Topic: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.
Q5. How has economic liberalisation transformed the structure and competitiveness of Indian industry? Examine the factors that continue to constrain effective competition. Outline measures to deepen market-oriented reforms. (15 M)
Difficulty Level: Medium
Reference: TH
Why the question
Market concentration despite three decades of liberalisation, alongside India’s renewed focus on deregulation, manufacturing competitiveness and deeper integration with global value chains.
Key Demand of the question
The answer should explain how post-1991 liberalisation changed the structure and competitiveness of Indian industry, while identifying why effective competition remains constrained. It should finally outline market-oriented reforms needed to create more competitive and contestable markets.
Structure of the Answer:
Introduction
Begin with the 1991 New Industrial Policy as the transition from licensing and administrative controls towards a more open, private-sector-driven and competitive industrial economy.Body
- Transformation of Indian industry: Discuss how delicensing, private participation, trade and FDI liberalisation, technological upgrading and global integration altered the structure, efficiency and competitive orientation of Indian industry.
- Constraints on effective competition: Highlight continuing barriers such as regulatory complexity, unequal access to productive resources, market concentration, infrastructure gaps and limited integration of firms into global value chains.
- Deepening market-oriented reforms: Suggest second-generation deregulation, stronger competition governance, efficient factor markets, greater trade integration and a transparent, performance-oriented industrial policy that facilitates entry and scaling of productive firms.
Conclusion
Conclude that the next stage of reforms must move beyond simply liberalising markets towards making them contestable, predictable and opportunity-enhancing, enabling productivity-led and globally competitive industrialisation.
