The Industrial Policy of 1991

Industrial Policy of 1991 and Industrial Growth in India

• The Industrial Policy of 1991 opened up India's economy to the world during a severe economic crisis.
• The policy led to an acceleration of economic growth in India.
• Dereservation of the industrial sector allowed most industries to be opened to the private sector, except for atomic energy, mining, and railways reserved for the public sector.
• The end of industrial licensing or the license raj or red tapism was abolished, barring hazardous chemicals industries, defense, aerospace, industrial explosives, cigarettes, and tobacco.
• Loss-making public sector enterprises were sold to the private sector, and autonomy was given to PSU boards for efficient functioning.
• The new policy welcomed foreign investment, foreign technology, FDI, FPI, and loan capital to attract foreign capital.
• The Monopoly and Restricted Trade Practice Act were abolished.
• The industrial growth rate in Phase 1 (1951-67) was 6.3%, with a focus on agriculture, irrigation, and infrastructure due to domestic shortages.
• Industrial growth rate in Phase 2 (1967-80) fell to 4.1% due to various government impositions like small scale industry reservations, MRTP act, normalization of major banks.
• Industrial growth rate in Phase 3 (1980-91) increased to 7.1% due to liberalization, success of green revolution and expansionary fiscal policy, but end of phase witnessed severe balance of payment crisis.
• Phase 4 (1991-2001) introduced wide-ranging reforms like delicensing, privatization, and disinvestment, abolition of MRTP act, etc., accelerating GDP growth rate of the industrial sector to above 9%.
• Challenges arising from government policies include a difficult business environment, labor deployment rigidities, infrastructure bottlenecks, regulatory delays and lack of transparency, high cost and non-availability of commercial bank credit.

Test your knowledge on the Industrial Policy of 1991 and its impact on industrial growth in India with this informative quiz. Explore the key features of the policy, such as the dereservation of the industrial sector, end of industrial licensing, and privatization of public sector enterprises. Learn about the various phases of industrial growth in India and the challenges faced due to government policies. Enhance your understanding of India's economic history and its journey towards industrialization.