INDUSTRIAL POLICY 1991

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• The New Industrial Policy announced on July 1991
was a bold step by the then PM Narsimha Rao and
his Finance Minister Dr. Manmohan Singh.
• It heralded economic reforms which greatly
expanded the scope of the private sector, which
until then had been subdued.
• It opened up most of the sectors for private sector
and dismantled entry and growth restrictions.

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• The major objectives of the new industrial
policy package are:-
• 1. To build on the gains already made.
• 2. To correct the distortions or weaknesses
that may have creapt in.
• 3. To maintain a sustained growth in
productivity and gainful employment.
• 4. To attain international competitiveness.

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• These above objectives will be pursued with
due consideration to the environmental
concerns and efficient use of the available
resources.
• All sectors of the industry, whether small scale
or large scale, will be encouraged to grow.

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• Redefining the role of public sector:
• The role of public sector which until 1991
enjoyed the lion’s share of the industry was
redefined and its scope considerably restricted.
• The number of industries in the public sector
was first reduced to only and subsequently, in a
phased manner brought down to only two –
atomic energy and rail transport.

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• The policy also seeks to resort to privatisation of the
public sector and withdrawal of the public sector from
such industries which do not conform to its redefined
role.
• It seeks to expand the scope of Private sector by
dismantling the restrictions on entry and growth.
• Delicensing:
• Initially all but 18 industries were freed from
delicensing and the number has been further brought
down to 6.
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• Removal of MRTPA restrictions:
• Most of the provisions of the MRTP act related to concentration
of economic power were scrapped.
• Liberalization of Foreign Investment:
• Policy with respect to FDI and technology has been modified and
liberalized. Except for a small negative list, foreign capital is now
allowed upto varying degrees ranging from 26% to 100%.
• Since 1992 – 93 Indian stock markets are now open to
investment by Foreign Institutional Investors and similarly,
subject to certain conditions, Indian companies are now allowed
access to foreign capital.

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• Related Measures:
• One of the objectives of the Exim policy is the
integration of Indian economy with the global
economy.
• This has been done by drastically reducing the import
tariffs , removing quantitative restrictions and by
reforming the procedures.
• Another significant change was the partial
convertibility of rupee in the current account initially,
which was later made fully convertible.
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• Measures are now being initiated to make the
convertibility in capital account as well.
• The Capital Issues Control act and the office of
the controller of capital issues was abolished.
• Price controls have been gradually eased out.

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