How did licensing policy under the planning era affect the emergence of large industrial conglomerates?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. It allowed firms to block competitors by hoarding licenses.
Impact of Licensing on Industrial Conglomerates
During India's planning era (the "License Raj"), the industrial licensing policy intended to prevent the concentration of wealth and regulate production. However, it inadvertently favored large industrial houses.
Established conglomerates often exploited the system by applying for and obtaining multiple licenses without the intention of setting up new units. This practice, known as license hoarding, effectively "pre-empted" capacity, preventing potential competitors and smaller firms from entering the market. Instead of fostering competition, the policy enabled a few large players to maintain market dominance and restricted the overall growth of the private sector.