INTRODUCTION• The INDUSTRIAL POLICY plan of a country,

sometimes shortened IP, is its official strategic effort to encourage the development & growth of the SECONDARY SECTOR of the economy.

• SECONDARY SECTOR of the economy or industrial sector includes those economic sectors that create a finished, tangible product: production and construction. It takes output of the primary sector and manufactures finished goods. India’s industrial sector accounts for 27.6% of the GDP and gives employment to 17% of total workforce.

• A country’s infrastructure (transportation, telecommunication & energy industry) is a major part of manufacturing sector that usually has a key role in IP.

• INDUSTRIAL POLICIES are sector specific, unlike broader macroeconomic policies.

• An example of typical industrial policy is IMPORT-SUBSTITUTION-INDUSTRIALISATION (ISI), where trade barriers are temporarily imposed on some key sectors, such as manufacturing.

NEW INDUSTRIAL POLICY OF INDIA

• INDIA’s New Industrial Policy tabled in both the houses of parliament by Mr. P.V.Narasimha Rao on July 24,1991.

• The NIP aims at LIBERALISATION of Indian industry.

• LIBERALISATION of the economy means its freedom from direct or physical controls imposed by the government.

EVALUATION• The NIP marks the end of the policy regime & the

beginning of a new era in government’s approach towards the control & management of the industrial sector.

• Some of the changes are;1. a) The earlier policy resolutions had put a greater

emphasis on such policy goals as strengthening the public sector, preventing economic concentration, reducing economic disparities & expanding gainful employment.

b)…In the NIP, the top priority has been accorded to industrial efficiency, growth & international competitiveness.

2. a) The earlier industrial policies had made the public sector the main instrument of industrial growth.

b)…In the NIP, the private sector has been made the main instrument for the future industrial growth of the economy.

3. Another striking feature of NIP is LIBERALISATION of foreign investment. Foreign investment was earlier allowed on selective basis with only 40% equity. The NIP invited direct foreign investment to 34 industries with 51% equity. This has been done in view of the need for GLOBALISATION of the Indian industries & the advantage of transfer of new technology.

• GLOBALISATION means integrating the economy of a country with the economies of other countries under conditions of free flow of trade & capital, and movement of persons across borders.

OBJECTIVES

Encouraging competition within

Indian industry.

Development of backward areas.

Attainment of international

competitiveness.

Efficient use of

productive resources.

Full utilization of

plant capacities

to generate employmen

t.

To correct imbalance

in the growth &

development of

industries.

NEED & IMPORTANCETo establish co-ordination between industrial development &

agricultural development.

To establish co-ordination between public & private sector.

To direct national resources in desired direction.

To formulate a plan of industrial development.

To promote export & reducing the dependence on imports.

To formulate rules, principles & policies for the management, regulation & control of industrial undertakings.

FEATURES

DERESERVATION of PUBLIC SECTOR DELICENSING DISINVESTMENT OF

PUBLIC SECTOR

LIBERALISATION of FOREIGN INVESTMENT

LIBERALISATION of FOREIGN TECHNOLOGY

LIBERALISATION of INDUSTRIAL LOCATION

1.DERESERVATION of PUBLIC SECTOR

• The role of public sector has been reduced to a great extent. The number of industries reserved for public sector was reduced to 8 industries. There was further DERESERVATION.

• At present, there are only 3 INDUSTRIES reserved for public sector which include;

1…Atomic energy 2…Railways 3…Specified minerals.

2.DELICENSING• The most important feature if NIP, 1991 was the

abolition of industrial licensing of all industries except 6 INDUSTRIES. The six industries are of social & strategic concern.

• The 6 INDUSTRIES are; 1…HAZARDOUS CHEMICALS 2…ALCOHOL 3…CIGARETTES 4…INDUSTRIAL EXPOLSIVES 5…DEFENCE PRODUCTS 6…DRUGS & PHARMACEUTICALS.

3.DISINVESTMENT of PUBLIC SECTOR

• The NIP, 1991 permitted DISINVESTMENT of public sector units. DISINVESTMENT is a process of selling government equity in Public Sector Undertakings (PSUs) in favour of private parties.

• DISINVESTMENT aim’s at certain objectives;

1..To provide better customer services.

2..To make effective use of DISINVESTMENT funds.

3..To overcome the problem of political interference.

4..To enables the government to concentrate on social development etc.

4.LIBERALISATION of FOREIGN INVESTMENT

• Prior to this policy, it was necessary to obtain approved from the government in respect of foreign investment.

• At present, 100% foreign equity participation is allowed in selected industries.

5.LIBERALISATION of FOREIGN TECHNOLOGY

• NIP, 1991 liberalised foreign technology to bring about technological improvement in Indian industry. No permission is required for hiring foreign technicians & foreign testing of indigenously developed technologies.

6.LIBERALISATION of INDUSTRIAL LOCATION

• The NIP, 1991 stated that there is no need to obtain approval from CENTRAL GOVERNMENT to locate industries in areas (other than cities of more than one million population). However, industries subjected to compulsory licensing, approval need to be obtained.

• In cities with a population of more than one million, polluting industries were required to be located outside 25 km. of the city area.