• The INDUSTRIAL POLICY plan of a country,
sometimes shortened IP, is its official strategic effort
to encourage the development & growth of the
SECONDARY SECTOR of the economy.
• SECONDARY SECTOR of the economy or
industrial sector includes those economic sectors
that create a finished, tangible product: production
and construction. It takes output of the primary
sector and manufactures finished goods. India’s
industrial sector accounts for 27.6% of the GDP and
gives employment to 17% of total workforce.
• A country’s infrastructure (transportation,
telecommunication & energy industry) is a major
part of manufacturing sector that usually has a key
role in IP.
• INDUSTRIAL POLICIES are sector specific, unlike
broader macroeconomic policies.
• An example of typical industrial policy is IMPORT-
where trade barriers are temporarily imposed on
some key sectors, such as manufacturing.
NEW INDUSTRIAL POLICY
• INDIA’s New Industrial Policy tabled in both
the houses of parliament by Mr. P.V.Narasimha
Rao on July 24,1991.
• The NIP aims at LIBERALISATION of Indian
• LIBERALISATION of the economy means its
freedom from direct or physical controls
imposed by the government.
• The NIP marks the end of the policy regime &
the beginning of a new era in government’s
approach towards the control & management of
the industrial sector.
• Some of the changes are;
1. a) The earlier policy resolutions had put a
greater emphasis on such policy goals as
strengthening the public sector, preventing
economic concentration, reducing economic
disparities & expanding gainful employment.
b)…In the NIP, the top priority has been accorded
to industrial efficiency, growth & international
2. a) The earlier industrial policies had made the
public sector the main instrument of industrial
b)…In the NIP, the private sector has been made
the main instrument for the future industrial
growth of the economy.
3. Another striking feature of NIP is LIBERALISATION of
foreign investment. Foreign investment was earlier
allowed on selective basis with only 40% equity. The
NIP invited direct foreign investment to 34
industries with 51% equity. This has been done in
view of the need for GLOBALISATION of the
Indian industries & the advantage of transfer of new
• GLOBALISATION means integrating the economy
of a country with the economies of other countries
under conditions of free flow of trade & capital, and
movement of persons across borders.
NEED & IMPORTANCE
To establish co-ordination between industrial development &
To establish co-ordination between public & private sector.
To direct national resources in desired direction.
To formulate a plan of industrial development.
To promote export & reducing the dependence on imports.
To formulate rules, principles & policies for the management,
regulation & control of industrial undertakings.
1.DERESERVATION of PUBLIC
• The role of public sector has been reduced to
a great extent. The number of industries
reserved for public sector was reduced to 8
industries. There was further DERESERVATION.
• At present, there are only 3 INDUSTRIES
reserved for public sector which include;
• The most important feature if NIP, 1991 was the
abolition of industrial licensing of all industries
except 6 INDUSTRIES. The six industries are of
social & strategic concern.
• The 6 INDUSTRIES are;
6…drUgs & pHArmAceUticAls.
3.DISINVESTMENT of PUBLIC SECTOR
• The NIP, 1991 permitted DISINVESTMENT of public
sector units. DISINVESTMENT is a process of selling
government equity in Public Sector Undertakings
(PSUs) in favour of private parties.
• DISINVESTMENT aim’s at certain objectives;
1..To provide better customer services.
2..To make effective use of DISINVESTMENT funds.
3..To overcome the problem of political
4..To enables the government to concentrate on
social development etc.
4.LIBERALISATION of FOREIGN
• Prior to this policy, it was necessary to obtain
approved from the government in respect of
• At present, 100% foreign equity participation
is allowed in selected industries.
5.LIBERALISATION of FOREIGN
• NIP, 1991 liberalised foreign technology to
bring about technological improvement in
Indian industry. No permission is required for
hiring foreign technicians & foreign testing of
indigenously developed technologies.
6.LIBERALISATION of INDUSTRIAL
• The NIP, 1991 stated that there is no need to
obtain approval from CENTRAL GOVERNMENT
to locate industries in areas (other than cities of
more than one million population). However,
industries subjected to compulsory licensing,
approval need to be obtained.
• In cities with a population of more than one
million, polluting industries were required to be
located outside 25 km. of the city area.