Meaning: -The Government of India announced the new industrial policy (NIP) on 24th July, 1991. The NIP aims at liberalisation of Indian industry. The main objectives of the NIP are:
1. Attainment of international competitiveness.
2. Development of backward areas.
3. Encouraging competition within Indian industry.
4. Efficient use of productive resources.
5. Full utilisation of plant capacities to generate employment.
6. Revival of weak units, etc.
Following are some of the main features of the industrial policy 1991
1. Dereservation of Public Sector: -The role of public sector has been reduced to a great extent. The number of industries reserved for public sector was reduced to 8 industries. There was further Dereservation. At present, there are only three industries reserved for public sector which include. (a) Atomic energy (b) Railways, and (c) specified Minerals.
2. Delicensing: -The most important features of NIP, 1991 was the abolition of industrial licensing of all industries except six industries. The six industries are of social and strategic concern. The six industries are
1. Hazardous Chemicals. 2. Alcohol 3. Cigarettes 4. Industrial Explosives 5. Defence Products, and 6. Drug and pharmaceuticals.
3. Disinvestment of public sector: -The NIP 1991 permitted disinvestment of public sector units. Disinvestment is a process of selling government equity in PSUs in favour of private parties. Disinvestments aim at certain objectives. (1) To provide better customer Service. (2) To make effective use of disinvestment funds. (3) To overcome the problem of political interference. (4) To enables the government to concentrate on social development. Etc,
4. Liberalisation of Foreign Investment: -Prior to this policy, it was necessary to obtain approval from the government in respect of foreign investment. At present, 100% foreign equity participation is allowed in select industries.
5. Liberalisation Foreign Technology: -The NIP 1991 liberalised foreign technology to bring about technological improvement in Indian industry. (1) No Permission is required for hiring foreign technicians and foreign testing of indigenously developed technologies.
6. Liberalisation of Industrial Location: -The IP 1991 stated that there is no need to obtain approval from Central Government to locate industries in areas (other than cities of more than one million populations). However, industries subject to compulsory licensing, approval need to be obtained. In cities with a population of more than one million, polluting industries were required to be located outside 25 Kms of the city area.
7. Removal of Mandatory Conversion Clause (MCC): - In India, banks and FIs provide a large part of industrial finance. The banks and FIs have the option to convert the loans into equity. This may create a threat of takeover by FIs. Therefore, the IP 1991 abolished MCC.
8. Abolition of phased Manufacturing Programme: - The IP 1991 has suggested for the abolition of PMP, which was in force in engineering and electronic industries.
