Title: Difficulty in setting up business
1991 Reforms from a businessman’s viewpoint
Name: Jaswinder Kaur (daughter of a businessman)
I was doing my graduation when my father used to tell me about his struggles in setting up his furniture business.
Since you have asked me, I want to share a business man viewpoint to the license Raj.
Before 1991, firstly, there was the problem of rising unemployment and a low rate of growth. Secondly, we had a huge budget deficit, an adverse balance of payment situation and a continuously falling rupee. Lastly, License-Permit-Quota Raj was posing a problem which was abolished gradually.
Everything which to is be produced required license. Furniture components and some minor items were also licensed. Before 1991, our economy operated under a system of central planning where all aspects of the economy were controlled by the state and this is why every firm required a license to invest and to produce. This is called bureaucracy. This bureaucracy led to a lot of restrictions. For example, up to 80 agencies need to be agreed before a firm receives a license to produce. It took my father much costs and a lot of contacts to get a license.
This was not enough. Even after that, his firm was not free to produce any quantity they want. The quantity, price, even the sources of capital generation to be used were instructed by the state who granted the license.
From what I know from his talks, his firm was not allowed to open up or close a factory, to lay off workers etc. Businessmen were not allowed to trade with foreign companies, or invest in foreign bonds and shares. All doorways to expand the business were not allowed to be exercised.
The government in India took the attempt to close our economy to the outside world. The Indian rupee was inconvertible. Not only this, there were high tariffs on foreign goods that were imported to India during that time. Everything was under control of the government through the license they granted. So overall it was a hard time to set up a furniture firm. Actually, very hard.
But look at the firms these days, they are so free. The government is in fact giving subsidies to new entrepreneurs to help them grow.
They do not produce and invest under the regulations of govt. They are free to choose how much to sell, at what price, open up factories, hire as many workers they need and do whatever they think is good for their business. I think this is a big change. This is a great utility.