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New Industrial Policy 1991 (Public sector De-reservation and privatization…
New Industrial Policy 1991
Public sector De-reservation and privatization through Dis-investment
Till 1991, public sector pre-eminent position. Areas of strategic importance + Core sector exclusively for public sector
Since 1991, Industries reserved for public sector ↓. Now only 2 atomic + Railway
Govt equity in all PSU ↓ + Govt withdrawal from non-core sectors.
MoU implementation- to improve performance of public enterprises. MoU is a performance contract b/w govt & a specific public enterprise.
Referral to BIFR, Board for Industrial & Financial reconstruction for rehab of sick PSU's
Manpower rationalization- VRS introduced in PSU's to shed surplus manpower
Private equity participation, PSU's allowed to raise equity finance from capital mkt, thus mkt pressure on PSU's to improve performance.
Disinvestment and Privatization of existing PSU's i.e Transfer of govt holding in PSU's to private sector
Industrial delicensing
Till, 1990 licensing compulsary for every industry but not in public sector
Removal of licensing requirements for industries, Domestic + Foreign
With liberalization & deregulation of economy, licensing required in few cases.
Investor free to set up industrial enterprise, expand it, change the location. free to make investment decisions
Technological dynamism + International competitiveness ↑
Industries have freedom to take advantage of economies of scale + economies of scope
Amendment of MRTP Act 1969
Earlier MRTP act prevent private monopolies and concn of economic power in few individuals. Prior govt approval for setting new enterprises or extension. This act only for pvt sector not public sector
Since 1991, MRTP restructured. Pre entry restriction removed. Applicable to both sector
MRTP replaced by Competition act, 2002 to uphold competition in Indian mkt
Liberalized foreign investment policy
Earlier policies welcomed FDI only for enterprises owned by Indian industries.
BoP crisis, 1960. Restrictive approach adopted. No of industries for foreign investment narrowed down. FERA 1973 adopted, most restrictive phase of India's FIP.
In NIP, FERA repealed and FEMA in effect from 2000. Foreign investors can freely enter, invest and operate industrial enterprises in India.
Dilution of restrictions on FDI i.e allowed in all sectors including services sector. except- Atomic energy and railway transport.
Foreign technology agreement
Indian industries free to negotiate terms of technology transfer with their foreign counterparts
Dilution of protection to SSI and emphasis on competitiveness
Concessional credit from banking system, Fiscal concessions, Exemption from industrial licensing & labor legislations, Preferential access to scarce raw materials, Reservn of products for govt purchase and for exclusive manufctrng in SSI. Protected from both int & ext competition.
Since 1991, end to protective measures for SSI.
Promote competition by addressing basic concerns of sector namely Technology, Finance, Marketing.
Reserved items brought down. Measures adopted to improve technology and export competitiveness of SSI
Overall SSI orientation shifted Protection → Competitiveness