INDUSTRIAL POLICY 1991 • Govt . recognizes the need for • social and economic justice, to end poverty and unemployment and to build a modern, democratic, socialist, prosperous and forward-looking India • India to grow as part of the world economy and not in isolation • Greater emphasis placed on building up ability to pay for imports through our own foreign exchangeearnings • development and utilization of indigenous capabilities in technology and manufacturing as well as itsup gradation to world standards.
INDUSTRIAL POLICY 1991 • Sound policy framework encompassing encouragement of entrepreneurship, development of indigenous technology through investment in research and development, bringing in new technology, dismantling of the regulatory system, development of the capital markets and increasingcompetitiveness for the benefit of the commonman.
INDUSTRIAL POLICY 1991 • The spread of industrialization to backward areas of the country will be actively promotedthrough appropriate incentives, institutions andinfrastructure investments. • Government will provide enhanced support to the small-scale sector so that it flourishes in an environment of economic efficiency and continuous technological up gradation
INDUSTRIAL POLICY 1991 • Foreign investment and technology collaboration will be welcomed to obtain highertechnology, to increase exports and to expand theproduction base. Government will endeavor to abolish the monopoly of any sector or any individualenterprise in any field of manufacture, except onstrategic or military considerations and open allmanufacturing activity to competition.
INDUSTRIAL POLICY 1991 • The Government will ensure that the public sector plays its rightful role in the evolvingsocioeconomic scenario of the country.Government will ensure that the public sector isrun on business lines as envisaged in the IndustrialPolicy Resolution of 1956 and would continue toinnovate and lead in strategic areas of nationalimportance.
INDUSTRIAL POLICY 1991 • Government will fully protect the interests of labour, enhance their welfare and equip them in all respects to deal with the inevitability of technological changeLabour will be made an equal partner in • progress and prosperity • Workers’ participation in management will be promoted
INDUSTRIAL POLICY 1991 • Workers cooperatives will be encouraged toparticipate in packages designed to turn aroundsick companies. • The major objectives of the new industrial policy package will be to build on the gains already made, correct the distortions or weaknesses that may have crept in, maintain a sustained growth in productivity and gainful employment and attain international competitiveness.
INDUSTRIAL POLICY 1991 • Need to preserve the environment and ensure the efficient use of available resources. • Government’s policy will be continuity with change
INDUSTRIAL POLICY 1991 • In pursuit of the above objectives, Governmenthave decided to take a series of initiatives in respect of the policies relating to the following areas.A. Industrial Licensing.B. Foreign Investment.C. Foreign Technology Agreements.D. Public Sector Policy.E. MRTP Act.
INDUSTRIAL POLICY 1991 • Industrial licensing: • Modified industrial licensing policy to ease restrictions on capacity creation, respond to emerging domestic & global opportunities by improving productivity • Abolished industrial licensing for most industries but for 18 categories • Small scale sector reserved • Foreign Investment: • FDI (up to 51% foreign equity) permitted in high priority industries (high investment and advanced technology) & export oriented companies
INDUSTRIAL POLICY 1991 • Foreign Technology Agreements: • Towards technological dynamism, automatic approval for technological agreements related to high priority industries; eased procedures for hiring foreign technical expertise • Public Sector Policy: Restructuring pubic sector units, raise resources through pubic participation PSUs, refer sick units to Board of Industrial & Financial Reconstruction • MRTP Act: • Abolished scrutiny of investment decision of MRTP companies etc.
Current Scenario: • Substantial changes: • Only six industries require compulsory licensing • Only three industries reserved for the public sector • Relation of restriction on FDI: FDI up to 100 % under automatic route for most manufacturing activities in Special Economic Zones; FDI ceiling in pvt banking sector up to 74%; oil exploration (100%); natural gas and LNG pipelines (100%); telecom (74%) • Small Scale industries sector: reduced # of items reserved from 821 (1991) to 506 (2005)
Lessons from India: • Industrial Policy should not be about: • Controlling Prices • Controlling Quantity • Specifying Geographical Location of Activity • Preemption by Public Sector • Policy Body, Regulatory Body and Service Provider being Government Agencies