What Has Changed In The 1990s?

Industrial licensing had three major effects: it prevented emergence of excess capacity, it slowed down the emergence of competition, and it gave companies ample notice of coming competition. In spite of industrial licensing, excess capacity did arise sometimes: plan demand projections proved overambitious, or companies built in capacity beyond their licences, or competition came from uncontrolled small industry. But such imbalances were limited and temporary. For industrial licensing was buttressed by import licensing of capital goods and inputs and rationing of funds from the government financial institutions. So competition was kept more or less orderly. Further, it took anything between two and seven years to get a licence; so competition took that long to emerge. Meanwhile, the application for an industrial licence gave other companies ample notice of emerging competition, and they could take retaliatory measures: they could themselves get new licences and technology, or they could try and block the

licence application. Now that industrial licensing is gone, companies can no longer obstruct or delay emerging competition; their only defence against it is to get in first. This is what created the hunger for growth in 1992-96