The A grade given to the finance minister for stimulating industrial growth can becredited to a sin-gle move: the banishment of the licence raj.
Before reforms were initiated, practically every notable industry waslicenced. Today, industrial licensing does not extend beyond 16 industries, apart fromfive others reserved for the public sector. Says economist Jairam Ramesh: "TheGovernment has managed to induce an investment boom, especially in sectors likeelectronics, automobiles, textiles and capital goods. Mind you, these sectors were notexactly high growth industries in the ’80s."
Industrial growth, stagnant in 1991-92 due to the pre-reform hangover,grew by only 2.3 per cent in the next fiscal year because the Government had to clamp downon money supply, which, combined with a declining savings rate, reduced the availabilityof money for investment. Industry was, however, back on track in 1993-94. In spite of thehuge credit squeeze in the last six months, growth in 1995-96 should be close to thedouble-digit mark, if not more. This ind-ustrial revival was spearheaded by the capitalgoods sector, which witnessed a 25 per cent growth last year, apart from consumer goods,which have been growing at over 8 per cent. The combined annual rate of industrial growthduring the reform period is expected to be 5.5 per cent. Says Shashanka Bhide, chiefeconomist, National Council of Applied Economic Research (NCAER): "Reduction inimport tariffs provided more competition and spurred growth."
The sum total of loans disbursed and capital raised in the primary market by industrywent up from Rs 5,757 crore in 1991-92 to Rs 22,000 crore in 1993-94. "In the lastfour years, India has attracted over Rs 40,000 crore ($12 billion) in equity fromabroad," says Rajive Kaul, president, Confederation of Indian Industry (CII). Anddespite industry’s complaints of a credit squeeze over the last year, the Governmentpoints out that disbursement of non-food credit has risen by 22 per cent this year. Whichindicates that investment demands by industry have been growing faster than the steadyclip at which credit availability has increased.
However, as Rolf Luders, former finance minister of Chile and architect of one of theworld’s most successful privatisation programmes, notes: "I wouldn’t termselling 5 per cent stake in a public enterprise as privatisation." Until publicsector monoliths are truly privatised and their productivity increased, industrial reformwill not even have reached the half-way stage.
