impact of MRTP Act for Development of Nation- A Study". Rochester, NY. SSRN 3690822. {{cite journal}}: Cite journal requires |journal= (help)
  36. ^ Jordan, Joshua (2022-01-24). "From the Permit Raj to the Billionaire Raj: Corruption, Liberalization, and Income Inequality in India". GAB | The Global Anticorruption Blog. Retrieved 2023-01-06.
  37. ^ Address by Mr. Somak Ghosh 2006-05-19 at the Wayback Machine
  38. ^ Das, Gurcharan (2006). "The India Model". Foreign Affairs. 85 (4): 2–16. doi:10.2307/20032037. JSTOR 20032037.
  39. ^ "25 years of liberalisation: A glimpse of India's growth in 14 charts". 7 July 2016.
  40. ^ a b (PDF). Astaire Research. Archived from the original (PDF) on 24 August 2009.
  41. ^ Choudhury, Chandrahas (29 August 2014). "India's central planning gets its eulogy". livemint.com/. Retrieved 11 April 2018.
  42. ^ . Archived from the original on 2015-08-07. Retrieved 2014-08-31.
  43. ^ "Govt notifies FDI cap relaxation in Railways". 28 August 2014.
  44. ^ a b "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India" (PDF).
  45. ^ Colmer, Jonathan. "Urbanisation, Growth, and Development: Evidence from India" (PDF).

licence, article, lead, section, need, rewritten, please, help, improve, lead, read, lead, layout, guide, august, 2021, learn, when, remove, this, template, message, permit, rāj, meaning, rule, hindi, pejorative, system, strict, government, control, regulation. The article s lead section may need to be rewritten Please help improve the lead and read the lead layout guide August 2021 Learn how and when to remove this template message The Licence Raj or Permit Raj raj meaning rule in Hindi 1 is a pejorative for the system of strict government control and regulation of the Indian economy that was in place from the 1950s to the early 1990s Under this system businesses in India were required to obtain licences from the government in order to operate and these licences were often difficult to obtain 2 3 4 The Licence Raj was intended to protect Indian industry promote self reliance and ensure regional equality 5 Up to 80 government agencies had to be satisfied before private companies could produce something and if granted the government would regulate production 6 The term Licence Raj is a play on the British Raj which refers to the period of British rule in India It was coined by Indian independence activist and statesman Chakravarti Rajagopalachari who was strongly opposed to the system of strict government control and regulation of the economy that it represented Rajagopalachari believed that the Licence Raj had the potential for political corruption and economic stagnation and founded the Swatantra Party to oppose these practices 7 Reforms started in 1991 have significantly reduced regulation However Indian labor laws continue to protect workers in the formal sector from being laid off by employers and place significant restrictions on the ability of businesses to reduce their workforce without incurring significant costs and burdens This is viewed by some as a barrier to economic growth and development as it may create a disincentive for businesses to hire workers and can make it difficult for them to respond to changing market conditions or economic challenges 8 It is also to be noted that majority of Indian workers are employed in the informal sector where much of the labour protections do not apply 9 10 Contents 1 History 2 Characteristics 3 Fall of the Licence Raj 4 Consequences of the fall of Licence Raj 5 See also 6 ReferencesHistory editSee also Nehruism Following the Russian Revolution socialist thinkers in India began drawing parallels between the pre revolution Russian proletariat and the Indian masses under colonial rule seeing socialism as a way to empower poor Indian farmers 11 Following Indian independence these socialist factions most importantly Jawaharlal Nehru s conception of democratic socialism influenced the policies of the Licence Raj 12 Nehru studied at Trinity College Cambridge and was exposed to socialist ideas during his time there He also visited the Soviet Union in 1927 and this experience may have further influenced his views on socialism However Nehru s own political views and the policies he implemented as Prime Minister were often more pragmatic and centrist than strictly socialist He believed in the need for a strong centralized government and a planned economy but he also recognized the importance of private enterprise and the market in driving economic growth and development 13 Nehru also believed that protecting domestic industries would help to promote industrialization and economic development in India and he implemented a number of protectionist policies during his time in office 14 He saw such government intervention as a way to modernize the Indian economy which had been left impoverished by decades of colonial rule 15 However Nehru did not seek to eliminate the private sector entirely as was the case in the Soviet Union Rather he pursued a policy of creating a mixed economy in India with strategic industries under state control and public sector corporations guiding investment while also allowing for a significant role for the private sector and market forces 16 The economic centralization and controls required for the war effort during World War II helped create the bureaucratic and manufacturing infrastructure necessary to institute Nehru s plans 17 and so following independence and his election as prime minister he had the opportunity to put his ideas