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Industrial Policy 1991

Industrial Policy
Rules, Regulations, Principles, Policies and procedures laid down by govt. for regulating& controlling industrial undertakings in the country Prescribes the resp. role of the public, private, joint, co-operative large, medium and small scale sectors for the development of industries

Objectives of IIP
To maintain a sustained growth in productivity To enhance gainful employment To prevent undue concentration of economic power To achieve optimal utilization of human resources To attain international competitiveness and To transform India into a major partner and player in the global arena

Industrial Policy up to 1991

The objective of the policy were to : Reduce disparities in income and wealth Prevent monopolies and concentration of economic power Build a large and heavy public sector and manage the same effectively Develop heavy and machine making industries

Industrial Policy up to 1991

Accelerate the rate of industrialization and economic growth Higher employment generation Focus on development of small scale sector Optimum utilization of installed capacity Rural Industrialization Promotion of export oriented units (Industrial Policy 1980) Industrial Dispersal and decentralization (Industrial Policy 1990)

India before 1991

Planned Industrial Development Industry Licencing and Quotas Dominance of Public Sector Restriction on Private Investment Socialism

Industrial Policy 1991

Announced on July 24, 1991 Crisis faced before IIP 1991
Extremely low foreign exchange reserves Inflation was high as 13.5

Objectives of IIP 1991

To maintain a sustained growth in productivity To enhance employment To achieve optimal utilisation of HR To attain international competitiveness Development of indigenous technology Abolish Monopoly

Objectives of IIP 1991

Ensure running of PSUs on business line and cut their losses Protect interest of workers Transform India into a major partner and player in the global arena

Industrial Policy 1991

Liberalization of industrial Licencing FERA Liberalization MRTP Liberalization Curtailment of Public Sector

Features of IIP 1991

Liberalization Privatization Globalization Stabilization

Industrial Licencing
De-licencing De-control De-regulation Broad banding Abolition of Registration

Industrial Licencing
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 All excepting 18 industries were freed from licensing. The number was later reduced to five. Distillation and brewing of alcoholic drinks; cigars and cigarettes; electronic aerospace; hazardous chemicals and industrial explosives

FERA Liberalization
Liberalization of Foreign Investment
Allowed in all industries, except falling in a small negative list

Liberalization of Technology Import

FERA Liberalization
Pre 1991
FDI was allowed selectively up to 40% under FERA


35 high priority industry groups were placed on the Automatic Route for FDI up to 51%


Automatic Route expanded to 111 high priority industry groups up to 100%/ 74%/ 51%/50%


All sectors placed on the Automatic Route for FDI except for a small negative list

Post 200

Many new sectors opened to FDI; Sectorial caps in many other sectors relaxed;

Liberalization of Technology Import

Foreign technology agreements in highpriority industries up to Rs. 1 crore were given automatic permission. No permission was required for hiring foreign technicians and foreign testing of indigenously developed technologies

MRTP Liberalization
Abolition of threshold assets limit No MRTP clearance needed for expansions, mergers

Objectives: MRTP
Prevention of concentration of economic power in a few hands Control and regulation of monopolies in certain sectors Prevention of unfair trade practices Prevention of restrictive trade practices

Amendments after 1991

Changes felt necessary in MRTP Act Concentration of economic power to the common detriment and control of monopolies de-emphasized Pre-entry restrictions (prior approval of government), expanding existing undertaking, M&As, takeovers deleted from Act

Amendments after 1991

Expert Group on interaction between Trade and Competition Policy recommended new competition law to promote fair competition and control (eliminate) anticompetitive practices in the market 2000: High Level Committee on Competition Law and Policy provided a draft Competition law.

Curtailment of Public Sector

Public sector opened up to private sector Only eight core industries remain reserved for the public sector Purview of Board for Industrial and Financial Reconstruction (BIFR) extended to Public sector

Public Sector Policy

List of industries reserved for the public (Schedule A) reduced from 17 to 8 List of sector reserved for dominance by public sector (Schedule B) effectively abolished Disinvestment in selected public sector enterprise to raise finance for development, bring in greater accountability & help create a new culture in their working for improved efficiency

Industries Reserved as Public Sectors

Arms and ammunition and allied items of defence equipment, defence aircraft and warships. Atomic energy Coal and lignite Mineral oils Minerals specified in the Schedule to the Atomic Energy (Control of Production and Use)Order, 1953 Railway transport

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