The 1991 Industrial Policy announced major economic reforms in India to liberalize and open up industries that had previously been restricted. It removed licensing requirements for all but a few strategic industries and welcomed foreign investment. The objectives of the policy were to promote sustained growth, employment, technology development, and international competitiveness. It reduced the number of industries reserved for public sector enterprises and granted them more autonomy. The policy largely deregulated and liberalized industries, removing barriers to private and foreign investment. While it aimed to boost the economy, some critics warned it could lead to foreign domination and unemployment.

1. Industrial Policy

2. The New Industrial Policy 1991
The Industrial Policy announced on July 24, 1991 heralded the economic
reforms in India and sought to drastically alter the industrial scenario in
our country. The most visible sign of the country’s economic crisis in
early 1991 was:
 Extremely low foreign exchange reserves of Rs. 2400 crore (just
enough to buy from abroad only three weeks requirements.)
 Inflation was as high as 13.5%
This policy expanded the scope of the private sector by opening up
most of the industries for the private sector and did away with the entry
and growth restrictions. The most important initiatives are with respect
to the virtual scrapping of industrial licensing and registration policies,
an end to the monopoly law and a welcoming approach to foreign
investments.

3. The New Industrial Policy 1991 (contd…)
Objectives of the Industrial Policy of the Government are –
 to maintain a sustained growth in productivity;
 to enhance employment;
 to achieve optimal utilization of human resources;
 to attain international competitiveness
 Development of indigenous technology through greater investment
in R&D and bring in new technology to help Indian manufacturing
units Incentive for industrialization of backward areas
 Ensure running of PSUs on business lines and cut their losses
 Protect the interests of workers
 Abolish the monopoly of any sector in any field of manufacture
except on strategic or security grounds.
 to transform India into a major partner and player in the global
arena.

4. The New Industrial Policy 1991 (contd…)
Redefinition of the role of the Public Sector:
The number of industries reserved for the public sector was reduced to
eight and it was later pruned to two ie atomic energy and railway
transport.
Also, in respect of public sector enterprises, the following measures
were adopted:
 Public enterprises which are chronically sick and unlikely to be
turned around to be referred to the Board for Industrial and Financial
Reconstruction for formulation of revival / rehabilitation schemes.
 In order to encourage wider public participation, a part of the
Government’s shareholding in the public sector would be offered to
mutual funds, financial institutions and the general public.
 Board of PSU to be more professional and have greater powers.
 Thrust to be on performance improvement and management would
be granted more autonomy in operation.

5. The New Industrial Policy 1991 (contd…)
Industrial Licensing:
 Industrial Licensing was governed by the Industries Development &
Regulation Act, 1951.
 Industrial Licensing policy and procedures have been liberalized and
continuously changed. Industrial licensing has been abolished for all
projects except for a short list of industries related to security and
strategic concerns, social reasons, hazardous chemicals and
overriding environmental reasons and items of elitist consumption.
All excepting 18 industries were freed from licensing. The number
was later reduced to six.
 The industries subject to compulsory industrial licensing account for
a very small share of the value added in the manufacturing sector.

6. The New Industrial Policy 1991 (contd…)
Liberalization of Foreign Investment: Policy towards foreign capital
and technology has been modified very significantly. Foreign
investment will bring advantages of technology transfer, marketing
expertise, introduction of modern managerial techniques and new
possibilities for promotion of exports.
 FDI is allowed in all industries, except industries falling in a small
negative list.
 Approvals for FDI upto 51% in high priority industries requiring large
investments and advanced technology will be provided.
 Since 1992-93, the Indian stock market is open for investment by
Foreign Institutional Investors (FIIS) and Indian companies satisfying
certain conditions may access foreign capital market by Euro issues.

7. The New Industrial Policy 1991 (contd…)
Liberalization of Foreign Investment
 Recent initiative under the small scale policy, equity holding by
other units including foreign equity in a small scale undertaking is
permissible up to 24 per cent.
 Integration of the Indian Economy with the Global Economy is one
of the objectives of the EXIM Policy. The import policy has been
made liberal by reducing tariff levels.
 Another change has been the reform of the foreign exchange rate
policy. The Rupee has been made fully convertible on the current
account. The effort is to move towards capital account convertibility.
The Capital Issues Control Act and the office of the Controller of
Capital has been scrapped and free pricing of capital issues was
introduced.

8. The New Industrial Policy 1991 (contd…)
Foreign Technology Agreements:
 Government will provide automatic approval for technological
agreements related to high priority industries within specified
parameters.
 Indian companies will be free to negotiate the terms for technology
transfer with their foreign counterparts according to their own
commercial judgment.
Removal of MRTP Restrictions:
 Most of the MRTP restrictions pertaining to concentration of
economic power (those requiring permission for establishment of
new undertaking, substantial expansion, manufacture of new items
and mergers and acquisitions) were scrapped.
 The thrust of the policy is on controlling and regulating monopolistic,
restrictive and unfair trade practices.

9. Evaluation of the New Industrial Policy
Positives of the new policy are:
 De-licensing of most industries will help entrepreneurs to quickly
seize business opportunities.
 Removal of controls under the MRTP Act will facilitate expansion
and growth.
 There will be greater inflow of foreign capital and technology due to
easing of restrictions.
Watch- outs :
 However, de-bureaucratization is a challenging task. The
bureaucracy has a tendency to attempt to defeat measures aimed at
deregulations.
 Further, foreign investors still regard the policy and procedural
system in India confusing. Rather many feel that policy and
development environment in China is superior to India.

10. Evaluation of the New Industrial Policy
This Policy has been criticized on the following grounds:
 It will lead to domination of MNC on the Indian Economy. Threat
from foreign competition due to cheaper imports and inability to
meet the challenge from MNCs due to their weak economic strength
vis-à-vis the MNCs.
 Trade Unions oppose the policy due to fear of unemployment which
may arise due to privatization.
 Monopolies and concentration of economic power in a few hands is
likely to increase.
 Government is silent about tackling the growing industrial sickness.
The Government has not announced a clear exit policy for sick units.

11. Thank
You.