Q.Critically examine the Industrial Policy Resolution, 1991.

The 1991 New Industrial Policy (part of the LPG reforms) ended the 'licence-permit raj': it scrapped licensing for most industries, shrank the public-sector reserved list, welcomed foreign investment and technology, and freed large firms from MRTP limits. It boosted growth and efficiency, but critics point to job insecurity, foreign dominance and widening inequality.

Background

By 1991 India faced a deep balance-of-payments crisis, high fiscal deficit and low foreign reserves. The response was Liberalisation, Privatisation and Globalisation (LPG), of which the New Industrial Policy was the industrial pillar.

Main provisions

1. Abolition of industrial licensing for all but a few industries (security, strategic and hazardous).
2. Reduced public-sector reservation: The number of industries reserved only for the public sector was cut sharply.
3. Liberalised foreign investment: Automatic approval for foreign equity up to high limits in many industries.
4. Free import of technology to modernise industry.
5. Dilution of MRTP Act: Large companies no longer needed prior approval to expand.
6. Disinvestment of part of government equity in public-sector undertakings.
7. Liberal location policy except in large cities.

Merits

• Faster industrial and overall growth; wider choice and better quality for consumers.
• Higher efficiency and competitiveness; large inflow of foreign investment and technology.
• Growth of private enterprise and the services sector.

Critical points

• Fear of job losses and closures in weak public-sector and small units facing competition.
• Dominance of large and foreign firms; neglect of small industry. …