into action In his speech to the Constituent Assembly of India he declared The service of India means the service of the millions who suffer It means the ending of poverty and ignorance and disease and inequality of opportunity 18 By the late 1950s the Swatantra Party the country s first market friendly political party had formed in opposition to Nehru s policies This party which was made up of ex landlords businessmen and rich peasants argued that Nehru s centralized economic policies were incompatible with democracy In a memorandum to party officials they claimed that the best guarantee of speed in progress is a maximum of individual freedom and a minimum of governmental interference They argued that Nehru s policies were stifling individual initiative and freedom and slowing economic progress 19 Chakravarti Rajagopalachari a founder of the Swatantra Party coined the term Permit Licence Raj to encapsulate the party s frustrations with Nehru s policies writing in his right wing magazine Swarajya 20 I want the corruptions of the Permit Licence Raj to go I want real equal opportunities for all and no private monopolies created by the Permit Licence Raj Characteristics editA key characteristic of the Licence Raj was a Planning Commission that centrally administered the economy of the country Like a command economy India had Five Year Plans on the lines of the five year plans in the Soviet Union However unlike Soviet Union private sector also played a significant role The Planning Commission was set up in 1950 to survey the available resources in the country and formulate plans to raise the standard of living 21 Planning Commission enacted the First Five Year Plan in 1951 aimed at developing the agricultural sector amid severe food shortages and an influx of refugees from the Partition and that plan led to a 4 increase in GDP higher than the projected 2 22 Nehru s government hoped to build on the success of the First Five Year Plan with their more ambitious Second Five Year Plan aimed at continuing agricultural and infrastructure investment while developing heavy industry and increasing employment 23 But this plan failed to reach its goal of 5 growth 24 and the heavy spending in the plan depleted the country s foreign currency reserves as the country did not have sufficient domestic resources to fund these projects and therefore had to rely on imported capital and technology 23 Another main characteristic of the Licence Raj was heavy regulation on industry Legislation to regulate industry started with the Industrial Development Regulation Act of 1951 which laid out licensing restrictions on industries it designated as Schedule I which included industrial machinery telecommunications and chemical manufacturing 25 Next the Industrial Policy Resolution of 1956 extended these restrictions by designating certain industries known as Schedule A to be exclusively under state control and certain other industries under Schedule B to be majority state owned 26 Industries in Schedule A included defense production metallurgy mining and transportation 27 During the 1960s the Indian banking sector came under criticism for being controlled by a few big industrialists in large cities and thus failing to meet the needs of rural Indians and small scale industry In response the government of Indira Gandhi began pursuing social control of banking institutions with Deputy Prime Minister Morarji Desai spearheading the Banking Laws Amendment Bill in 1968 to regulate the commercial banks leadership The bill stipulated that at least 51 of the directors should not be directly connected monopolies and big business that industrialist chairmen had to be replaced by professional bankers and that banks could not form relationships with companies tied to their own directors Additionally Desai forged the National Credit Council NCC to regulate credit allocations in order to bring more credit to rural areas and small industry 28 29 However many of these changes were rendered moot when Indira Gandhi decided to fully nationalize 14 major banks in 1969 with 6 additional banks coming under state control in 1980 30 Indian capital controls started as wartime restrictions imposed by the British on cross border transactions during World War II eventually growing into a complex framework of restrictions on the current account and capital account 31 After independence the Indian government introduced restrictions on the flow of foreign exchange reserves and following a balance of payments crisis from 1956 to 1957 the government became more concerned with carefully allocating foreign exchange between different sectors of the economy 32 After a failed attempt at liberalization in 1966 the Foreign Investments Board was established in 1968 to scrutinize companies investing in India with more than 40 foreign equity participation Foreign investment that did not involve technology transfers was severely restricted and foreign collaboration with local companies was conditioned on export quotas 33 This tight control over foreign investment became a core part of a broader policy of import substitution industrialisation the belief that countries like India needed to rely on internal markets for development not international trade To achieve this goal the Indian government erected strict import restrictions and a complex system of tariffs that featured high rates which varied by industry 34 One consequence of the Licence Raj was that it benefited large corporations at the expense of smaller businesses