Industrial Policy Of 1991 – Industrial Development in India


Industrial Policy 1991

Professor P. J. Kurien of Vennikulam, Kerala, is a political and social worker, teacher and educationist. He known for Industrial Policy, 1991.

In order to accelerate Industrial Development in India, and in accordance with the changing circumstances, various industrial policies were declared in the years 1948, 1956, 1977, 1980 and 1985, but in spite of all efforts, the pace and as well as the level of Industrial Development in India, could not reached according to its need. Therefore, in order to lift unnecessary restrictions on Industries, under the licensing policy, and to increase their efficiency, development and technological level, in order to make Indian goods usable in the competitive global market, on 24th July, 1991, in Lok-Sabha the Minister of States for industries, Mr. P. J. Kurian declared the Industrial Policy, 1991.


  1. To liberalise the economy
  2. To increase employment opportunities
  3. To encourage foreign assistance and co-partnership
  4. To make the Public Sector more competitive
  5. To increase the production and productivity, give encouragement to industries
  6. To liberate the economy from various government restrictions
  7. Industrial development of backward areas
  8. To give liberty to private sector to work independently
  9. To make development for modem competitive economy
  10. To give encouragement for expansion of production capacity
  11. To increase exports and liberalize (facilitate) imports.


  1. Liberalized Industrial Licensing Policy

    Under this policy, with the exception of 18 industries, licensing system has been removed for all other industries. Some of those 18 industries, where the licensing system is still mandatory are; Army and Defence, Forest Conservation, Industries engaged in manufacturing goods which are harmful to the Environment and industries, which are manufacturing luxury goods, for the affluent (very rich) class, etc.

  2. Localisation Policy

    Those industries which are situated in cities, where the population is less than 1 million, industrial permission from the government, to start any industry is not required. In cities having population of more than 1 million, with the exception of electronics and other pollution free industries, all industrial units may be 25 kilo meters away from the city’s boundary.

  3. Foreign Investment

    Provision has been made to invest up to 51 percent by foreign investors in the equity shares of Indian Companies. Earlier, this limit was limited up to 40% only. This will increase the flow of foreign capital into India and make possible technical exchange from developed countries.

  4. Workers’ Participation in Management

    Under this industrial policy, emphasis has been laid on safeguarding the workers’ interest. Provision has been made for workers’ participation in management, in order to manage sick units, provision has been made to form co-operative societies of workers, to run them.

  5. Role of Public Sector

    Those public sector undertakings which are not doing well at present, but in which there are enough chances of improvement, shall be re-constituted. Public sector undertakings, which are facing constant financial crisis, shall be kept under observation by ‘Board of Industrial and Financial Reconstruction’ or by any other institution, which is fixed by the government.

  6. Change in the MRTP Act

    In the industrial policy 1991, major changes have been made in the Monopolistic and Restrictive Trade Practice Act. Companies having investment of Rs. 100 crores, will not be required to take prior Government permission, for opening new subdivisions, or to expand the present industry or for amalgamation of companies. This industrial policy has also eliminated the investment limit, which was fixed by MRTP Act.

  7. Creation of Productive Capacity

    In order to increase the productive capacity of new industries, all administrative controls have been removed. Industrialists will only have to inform the government of opening of new units or increasing their production capacity.

  8. Promotion of Industries in Rural Areas

    In order to remove the regional imbalances, under this industrial policy, various provisions have been made to encourage industries in rural areas.

  9. Foreign Technology

    No prior permission from government will be required in importing foreign technology, up to the limit of One Crore rupees. Indian companies, will be free to negotiate their terms and conditions, with their foreign collaborators, in matters of technology transfers (exchange of ‘technical know-how).

  10. Reservation of Small Scale Industries

    This policy has stated that the government shall keep giving assistance to small scale industries. The limit for small scale industries has been reduced from Rs 3 Crores to Rs. 1 Crore, since 24 December, 1999.


“Industrial Policy 1991” is also known as “Open Industrial Policy”, because it contains several revolutionary schemes and plans. If, we make an analytical study of the special features of Industrial Policy 1991, it becomes clear that several fundamental changes have been, made, in this policy.

  1. Liberalization of industrial licensing system
  2. Welcoming of foreign capital
  3. Facility of Import of Technical Know-how
  4. Exemption to industrial structure from several unnecessary government controls
  5. Aiming to make Indian industries more competitive at national and international level
  6. Safeguarding the interest of workers, etc.

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