The New Economic Reforms (NER) initiated in India in 1991 marked a watershed moment, fundamentally altering the country's economic landscape from a state-controlled, inward-looking model to a more liberalized, market-oriented one. The statement accurately identifies two significant impacts of these reforms: the reduction in industrial licensing and public sector reservation, and the alleged infringement on the autonomy of existing Public Sector Undertakings (PSUs).

1. Reduction in Industrial Licensing and Public Sector Reservation:

Prior to 1991, India operated under the 'License Raj,' a system where almost every industrial activity, from setting up a new unit to expanding capacity or diversifying production, required a government license. This led to inefficiencies, corruption, and stifled competition and innovation.

• Abolition of Industrial Licensing: A cornerstone of the 1991 reforms was the near-total abolition of industrial licensing. Most industries were delicensed, allowing private players to enter and operate with greater freedom. Licensing was retained only for a few strategic, environmentally sensitive, or hazardous industries (e.g., defence, atomic energy, tobacco, alcohol).
• Opening Up Reserved Sectors: Historically, many core and strategic sectors (e.g., power, telecommunications, civil aviation, banking, insurance, heavy manufacturing) were exclusively reserved for the public sector. The NER progressively opened up most of these sectors to private participation, both domestic and foreign. This significantly reduced the exclusive domain of PSUs and introduced competition.

Impact: These changes led to a surge in private investment, increased competition, technological upgradation, and greater choice for consumers. It also forced PSUs to become more competitive and efficient in the face of new private rivals.

2. Infringement on the Autonomy of Existing Public Sector Undertakings (PSUs):

The second part of the statement argues that while these reforms aimed at efficiency, they also infringed upon the autonomy of existing PSUs. This assertion holds considerable truth, albeit with some nuances.

• Disinvestment and Privatization Pressure: A key component of NER was the policy of disinvestment in PSUs, involving the sale of government equity to private entities. While the stated objectives were to raise revenue, reduce fiscal deficit, and improve PSU efficiency, this often came with increased scrutiny and pressure from the government (as the majority owner) to perform. The threat of privatization or strategic sale could lead to short-term decision-making and a focus on immediate profitability over long-term strategic goals, sometimes overriding commercial decisions.
• Increased Government Interference: Despite the rhetoric of granting greater autonomy to PSUs, many continued to face significant government interference in their operational and strategic decisions. This interference often stemmed from political or social objectives (e.g., maintaining employment levels, operating loss-making units for public service, pricing policies) rather than purely commercial considerations. This limited their ability to respond flexibly to market changes.
• Performance Pressure and Accountability Mechanisms: With increased competition and the push for efficiency, PSUs were subjected to greater performance pressure. While positive for accountability, this often came with enhanced governmental oversight through mechanisms like Memoranda of Understanding (MoUs) with administrative ministries. While MoUs aimed to define performance targets and grant operational freedom, they could also become tools for micro-management if not implemented in spirit.
• Strategic Decisions and Board Appointments: Major strategic decisions, such as mergers, acquisitions, diversification, or large-scale investments, often required extensive government approval, leading to delays and hindering their ability to capitalize on market opportunities. Furthermore, the government continued to play a dominant role in appointing board members and top management, which could sometimes lead to political appointments rather than purely merit-based ones, impacting independent decision-making.
• Dual Objectives: PSUs often had to balance commercial viability with social obligations (e.g., regional development, employment generation, providing goods/services at subsidized rates). This dual objective inherently limited their commercial autonomy compared to purely private enterprises.

Nuance: It's important to note that the reforms also led to the classification of some high-performing PSUs as 'Navratnas' and 'Maharatnas,' granting them greater financial and operational autonomy. However, this was often a reward for strong performance rather than a universal outcome of the reforms, and even these entities still operated under significant governmental oversight.

Conclusion:

The New Economic Reforms of the past three decades undeniably dismantled the 'License Raj' and opened up previously reserved sectors, fundamentally transforming India's economic landscape. However, the assertion that they infringed upon the autonomy of existing PSUs holds considerable truth. While the intent was often to make PSUs more efficient and market-oriented, the methods employed (disinvestment, increased oversight, and continued government control over key decisions) often led to a reduction in their operational and strategic independence. This created a complex dynamic where PSUs were expected to compete in a liberalized market while still being subject to governmental directives and social mandates, thereby limiting their true autonomy.