Because large corporations were often better able to navigate the complex bureaucracy of the Licence Raj and secure the necessary licences they were able to dominate many sectors of the economy This made it difficult for small businesses to compete and contributed to a concentration of economic power in the hands of a few large corporations 35 Another criticism of the licensing system in India was that it was prone to corruption as businesses and individuals had to navigate a complex bureaucracy in order to obtain licences and permissions and may have had to pay bribes or engage in other forms of corruption in order to obtain the necessary approvals This corruption was fueled by a broader environment of corruption in India which was characterized by a lack of transparency and accountability in the government a weak legal system and a culture of corruption that had been allowed to persist for many years 36 Fall of the Licence Raj editSee also Economic liberalisation in India The Licence Raj system was in place for four decades Many members of the Congress including Prime Minister P V Narasimha Rao and Finance Minister Manmohan Singh were strong supporters of liberalisation and played key roles in implementing these changes In 1991 Prime Minister Narasimha Rao who was also the Minister of Industries initiated a policy of liberalisation in India This policy aimed to reduce government intervention in the economy and promote market based solutions to economic problems 37 The Licence Raj was believed by some to be hindering economic growth and preventing the Indian economy from reaching its full potential This belief was based on the idea that the government s heavy intervention in the market was stifling economic activity and hampering the ability of the economy to grow and develop 38 Liberalisation resulted in substantial growth in the Indian economy which continues today 39 The Licence Raj is considered to have been significantly reduced in 1991 when India had only two weeks of foreign reserves left In return for an IMF bailout India transferred gold bullion to London as collateral devalued the rupee and accepted economic reforms 40 The federal government with Manmohan Singh as finance minister reduced licensing regulations lowered tariffs duties and taxes and opened up to international trade and investment 40 The reform policies introduced after 1991 removed many economic restrictions Industrial licensing was abolished for almost all product categories except for alcohol tobacco hazardous chemicals industrial explosives electronics aerospace and pharmaceuticals Arguing that the Planning Commission had outlived its utility the Modi government disbanded it in 2014 41 On 6 August 2014 the Indian Parliament raised the limit on foreign direct investment in the defence sector to 49 42 and removed the limit for certain classes of infrastructure projects high speed railways including construction operation and maintenance of high speed train projects 43 suburban corridor projects through PPP dedicated freight lines rolling stock including train sets locomotives manufacturing and maintenance facilities railway electrification and signalling systems freight and passenger terminals infrastructure in industrial parks pertaining to railway lines and mass rapid transport systems Consequences of the fall of Licence Raj editSee also Economic liberalisation in India Criticisms and 1991 Indian economic crisis Aftermath The fall of the Licence Raj and the implementation of economic liberalization policies have contributed to increased regional inequality in India Some experts argue that these policies benefited certain regions of the country such as the major cities and industrial centers at the expense of others leading to a widening gap between rural and urban areas 44 It has contributed to mass migration from rural areas to cities as people sought to take advantage of new economic opportunities and improved living standards in urban areas This mass migration can place a burden on cities as they may struggle to accommodate the influx of new residents and provide them with adequate housing education and other basic services Slums in India are a common sight in many cities and are often found in areas that are vulnerable to flooding or other natural disasters They are often home to marginalized communities including migrant workers informal sector workers and other groups that may be excluded from mainstream society 45 The scaling back of public sector enterprises may also have led to a reduction in the ability of the government to direct investment and resources towards priority areas and to protect the interests of workers minorities and other stakeholders 44 See also editEconomic history of India Mafia Raj Planned economy Socialism in India Swadeshi movementReferences edit Oxford English Dictionary 2nd edition 1989 from Skr raj to reign rule cognate with L rex reg is OIr ri rig king see RICH Mathew George Eby 2010 India s Innovation Blueprint How the Largest Democracy is Becoming an innovation Super Power Oxford Chandos Publishing pp 13 ff ISBN 978 1 78063 224 7 OCLC 867050270 Nehru S ed 2019 Economic Reforms in India Achievements and Challenges Chennai MJP Publisher p 271 ISBN 978 81 8094 251 8 OCLC 913733544 Street Hawking Promise Jobs in Future Archived March 29 2008 at the Wayback Machine The Times of India 2001 11 25 Aghion Philippe Burgess Robin Redding Stephen Zilibotti F 2005 The Unequal Effects of Liberalization Evidence fromDismantling the License Raj