(a) What are the causes of industrial backwardness in India? Critically evaluate the role of the New Industrial Policy, announced…

(a) Industrial backwardness and a critical evaluation of NIP 1991

Industrial backwardness in pre-1991 India was rooted in the colonial legacy of deindustrialization, low gross domestic capital formation, chronic technology gaps, and acute logistical deficits. This was aggravated by regulatory failures under the License-Permit Raj, output curbs under the Monopolies and Restrictive Trade Practices (MRTP) Act 1969, rigid foreign exchange controls under FERA 1973, extensive Small Scale Industry (SSI) reservations that prevented economies of scale, and severe technical skill shortages.

The New Industrial Policy (NIP) of July 1991 sought to dismantle these constraints by abolishing industrial licensing for most sectors, removing MRTP asset thresholds, liberalizing Foreign Direct Investment (FDI) via automatic routes, diluting FERA (later replaced by FEMA in 1999), and shrinking the public sector's reserved domain through disinvestment.

Critical evaluation and verdict: NIP 1991 successfully dismantled state-enforced entry barriers, curbed rent-seeking, enhanced industrial efficiency, and spurred globally competitive capital- and knowledge-intensive sectors like automobiles and pharmaceuticals. However, on the metric of structural transformation, the policy fell short. Manufacturing’s share of GDP has remained virtually stagnant at 15–17%, producing a trajectory of "jobless growth". By liberalizing product markets while leaving factor markets (land, labour) unreformed and physical infrastructure deficient, NIP 1991 exposed domestic MSMEs to premature global competition without fostering the mass labour-intensive manufacturing base necessary to absorb rural surplus labour.

(b) Implications of the WTO Agreement on Agriculture (1995)

The WTO Agreement on Agriculture (AoA) introduced rules across three core pillars: market access (tariffication of non-tariff barriers), domestic support reduction (disciplining Aggregate Measurement of Support or AMS), and the phase-out of export subsidies (formalized at the Nairobi Ministerial, 2015).

For India, the implications are two-fold:

• Market Access and Vulnerability: Tariffication allowed India to expand exports in commodities like rice and marine products. However, high non-tariff barriers (sanitary and phytosanitary measures) in developed markets, combined with heavily subsidized Western farm imports under Green Box exemptions, continually threaten domestic smallholders.
• Domestic Policy Constraints: India’s Minimum Support Price (MSP) and Public Distribution System (PDS) operations face constraints under the 10% de minimis product-specific AMS ceiling, which relies on an outdated 1986–88 external reference price that ignores inflation. The Bali Ministerial (2013) secured a "Peace Clause" protecting public stockholding for food security from legal challenge, which the General Council extended in November 2014 until a permanent solution is agreed; India has invoked it for rice since 2020, and no permanent solution has yet been reached.
• Border measures and safeguards: India bound most farm tariffs at high ceiling rates, which preserved policy space, but it had to remove its balance-of-payments quantitative restrictions by 2001 after losing a WTO dispute with the US; developing countries' demand for a Special Safeguard Mechanism against import surges remains unmet.

(c) Rationale for a National Employment Policy and government initiatives

A National Employment Policy (NEP) is essential to harness India’s fleeting demographic window, address the structural stagnation where over 45% of the workforce remains in low-productivity agriculture, formalize the overwhelming 85%+ informal sector, mitigate technology- and AI-led labour displacement, and institutionalize international labour standards (ILO Convention C122).

To generate employment, the Government has implemented key multi-pronged interventions:

• Rural Safety Net: MGNREGA (now succeeded by the VB-G RAM G Act, 2025) provides guaranteed wage employment, mitigating seasonal distress.
• Skill Development: Skill India, anchored by the National Skills Qualifications Framework (NSQF), aims to bridge the industry-academia skill mismatch.
• Manufacturing and Enterprise: Make in India, Startup India, PM MUDRA Yojana, and Production Linked Incentive (PLI) schemes across 14 key sectors incentivize labour-absorbing domestic manufacturing.
• Employment-linked incentives: the Employment Linked Incentive scheme announced in Budget 2024-25 (launched as the PM Viksit Bharat Rozgar Yojana in 2025) subsidises first-time hiring and EPFO contributions, and the PM Internship Scheme places youth in top companies.
• Labour Reforms and Social Security: Rationalization of 29 central labour laws into four Labour Codes (in force since 21 November 2025) to improve ease of doing business while extending statutory minimum wages, and the e-Shram portal to provide targeted social security architecture for unorganized and gig economy workers.