Evaluation of LPG policies means the evaluation of new industrial policy and the economic improvement of 1991.
- Increase in GDP growth rate : India’s GDP growth rate is increased. During 1990-91, India’s GDP growth rate was only 1.1%, but after the 1991 reforms due to the LPG policy, India’s GDP growth rate has increased year on year, and in 2015, it was recorded at 7.26%, and in 2015-16, it was estimated to be 7.5% by the IMF. Due of the abolition of Industrial licensing, privatization, advanced foreign technology and reduction of taxes, India’s GDP has increased after 1991 reforms.
- India is now recognised as an emerging power : India has already marked its presence as one of the fastest growing economies of the world. It is ranked among the top 3 attractive destinations for inbound investments. Since 1991, the regulatory environment in terms of foreign investment has been consistently eased to make it investor-friendly. India has also firmly established itself as a lucrative foreign investment destination.
- Increase in Per Capita Income : In 1991, India’s per capita Income was Rs. 11235, but in 2014-15, per capita income has reached to Rs. 85533. Per capita income has increased due to increase in employment and due to new economic policy of globalization and privatization, many job opportunities have been created so, people’s income has also increased.
- Unemployment rate has reduced : In 1991, unemployment rate was 4.3%, but after India adopted the new LPG policy, more employment has been generated. Because of globalization, many new foreign companies came in India, and due to liberalization, many new entrepreneurs have started new companies because of abolition of industrial licensing/Permit Raj, so, employment is generated, and due to which India’s unemployment rate has reduced.
- Privatization has resulted into the reduction of the government’s financial and administrative burden.
- Foreign capital investment has increased as a result of the new industrial policy. Both, FDI and FII have increased.
- Check on Inflation- after being impacted by the policies, inflation has gradually reduced. Till 2007-08, it was 4.5% which is not much issue of concern.
- Foreign technology has received encouragement, which has enable Indian industrialists to establish their identity in the global market.
Negative impacts are :
i. Low Growth of Agriculture Sector : Agriculture has been and still remains the backbone of the Indian economy. It plays a vital role not only in providing food and nutrition to the people, but also in the supply of raw material to industries and items of exports. In 1991, agriculture provided employment to 72 per cent of the population and contributed 29.02 per cent to the Gross Domestic Product. However, in 2014, the share of agriculture in the GDP went down drastically to 17.9 per cent. This has resulted in lowering the per capita income of the farmers and increasing rural indebtedness.
ii. Threat from foreign competition : Due to opening up of the Indian economy to foreign competition through liberalization and FDI policy, more MNCs have been attracted towards India after 1991 reforms and they are competing with local businesses and companies. Since, these MNCs have massive financial capacity and advanced foreign technology, so, they have extremely greater production capacity and huge money for promotion and other research activities, and therefore they are easily defeating our Indian domestic companies.
iii. Adverse impact on Environment : Globalization has also contributed to the destruction of the environment through pollution and clearing of vegetation cover. With the construction of companies, the emissions from manufacturing plants are causing environmental pollution which further affects the health of people.
iv. Increase in income disparity : Globalization leads to widening income gaps within the country. Globalization benefits only to those who have the skills and the technology in the country. The higher growth rate achieved by an economy can be at the expense of declining incomes of people who may be rendered redundant. Globalization has widened the gap between the rich and the poor, and has increased inequalities among people.
