New Industrial Policy 1991 | Objectives of New industrial policy 1991

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Hi friends, in today’s article we are going to know about new industrial policy 1991 and also know the Objectives of New industrial policy 1991. So let’s discuss in details.

What is new industrial policy 1991?

On July 24th, 1991, the congress (I) led govt. had introduced a new industrial policy. The major objective of this policy is to introduce liberalization measure in order to integrate objective or the various provisions that has taken by this 1991 industrial policy can be stated as follows.

Objectives of New industrial policy 1991

• Abolition of industrial Licensing – The major objective of industrial policy, 1991 is to abolish industrial licensing policy in order to liberalise the economy. The govt. has made a provision of licensing to only 18 industries as compulsory basis which include coal and bignite, petroleum, motor car, entertainment, electronics etc. It should be noted that no compulsory licensing is provided to the small scale industries.

Policy regarding public Sector – The major objective of this industrial policy is to revise the public sector industries that could not yield higher rate of return. In order to face the situation, the govt. restructure the potentially viable units.

It should be noted that the govt. has given much priority for the growth of future public sector enterprises which helps to earn more profit to the govt.

Monopoly restrictrade trade practices (MRTP) Limit – According to MRTP act any firm with assets over Rs.100 cr was classified as monopoly firm. But the new industrial policy, 1991 states that such monopoly firm will no longer be required.

This act has strengthened in order to take appropriate action in respect of monopolistic, restrictive and unfair trade practices.

Liberalization of location Policy – The new industries policy state no industrial approval will be required from the center for establishment of industries in that location where population is more than one million. In such an area, industries will be located outside 25 km from the periphery. But the industries should be non polluted in nature.

Foreign invention and Technology –The new industrial policy had prepared a specific list of high technology noted that these industries are given automatic permission for foreign direct invention upto 51% of foreign equity.

Abolition of phased manufacturing Programmes – The phased manufacturing programmes is introduced for increasing the pace of growth of way industries. The new policy has totally abolished all the programmes that the govt. feels due to substantial reforms.

Removal of mandatory convertibility Clause – Since independence industrial invention was mainly financed by loans from banks and financial institution. But the new industrial policy has provided an option to convert loans into equity if it is felt necessary by the management.

This policy has remove this system and hence financial institution will not impose this mandatory convertibility clause.

Criticism of New Industrial Policy 1991

The new industrial policy, 1991 has subjected to a number of criticism which are as follows –

(i) The new industrial policy had made too much provision for opening up to economy to foreign influences.

(ii) This policy will definitely attract foreign investment. But the capacity to generate important opportunities are doubtful.

(iii) Considering the huge man power resources in India, a labour intensive and capital saving technologies require. But opening up to foreign invention revers situation find it difficult to adopt such a technology.

(iv) The capacity of the MRTP commission’s to control and regulate the monopolistic and unfair practices is also doubtful.


So friends, this was the concept of new industrial policy 1991. Hope you get the full details about it and hope you like this article.

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