New Economic Policy 1991

 As a part of economic reforms, the Government of India announced a new industrial policy in July 1991. The broad features of this policy were as follows:

1. The Government reduced the number of industries under compulsory licensing to six.
2. Many of the industries reserved for the public sector under the earlier policy, were dereserved. The role of the public sector was limited only to four industries of strategic importance.
3. Disinvestment was carried out in the case of many public sector industrial enterprises.
4. Policy towards foreign capital was liberalized. The share of foreign equity participation was increased and in many activities 100 percent Foreign Direct Investment (FDI) was permitted.
5. Automatic permission was now granted for technology agreements with foreign companies.
6. Foreign Investment Promotion Board (FIPB) was set up to promote and channelize foreign investment in India.

• Appropriate measures were taken to remove obstacles in the way of growth and expansion of industrial units of large industrial houses.
• Small-scale sector was assured all help and accorded due recognition.
• In essence, this policy has sought to liberate industry from the shackles of the licensing system (liberalization), drastically reduce the role of the public sector (privatization) and encourage foreign private participation in India’s industrial development (globalization).