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MGT511
ABBAS ANSARI
Why to study Industrial
Policy?
Industrial policy and regulation determine,
to a large extent, business opportunities
and threats
Also it sets certain limits and norms for the
conduct of business
It decides the development path of the
economy to a larger extent
Industrial Policy
It covers rules, regulations, principles,
policies, & procedures laid down by
government for regulating & controlling
industrial undertakings in the country.
It prescribes the respective roles of the
public, private, joint, cooperative large,
medium & small scale sectors for the
development of industries.
Industrial Policy
It incorporates fiscal & monetary
policies, tariff policy, labor policy.
It shows the government attitude
not only towards external
assistance but also toward public &
private sectors.
Main Objectives
To maintain a sustained growth in
productivity
To enhance gainful employment
To prevent undue concentration of
economic power
Main Objectives
To achieve optimal utilization of
human resources
To attain international
competitiveness and
To transform India into a major
partner and player in the global
arena
Industrial Policies
Industrial Policy Resolution of 1948
Industrial Policy Resolution of 1956
Industrial Policy Resolution of 1973
Industrial Policy Resolution of 1977
Industrial Policy Resolution of 1980
The New Industrial Policy of
1991
Industrial Policy up to
1991
Reservation of Industries
Future development of most of the import
industries was exclusively reserved for the
public sector
Mfg of a large no ( over 850 in 1991) of
items was reserved for the small scale
sector
Industrial Policy up to
1991
Dominance of Public sector
Industry Policy Resolution 1948 established
public sector monopoly in 9 industries
IPR 1956 further expanded substantially the role
of public sector
17 most imp industries development was
reserved for the public sector (Scheduled A)
Industrial Policy up to
1991
Further, public sector was assigned
priority for the establishment of
new units in 12 most imp of
remaining industries (Scheduled
B)
Public sector also monopoly in the
remaining of the industries
Industrial Policy up to
1991
Entry and Growth Restriction
Entry and growth restriction for the private
firms even in the industries open for them
Large firms ( Assets > Rs 100 crore & Market share > 25%) had
to obtain clearance under MRTP Act
Industrial Licence, for new undertaking
establishment, substantial expansion and
mfg of new items
Industrial Policy up to
1991
Restrictions on Foreign Capital &
Technology
Scope of foreign capital and tech. was
ltd ( Ceiling of 40 % total equity)
Operations of foreign comp. in India
and issue of securities aboard by Indian
companies were routed(regulated) thro’
Foreign Exchange Reg. Act(FERA 1973)
The New Industrial
Policy
Objectives
To maintain a sustained growth in
productivity and gainfull
employment
To attain international
competitiveness
The New Industrial
Policy
Redefinition of Role of Public
sector
No of industries reserved for public
sector was reduced to 8 and later
on reduced to 2 ( atomic energy
and railway transport)
Selective privatisation
The New Industrial
Policy
Expansion of Scope of Private Sector
and Dismantling of Entry and growth
restriction
Delicensing : All but 18 industries were
freed from licensing
Removal of MRPTA restriction : Most of the
provisions of MRTP Act were scrapped
( related to expansion, mfg of new items
and M&As)
The New Industrial
Policy
Liberalisation of Foreign
Investment
Policy towards foreign capital and
technology are being modified
FDI allowed in all industries
( except industries falling in small –
ve list) from 26 to 100 %
The New Industrial
Policy
Related Measures
Liberal Import policy : reduction in
tariff levels and quant. Restriction
Price controls have been gradually
eased out
Industrial Policy 1991
Policy focus is on –
Deregulating Indian industry;
Allowing the industry freedom and
flexibility in responding to market forces
and
Providing a policy regime that facilitates
and fosters growth of Indian industry.
Industrial Policy 1991
In pursuit of the industrial objectives,
Government decided to take a series of
initiatives in respect of the policies relating
to the following areas:
Industrial Licensing
Foreign Investment
Foreign Technology Agreements
Public Sector Policy
MRTP Act
Industrial Licensing
Policy
The Industrial Policy Resolution of
1956 identified the following three
categories of industries:
Those that would be reserved for
development in public sector.
Those that would be permitted for
development through private enterprise
with or without State participation.
Those in which investment initiatives would
ordinarily emanate from private
entrepreneurs
Industrial Licensing
Policy
Industrial Licensing is governed by
the Industries (Development &
Regulation) Act, 1951.
Industrial licensing was abolished
for all industries, except those
specified (18 industries),
irrespective of levels of investment
Foreign Investment
Limit on foreign equity holdings raised
from 40% to 51% in a wide range of
industries
Foreign Equity Proposals need not to be
accompanied by Foreign Technology
Transfer Agreement
Procedure for FDI streamlined by
creating a Foreign Investment
Promotion Board to consider individual
application case by case
Foreign Technology
Agreements
Foreign technology agreements in high-
priority industries upto Rs. 1 crore were
given automatic permission.
No permission was required for hiring
foreign technicians and foreign testing
of indigenously developed technologies.
Public Sector Policy
List of industries reserved for the public
(Schedule A) reduced from 17 to 8