in India STICERD Development Economics Papers from 2008 This Series Has Been Superseded by Economic Organisation and Public Policy Discussion Papers India the economy BBC 1998 The Swatantra Party and Indian Conservatism Cambridge University Press 2007 p 131 ISBN 978 0 521 04980 1 Impact of labour regulations on Indian manufacturing sector www ideasforindia in Retrieved 2022 03 20 India s Unorganised Sector Is Being Engulfed Further Marginalised The Wire Retrieved 2023 04 23 Informal economy in South Asia ILO in India www ilo org Retrieved 2023 04 23 Saxena Chandni 2011 Emergence of Socialism in Early 20 Proceedings of the Indian History Congress 72 1515 1516 JSTOR 44145782 Kaushik P D 1985 Economic Creed of the Post Independence Congress The Nehru Indira Phase The Indian Journal of Political Science 46 4 474 486 JSTOR 41855200 Sharma Brij Kishore 2012 Jawaharlal Nehru s Model of Development Proceedings of the Indian History Congress 73 1292 1302 JSTOR 44156330 Singh Kuldip Nehru s Model of Economic Growth and Globalisation of the Indian Economy PDF Ahanger Javid Ahmad 2018 Revisiting Nehru The politics of nonalignment and secularism World Affairs The Journal of International Issues 22 2 24 33 JSTOR 48520062 Thakur Ramesh January 1993 Restoring India s economic health Third World Quarterly 14 1 137 157 doi 10 1080 01436599308420317 JSTOR 3992587 Kamtekar Indivar 2016 The Wartime Paternity of India s Licence Permit Raj Proceedings of the Indian History Congress 77 403 409 JSTOR 26552665 Jawaharlal Nehru Freedom at Midnight Tryst with Destiny Speech to the Assembly of India www americanrhetoric com Retrieved 2020 11 01 Balasubramanian Aditya 26 April 2021 Contesting Permit and Licence Raj Economic Conservatism and the Idea of Democracy in 1950s India Past amp Present 251 1 189 227 doi 10 1093 pastj gtaa013 Katiyar Prerna ET 50 Entrepreneurship no longer an aberration The Economic Times Retrieved 2020 11 01 Bhawan Yojana October 19 2019 Government of India Planning Commission History Retrieved November 1 2020 Krishnan Revathi 2020 07 09 All about the First Five Year Plan that was presented by Nehru nearly 70 years ago today ThePrint Retrieved 2020 11 02 a b TYSON GEOFFREY 1958 The Second Indian Five Year Plan Journal of the Royal Society of Arts 106 5024 609 621 JSTOR 41368676 L N Dash 2000 World bank and economic development of India APH Publishing p 375 ISBN 81 7648 121 1 THE INDUSTRIES DEVELOPMENT AND REGULATION ACT 1951 PDF New Delhi Parliament of India October 31 1951 Sivadasan Jagadeesh 2006 Regulatory Regime in India 1947 to 1998 PDF The B E Journal of Economic Analysis amp Policy 9 Archived from the original PDF on 2020 11 24 Retrieved 2020 09 28 via University of Michigan Archived copy PDF Archived from the original PDF on 28 May 2015 Retrieved 29 March 2013 a href Template Cite web html title Template Cite web cite web a CS1 maint archived copy as title link Torri Michelguglielmo 1 December 1975 Factional Politics and Economic Policy The Case of India s Bank Nationalization Asian Survey 15 12 1077 1096 doi 10 2307 2643585 JSTOR 2643585 Central Office Reserve Bank of India 2005 Chapter 2 Banking Expands In The Reserve Bank of India 1967 1981 pp 54 59 Ketkar Kusum W Ketkar Suhas L 1992 Bank Nationalization Financial Savings and Economic Development A Case Study of India The Journal of Developing Areas 27 1 69 84 JSTOR 4192167 PATNAIK ILA SHAH AJAY 2012 POLICY CORNER Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy IMF Economic Review 60 3 439 464 doi 10 1057 imfer 2012 16 JSTOR 23279077 S2CID 17865492 Panagariya Arvind 2004 India s Trade Reform In Bery Suman Bosworth Barry P Panagariya Arvind eds The India Policy Forum 2004 Volume 1 Brookings Institution Press pp 1 68 ISBN 978 0 8157 9762 3 Mukherji Rahul 2000 India s Aborted Liberalization 1966 Pacific Affairs 73 3 375 392 doi 10 2307 2672025 JSTOR 2672025 Callen Timothy Cashin Paul January 2002 Capital controls capital flows and external crises evidence from India The Journal of International Trade amp Economic Development 11 1 77 98 doi 10 1080 09638190110093172 S2CID 154055604 Kapparashetty Sri B V 2018 04 01 Impact of MRTP Act for Development of Nation A Study Rochester NY SSRN 3690822 a href Template Cite journal html title Template Cite journal cite journal a Cite journal requires journal help Jordan Joshua 2022 01 24 From the Permit Raj to the Billionaire Raj Corruption Liberalization and Income Inequality in India GAB The Global Anticorruption Blog Retrieved 2023 01 06 Address by Mr Somak Ghosh Archived 2006 05 19 at the Wayback Machine Das Gurcharan 2006 The India Model Foreign Affairs 85 4 2 16 doi 10 2307 20032037 JSTOR 20032037 25 years of liberalisation A glimpse of India s growth in 14 charts 7 July 2016 a b India Report PDF Astaire Research Archived from the original PDF on 24 August 2009 Choudhury Chandrahas 29 August 2014 India s central planning gets its eulogy livemint com Retrieved 11 April 2018 Business News Today Read Latest Business news India Business News Live Share Market amp Economy News Archived from the original on 2015 08 07 Retrieved 2014 08 31 Govt notifies FDI cap relaxation in Railways 28 August 2014 a b The Unequal Effects of Liberalization Evidence from Dismantling the License Raj in India PDF Colmer Jonathan Urbanisation Growth and Development Evidence from India PDF Retrieved from https en wikipedia org w index php title Licence Raj amp oldid 1204535288, wikipedia, wiki, book, books, library,

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