The New Industrial Policy 1991 T h e In d u s t r i a l P o l i c y a n n o u n c e d o n J u l y 2 4 , 1 9 9 1 h e r a l d e d t h e e c o n o m i c r e f o r m s in India and sought to drastically alter the industrial scenario in o u r c o u n t r y .

T h e m o s t v i s i b l e s i g n o f t h e c o u n t r y s e c o n o m i c c r i s i s i n early 1991 was: Ext r e m e l y l o w f o r e i g n e xc h a n g e r e s e r v e s o f R s . 2 4 0 0 c r o r e ( j u s t enough to buy from abroad only three weeks requirements.) Inflationwasashighas13.5%t h i s p o l i c y e xp a n d e d t h e s c o p e o f t h e p r i v a t e s e c t o r b y o p e n i n g u p most of the industries for the private sector and did away with the entry and growth restrictions. The most important initiatives are with respect to the virtual scrapping of industrial licensing and registration policies , an end to the monopoly law and a welcoming approach to fore i g n investments.

Objectives of the Industrial Policy of the Government are 1.to maintain a sustained growth in productivity; 2.to enhance employment; 3.to achieve optimal utilization of human resources; 4.to attain international competitiveness 5.Development of indigenous technology through greater investment i n R & D a n d b r i n g i n n e w t e c h n o l o g y t o h e l p In d i a n m a n u f a c t u r i n g units Incentive for industrialization of backward areas 6.Ensure running of PSUs on business lines and cut their losses 7.Protect the interests of workers 8.Abolish the monopoly of any sector in any field of manufacture except on strategic or security grounds. 9 . t o t r a n s f o r m I n d i a i n t o a m a j o r p a r t n e r a n d p l a y e r i n t h e g l o b a l are na. Industrial Licensing Industrial Licensing was governed by the Industries Development &Regula tion Act, 1951. Industrial Licensing policy and procedures have been liberalized andcontinuously changed. Industrial licensing has been abolished for allp r o j e c t s e xc e p t f o r a s h o r t l i s t o f industriesrelatedtosecurityands t r a t e g i c c o n c e r n s , s o c i a l r e a s o n s , h a z a r d o u s c h e m i c a l s a n d overriding environmental reasons and items of elitist consumption. A l l e xc e p t i n g 1 8 i n d u s t r i e s w e r e f r e e d f r o m l i c e n s i n g . T h e n u mb e r was later reduced to six. The industries subject to compulsory industrial licensing account for a very small share of the value added in the manufacturing sector. Liberalization of Foreign Investment R e c e n t i n i t i a t i v e u n d e r t h e s m a l l s c a l e p o l i c y , e q u i t y h o l d i n g b y other units i n c l u d i n g f o r e i g n e q u i t y i n a s m a l l s c a l e u n d e r t a k i n g i s permissible up to 24 per cent. Integration of the Indian Ec o n o m y w i t h t h e G l o b a l Ec o n o m y i s o n e o f t h e o b j e c t i v e s o f t h e EXI M P o l i c y . T h e i m p o r t p o l i c y h a s b e e n made liberal by reducing tariff levels. A n o t h e r c h a n g e h a s b e e n t h e r e f o r m o f t h e f o r e i g n e xchange rate p o l i c y . T h e R u p e e h a s b e e n m a d e f u l l y c o n v e r t i b l e o n t h e c u r r e n t account. The effort is to move towards capital account convertibility. T h e C a p i t a l I s s u e s C o n t r o l A c t a n d t h e o f f i c e o f

t h e C o n t r o l l e r o f Capital have been scrapped and free pricing of capital issues w a s introduced. Foreign Technology Agreements: Government will provide automatic approval for technologicalagree m e n t s r e l a t e d t o h i g h p r i o r i t y i n d u s t r i e s w i t h i n s p e c i f i e d parameters. I n d i a n c o mp a n i e s w i l l b e f r e e t o n e g o t i a t e t h e t e r m s f o r technologyt r a n s f e r w i t h t h e i r f o r e i g n c o u n t e r p a r t s a c c o r d i n g t o t h e i r o w n commercialjudgment. Removal of MRTPRestrictions Most of the MRTP restrictions pertaining to concentration of e c o n o m i c p o w e r ( t h o s e r e q u i r i n g p e r m i s s i o n f o r e s t a b l i s h m e n t o f new undertaking, substantial expansion, manufacture of new items and mergers and acquisitions) were scrapped. The thrust of the policy is on controlling and regulating monopolistic, restrictive and unfair trade practices.

Evaluation of the New Industrial Policy Positives of the new policy are: 1 . D e - l i c e n s i n g o f m o s t i n d u s t r i e s w i l l h e l p e n t r e p r e n e u r s t o q u i c k l y seize business opportunities. 2 . R e m o v a l o f c o n t r o l s u n d e r t h e M R T P A c t w i l l f a c i l i t a t e e xpansionand growth. 3.There will be greater inflow of foreign capital and technology due to easing of restrictions. Watch- outs: H o w e v e r , d e b u r e a u c r a t i z a t i o n i s a c h a l l e n g i n g t a s k . T h e bureaucracy has a tendency to attempt to defeat measures aimed at deregulations. 4.Further, foreign investors still regard the policy and procedurals ystem in India confusing. Rather many feel that policy a n d developmentenvironment in China is superior to India.

This Policy has been criticized on the following grounds : 1.It will lead to domination of MNC on the I n d i a n Economy. Threatf r o m f o r e i g n c o m p e t i t i o n d u e t o c h e a p e r i m p o r t s a n d i n a b i l i t y t o meet the challenge from MNCs due to their weak economic strength is--via the MNCs. 2.Trade Unions oppose the policy due to fear of unemployment which may arise due to privatization. 3.Monopolies and concentration of economic power in a few hands is likely to increase. 4.Government is silent about tackling the growing industrial sickness. The Government has not announced a clear exit policy for sick units.

Yashwant Kumar BVIMR, New Delhi.