Licence Raj

The Licence Raj or Permit Raj (rāj, meaning "rule" in Hindi)[1] is a pejorative for the system of strict government control and regulation of the Indian economy that was in place from the 1950s to the early 1990s. Under this system, businesses in India were required to obtain licences from the government in order to operate, and these licences were often difficult to obtain.[2][3][4]

The Licence Raj was intended to protect Indian industry, promote self-reliance and ensure regional equality.[5] Up to 80 government agencies had to be satisfied before private companies could produce something and, if granted, the government would regulate production.[6]

The term "Licence Raj" is a play on the "British Raj" which refers to the period of British rule in India. It was coined by Indian independence activist and statesman Chakravarti Rajagopalachari, who was strongly opposed to the system of strict government control and regulation of the economy that it represented. Rajagopalachari believed that the Licence Raj had the potential for political corruption and economic stagnation, and founded the Swatantra Party to oppose these practices.[7]

Reforms started in 1991 have significantly reduced regulation. However, Indian labor laws continue to protect workers in the formal sector from being laid off by employers and place significant restrictions on the ability of businesses to reduce their workforce without incurring significant costs and burdens. This is viewed by some as a barrier to economic growth and development as it may create a disincentive for businesses to hire workers and can make it difficult for them to respond to changing market conditions or economic challenges.[8] It is also to be noted that a majority of Indian workers are employed in the informal sector, where many of the labour protections do not apply.[9][10]

  1. ^ Oxford English Dictionary, 2nd edition, 1989: from Skr. rāj: to reign, rule; cognate with L. rēx, rēg-is, OIr. rī, rīg king (see RICH).
  2. ^ Mathew, George Eby (2010). India's Innovation Blueprint: How the Largest Democracy is Becoming an innovation Super Power. Oxford: Chandos Publishing. pp. 13 ff. ISBN 978-1-78063-224-7. OCLC 867050270.
  3. ^ Nehru, S., ed. (2019). Economic Reforms in India: Achievements and Challenges. Chennai: MJP Publisher. p. 271. ISBN 978-81-8094-251-8. OCLC 913733544.
  4. ^ Street Hawking Promise Jobs in Future Archived March 29, 2008, at the Wayback Machine, The Times of India, 2001-11-25
  5. ^ Aghion, Philippe; Burgess, Robin; Redding, Stephen; Zilibotti, F. (2005). "The Unequal Effects of Liberalization: Evidence fromDismantling the License Raj in India". STICERD - Development Economics Papers - from 2008 This Series Has Been Superseded by Economic Organisation and Public Policy Discussion Papers.
  6. ^ "India: the economy". BBC. 1998.
  7. ^ The Swatantra Party and Indian Conservatism. Cambridge University Press. 2007. p. 131. ISBN 978-0-521-04980-1.
  8. ^ "Impact of labour regulations on Indian manufacturing sector". www.ideasforindia.in. Retrieved 2022-03-20.
  9. ^ "India's Unorganised Sector Is Being Engulfed, Further Marginalised". The Wire. Retrieved 2023-04-23.
  10. ^ "Informal economy in South Asia (ILO in India)". www.ilo.org. Retrieved 2023-04-23.