New Industrial

Policy

1991

What is Industrial Policy?

It refers to the government’s policy towards ;

Establishment

Functioning

Growth

Management of the industries

It is a comprehensive government document that covers all those

policies, rules and regulations that control the industrial

undertakings of the country and shape the pattern of

industrialization.

Industrial Policy helpful to

The planners and administrators by providing them

clear guidelines for promoting and regulating industries.

The industrial investors for deciding areas and priorities

of their investment.

Birth of Industrial PolicyDue to poor condition of economy

Problem of Industrial sickness

Shortage of raw materials

Deficiency capital

Bad industrial relations

“Industry Policy Resolution” was issued on 6th April 1948

It accepted both private and public sector

This policy was implemented for 8 years

From here the Planning Era started in Indian economy

Industry Policy Resolution

1948

Industry Policy Resolution

1951

Industry Policy Resolution

1956

Industry Policy Resolution

1973

Industry Policy Resolution

1977

Industry Policy Resolution

1980

Industrial Policy

1991

Changes with due course of time

Year Objectives

1948 1. Accelerate rate of economic growth 2. To speed up industrialization

1956 1. Assistance to private sector2. Expanded role of Cottage and Small Industries3. Balanced industrial growth among various regions4. Incentives to labour

1980 1. Maximizing production 2. Achieving higher productivity3. Higher Employment generation4. Faster promotion of export oriented and import

substitution industries

Objectives of Industrial Policy 1991Maintain a sustain growth in productivity and gainful

employment

Greater investment in R & D

Bringing in new technology to increase international

competitiveness

Incentives for industrialization of backward areas for promoting

balanced regional development

Increasing productivity and efficiency in PSU’s and reduce their

losses

Enhanced support for small scale industrial

To integrate Indian economy with rest of the world

Significant changes in areas

Industrial Licensing Role Of Public Sector

Foreign Investment And Technology

The MRTP Act

a) Abolition of Industrial Licensing:

Abolishes the system of industrial licensing for most of the industries

No licenses are required for setting up new industrial units or for

substantial expansion

Except for a short list of industries relating to country’s security and

strategic concerns, hazardous industries and industries causing

environmental degradation

Earlier 18 industries were placed in this list of industries

Only 5 industries relating to health security and strategic concerns that

require compulsory licensing

b) De-reservation of Industries for Public Sector:

Most public sector enterprises became symbols of inefficiency

Imposed heavy burden on the government through their perpetual losses

Limit the role of public sector

Encourage private sector’s participation over a wider field of industry

Following changes were made in the policy regarding public sector

industries:

Reduced reservation for public sector

Efforts to revive loss making enterprise

Disinvestment in selected public sector industrial units

c) Liberalised Policy Towards Foreign Capital and Technology:

Inflow of foreign capital and import of technology was tightly regulated

Each proposal of foreign investment was to be cleared by the

government in advance

Share of foreign equity was kept very low so that majority of ownership

control remains with Indians

Kept the inflow of foreign capital very small and industrial development

suffered for want of capital resources and technology

Several concessions to encourage flow of foreign capital and technology,

which are as follows;

Relaxation in Upper Limit of Foreign Investment

Automatic Permission for Foreign Technology Agreement

d) MRTP Act:MRTP act, 1969, all big companies and large business houses (which had

assets of Rs.100 crores or more) were required to obtain clearance from

the MRTP commission for setting up any new industrial unit

Big impediment for industrial development as the big business firms

which had the resources for development could not grow and diversify

their activities

Put these industries on par with other firms by abolishing those

provisions of the MRTP act which would require no prior approval for

investment

It gives more emphasis on prevention and controlling unfair and

restrictive business practices to protect consumers from such practices

Evaluation of Industrial Policy

Aims to unshackle India’s industrial economy from the cobwebs of

unnecessary bureaucratic control

Removal of entry barriers and bringing about transparency in procedures

Virtually ending the ‘Licence-permit Raj’ which has hampered private

initiative and industrial development

New policy throws almost the entire field of industry wide upon for the

private sector

Public sector’s role has been confined largely to industries of defence,

strategic and environmental concerns

More market friendly

Aims at making the best use of available entrepreneurial talent