Licence Raj
Licence Raj refers to the elaborate licences, regulations and the accompanying
red tape that were required to set up business in
India between
1947-
1990. The Licence raj was a result of India's decision to have a
planned economy, where all aspects of the economy are controlled by the state and licenses were given to a select few. The term was coined by Indian
statesman C. Rajagopalachari, who firmly opposed it for its potential for
political corruption and economic stagnation.
The license raj is considered to have been dismantled in 1990, when a
macroeconomic crisis forced India to usher in economic reforms, including dismantling the licensing regulations in order to attract
Foreign Direct Investment and private businesses. Despite the ongoing reforms, India still ranks in the bottom quartile of
developing nations in terms of the ease of doing business; and, compared to
China, the average time taken to secure the clearances for a
startup or to invoke
bankruptcy is much greater.
The architect of the system of license-raj was
Jawaharlal Nehru, India's first
Prime Minister. Inspired by the economy in the
Soviet Union, he was determined to implement the model in India. Nehru was also an admirer of
Stalin, and initiated steps for converting India into a
socialistic pattern of society. This sovereign aspiration of the people of India was also articulated in the
Constitution of India, the
Preamble of which declares the aspiration of
the people of India to solemnly resolve to constitute India into a Sovereign Socialist Secular Democratic Republic.
The key characteristic of the license raj is a
Planning Commission, that centrally administers the economy of the country. As a
command economy, India has
five-year plans on the lines of the
Five Year Plans in the former Soviet Union.
The economic liberalisation of
1991, initiated by the
Congress Government under
P.V.Narasimha Rao, has cut down much of the
red tape, deregulated, and opened up most sectors even to foreign investors in most cases.
However, manufacturing organisations still face a good amount of red tape (though not as unsurmountable as it was earlier) in procurement of land, importing equipment, etc.
Recent reversal to this liberalisation is a draft bill seeking to regulate broadcasting media
concerns by broadcasters.
