Industrial policy

The concept of industrial policy is comprehensive and it covers all those procedures, principles, policies, rules, and regulations which control the industrial undertakings of a country and shape the pattern of industrialisation. It incorporates fiscal and monetary policies, the tariff policy, labor policy and governments attitude not only towards external assistance but the public and private sectors also.

Industrial policy 1991

The congress government led by Mr. Narasimha Rao announced the new industrial policy in July 1991. The main aim of the new industrial policy was: to prevent India from bureaucratic control To introduce liberalisation with a view to integrate the Indian economy with the world economy to remove restrictions on direct foreign investment as also to free the domestic entrepreneur from the restrictions of MRTP(Monopolies Restrictive Trade Policies) act The policy aimed to shed the load of the public enterprises which shown a very low rate of return or were incurring losses over the years. Fiscal deficit.

 All these reforms of industrial policy led the government to take a series of initiatives in respect of policies in the following areas 1. Industrial Licensing 2. Foreign Investment 3.Foreign technology policy 4.Public Sector Policy 5.MRTP Act

Industrial licensing policy

Industrial licensing to be 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 item enlisted for the small scale sector will continue to be reserved.

1. List of industries where industrial licensing will be compulsory included like coal and lignite, petroleum, alcoholic drinks, sugar, cigarettes , leather, motor cars, electronic goods etc. The compulsory license would not apply to small scale units taking up the manufacture of any goods which are reserved for them.

2. List of industries reserved for public sector

1. Arms and ammunition and allied items of defense equipments. 2. Atomic energy 3. Mineral oils 4. Mining of iron ore , diamond etc 5. Railway transport

 3. In projects where imported capital goods are required, automatic clearance will be given in cases where foreign exchange availability is ensured in other cases it required clearance from industrial department. 4. in locations other than cities of more than 1 million population, there will be no requirement of obtaining industrial approvals from the central government except where compulsory licensing.

Foreign investment
In order to invite foreign investment in high priority industries, requiring large investments and advanced technology, it was decided to provide approval for direct foreign investment up to 51% foreign equity in such industries. Government also encouraged exports and assist Indian exporters in export industries.

Foreign technology
With a view to injecting the desired level of technological dynamism in Industry, Government would provide automatic approval for technology agreements related to high priority industries within specified parameters. No permission will be necessary for hiring of foreign technicians, foreign testing of indigenously developed technologies.

Public Sector Policy

The original concept of the public sector undergone considerable change. New priority areas were 1. Essential infrastructure goods and services 2. Exploration and exploitation of oil and mineral resources 3. Technology development where private sector investment is inadequate 4. Manufacture of defense equipments.

Measures taken
1. Portfolio of public sector will be reviewed and some areas would be opened for private sector. 2. Sick public enterprises will be referred to BIFR ( Board of Industrial Financial Reconstruction) for rehabilitation. 3. A part of government's shareholding will be offered to mutual funds, financial institutions, the general public and workers.

MRTP Act
Monopolies Restrictive Trade Policies Act Emphasis will be on controlling and regulating monopolistic, restrictive and unfair trade practices rather than making it necessary for the monopoly house to obtain prior approval of Central Government for expansion, establishment of new undertakings, mergers, amalgamation etc