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.
[11] Following Indian independence these socialist factions, most importantly Jawaharlal Nehru's conception of democratic socialism, influenced the policies of the Licence Raj.
He believed in the need for a strong, centralized government and a planned economy, but he also recognized the importance of private enterprise and the market in driving economic growth and development.
In a memorandum to party officials, they claimed that "the best guarantee of speed in progress is a maximum of individual freedom and a minimum of governmental interference."
I want real, equal opportunities for all and no private monopolies created by the Permit/Licence Raj.A key characteristic of the Licence Raj was a Planning Commission that centrally administered the economy of the country.
To achieve this goal, the Indian government erected strict import restrictions and a complex system of tariffs that featured high rates which varied by industry.
Narasimha Rao and Finance Minister Manmohan Singh, were strong supporters of liberalisation and played key roles in implementing these changes.
This belief was based on the idea that the government's heavy intervention in the market was stifling economic activity and hampering the ability of the economy to grow and develop.
In return for an IMF bailout, India transferred gold bullion to London as collateral, devalued the rupee and accepted economic reforms.
[40] The federal government, with Manmohan Singh as finance minister, reduced licensing regulations; lowered tariffs, duties and taxes and opened up to international trade and investment.
[41] On 6 August 2014, the Indian Parliament raised the limit on foreign direct investment in the defence sector to 49%[42] and removed the limit for certain classes of infrastructure projects: high speed railways, including construction, operation and maintenance of high-speed train projects;[43] suburban corridor projects through PPP; dedicated freight lines; rolling stock including train sets; locomotives manufacturing and maintenance facilities; railway electrification and signalling systems; freight and passenger terminals; infrastructure in industrial parks pertaining to railway lines and mass rapid transport systems.
Some experts argue that these policies benefited certain regions of the country, such as the major cities and industrial centers, at the expense of others, leading to a widening gap between rural and urban areas.
This mass migration can place a burden on cities, as they may struggle to accommodate the influx of new residents and provide them with adequate housing, education, and other basic services.
[45] The scaling back of public sector enterprises may also have led to a reduction in the ability of the government to direct investment and resources towards priority areas and to protect the interests of workers, minorities and other stakeholders.