Barriers to entry into individual industries limited the scope for competition.
Indiscriminate and indefinite protection of domestic industries resulted in the breeding of inefficiency.
The adverse impact of protecting small-scale industries and promoting regional dispersal of growth on the choice of the optimal scale of production.
Administrative hurdles nurtured red-tapism, nepotism, and corruption.
All these resulted in dampening entrepreneurship and there was little or no incentive for up gradation of technology.
The establishment of a large number of major industrial projects in less developed regions has not had any significant impact on the industrial or overall economic growth of these regions (Ramadhyani, 1984). Thus the country didn't gain much in terms of growth.
Policy after 1991 economic reforms 1991年经济改革后的政策
Year 1991 is major turning point in the Indian economic history as the country witnessed sweeping reforms in that year. Gulf war and the breakdown of Soviet Union in the 1990s had a major impact on the economic happenings of the country. These developments coupled with our restrictive economic practices intensified the economic crisis. There was severe balance of payment crisis and inflationary surge which made our policy makers to rethink on the development strategy being pursued since its independence. Neo liberal economists blamed excessive control of private investment by the government, inward looking industrialization strategy, over protection of public sector industries and predominance of public sector in county's economic activities for the economic crisis of 1991(Singh and Ghosh, 1998). The present reforms were based on clear recognition of the need to integrate the domestic economy with the global economy through trade, investment and technology.
The area where radical changes were brought in during the reforms was in the area of industrial licensing. Earlier it was essential to obtain license for new investment as well as for the expansion of the existing capacity. Now licensing is required only to a small number of industries, most of which subject to environmental and pollution considerations. The controls over investment and expansion through Monopoly and Restrictive Trade Practices Act have also been removed. Some reforms were done in the tax structure too. It was decided to move towards a simpler system of direct taxation with moderate rates and fewer exemptions. In the area of public sector the government started the process of disinvestment with government retaining 51 percent equity and also management controls. Similar pro market reforms were undertaken in the areas of banking, insurance and exchange rate policy (Ahluwalia,2000).(责任编辑：BUG)