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Day 33 – Q 3.Liberalisation as an economic reform hasn’t yet attained its complete shape in India. Do you agree with this assessment. Examine the areas that are still stifled by the inefficiency of the state.

3. Liberalisation as an economic reform hasn’t yet attained its complete shape in India. Do you agree with this assessment. Examine the areas that are still stifled by the inefficiency of the state.

आर्थिक सुधार के रूप में उदारीकरण ने अभी तक भारत में अपना पूरा आकार प्राप्त नहीं किया है। क्या आप इस मूल्यांकन से सहमत हैं। उन क्षेत्रों का मूल्यांकन करें जो अभी भी राज्य की अक्षमता से निर्धारित हैं।


Liberalization refers to the process of opening markets for easy in and out movement of goods. The notion of free market in its changed from under “Washington consensus” came to India as economic liberalization. As an economic reform it was initiated in India in 1991 to tackle the ‘Balance of Payment’ crisis and even after 27 years, it remains to take a final shape. 


Liberalization refers to the “Rolling back of state” from the economy. This however, doesn’t mean no regulations, but it is the responsible of the Government to act as an umpire in economic sphere. It was considered to be a panacea for most of the problems with respect to Indian economy. The following issues have restricted liberalization from taking a complete shape and achieve its full growth potential – 

Issues in Economic Reforms of India –

  • FDI restrictions in various sectors hinder investments.
  • FEMA which regulates foreign.
  • Government maintains strict control even today on import and export.
  • No full Capital Account convertibility.
  • Stringent labor and tax norms, which are not encouraging for even domestic industrialists.
  • Inefficient labor involvement leading to Disguised unemployment 
  • Complete Financial inclusion and income equality are distant dreams.
  • Low Job Generation, it has not kept pace with economic growth.
  • “Entry without Exit” – the exit problem stifles ease of doing business and closing down of loss ventures.
  • Competition from foreign firms has led to wearing out of certain local firms, e.g in case of e-commerce capturing markets of local shops
  • Issues in Executive – Red tapism, delay in decision making, issues of environmental clearances, corruption, crony capitalism
  • Issues in Legislature -lack of political will, lack of fiscal consolidation, Political populism.
  • Issues in Judiciary -lack of arbitration, huge judicial pendency, delay in justice

However, in spite of the above issues, Liberalization brought boom to many sectors like IT, Telecom sector, Airline services etc. by the following changes which act as the Positives of Liberalization-

  • It induced competition, provided good quality in less prize.
  • Services of sectors like telecom, airline drastically improved.
  • FDI now allowed in almost all sectors barring very few sectors.
  • Administered regime of Petroleum pricing is done away with.
  • Real Estate, Entertainment sector became affordable for common man.
  • India now has huge Forex Reserves
  • Expansion of Indian companies worldwide – like Airtel, Bajaj, Mahindra etc.

Inspite of this certain sectors still stifle and remain inefficient, mostly to the high levels of interference by the state – 

  • Railways – under the government over the years has experienced poor service delivery & reduced profit.
  • Public Sector banks –  various scams and the issue of Non Performing assets are having a huge toll on it.
  • Education and Health – It faces huge service delivery issues at the primary level mostly by those provided by the Government.
  • Fertilizers –Government regulates the import, export and allocation of farmers.
  • Nuclear sector – Very slow progress in establishment of new plants, huge delays
  • Defense production – Defense PSU’s are ineffective and slow in producing modern technology & equipments
  • Many Public sector Undertakings (PSUs)


Thus, Liberalization though opened up the Indian economy, it drastically evolved many sectors like IT and Telecom, helping India’s economy to grow widely. However, increased government interference in various sectors to maintain the socialistic principles of Indian governance along with the executive, legislative failures coupled with corruption, red tapism etc. had led to under performance of Indian economy and lead to stiffing of various sectors due to the inefficiency of the state.


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