Industrial Policies before Liberalization
Reservation of Industries
1. Future development of most of the import
industries was exclusively reserved for public sector
2. Manufacturing of large number (over 850
units) of items was reserved for the small scale sector.
Dominance of Public Sector
y Policy of government was to ensure that
the public sector gained control over the commanding heights of the economy. y The Industrial Policy Resolution of 1948 established public sector monopoly /near monopoly in 9 industries. y The Industrial Policy Resolution 1956 gave emphasis to the basic and heavy industries, further expanded substantially the role of public sector.
Entry and Growth restrictions
y Entry and growth restriction were imposed
in industries where private players were allowed to trade. y A license was mandatory for
oestablishing new units with investment above specified limit. oManufacturing new product oExpansion of current undertakings
y Large firms and Dominant undertakings
had to take clearance from MRTP Act. In addition to the industrial license .
Restriction on foreign capital and Technology
Technology was limited.
y Wherever the foreign investment were
allowed the ceiling was fixed to 40 % of total equity.
y Expansion was allowed in very few cases. y FERA 1973 regulated the investment from
India to abroad, and from abroad to inside
The New Industrial Policy
The major objectives are as follows :
1. To build on the gains already made. 2. To correct the distortion or weakness that
may have crept in.
3. To maintain the sustained growth in the
productivity and gain full employment.
4. To attain international competitiveness.
Redefinition of role of Public sector
y Industries reserved for public sector was
reduced to 8 and further it reduced to only 2.
y Selective privatization and withdrawal of
public sector from specific industries.
privatization entry and
y Delicensing :18 industries were freed
from licensing , this was later reduced to 6 industries y Liberalization of foreign investment :policy towards investment and technology restrictions were scrapped . FDI were allowed in certain industries with a range from 26% investment to 100% investment. y By 1992-93 indian stock market was open for investment by FIIs
integration of Indian Economy with global economy has been acknowledged as one of the objectives of EXIM policy.