The role of government in economy has been indeterminate since the very beginning. In India, economic development has been marked mainly in quantitative terms. Over the years, the role of the Indian Government has increased and diversified.
The New Economic Policy which pushed the Indian economy to level of globalisation and liberalisation provided a new economic system, where in the economic was opened for private sector and abolished the licensing system. Under the New Industrial Policy, the entrepreneurial role of government was redefined significantly. The redefined role of government included setting up environment for privatisation, Public Private Partnership (PPP), reduce budgetary burden on public and achieve sustainable growth.
The government has disinvested in areas where privatisation is seen to be more effective. Under the new policy, the government portfolio was changed and government off-loaded its investments from low technology industries (ones which are more labour intensive), areas of low productivity, with negligible social significance, areas where private sector is performing better and has developed expertise, inefficient and low productivity areas, small and non-strategic areas , like small scale industries. The areas restricted forpublic sector included high-end technology, strategic and essential infrastructure (transport and communication).
Sensitive sectors like defence have been also reserved for public sector. The government aimed at increased private participation through Public Private Partnership (PPP) and existing public undertakings were converted into joint ventures with private participation. Further, management of public enterprises were given more autonomy for taking decisions. Public sector management was allowed to raise funds from mutual fund, and other banking and non-banking financial companies to meet their fund requirement. The government also entered into MOU with public sector units to make them accountable, while being autonomous at the same time. Government encouraged business restructuring, technical restructuring, liberalisation, increased privatisation and foreign participation to increase overall efficiency and productivity.
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