Notes on the Criticism/Short Comings of the New Economic Policy

The new economic reforms are not free from criticism. These reforms have been criticized on the following grounds:

(i) Budgetary deficit could not be brought down.

(ii) Unemployment has increased.

(iii) Real income of the poor class has declined.

(iv) Social assistance to the poor class has been reduced.

(v) Rate of domestic savings and investment has fallen.

(vi) Rate of capital formation in agricultural sector has declined.

(vii) Consumer goods industries have been given more importance than basic and capital goods industries.

(viii) Import substitutions have been given less importance.

(ix) Dependence on foreign technology is on the rise.

(x) More importance is being attached to stock market transactions. To check hawala transactions in foreign exchange, import of gold and silver has been permitted.

(xi) Liberal concessions given to foreign investors may prove harmful to the interest of the country in the long run.

(xii) Liberal policy has been adopted for the import of consumer goods.

(xiii) Fiscal deficit could not be reduced according to the set target.

In the end, let us close the discussion with the views of Prof. P.B. Brahmanand who has warned that a premature shift to reform before the readjustment process was completed could plunge the Indian Economy into a “whirlpool of severe economic crisis”.

Thus the Government should take proper care to complete the readjustment process before introducing further economic reforms of policy measures.

He further stated that unless the savings ratio went up significantly and the real export growth accelerated, there were chances of the country’s economy going the Latin American way with soaring inflation rates and growing social injustice.