What are the major Objectives of the new industrial policy of India?

The major objectives of the new industrial policy are as

(i) Maintenance of a sustained growth in productivity and gainful employment;

(ii) rectification of the distortions or weaknesses that may have crept in the industrial structure as has developed over the last four decades; (iii) consolidation of the strength build up during the last four decades of economic planning and to build on the gains already made; (iv) attaining of international competitiveness. The pursuit of the above cited objectives will be tempered by the need to preserve the environment as well as the need to ensure the efficient use of available resources.

1. Industrial Licensing:

(i) Industrial licensing policy and procedures have also been liberalized from time to time. A full realization of the industrial potential of the country calls for a continuation of this process of change.

(ii) Major policy initiatives and procedural reforms are called for in order to actively encourage and assist Indian entrepreneurs to exploit and meet the emerging domestic and global opportunities and challenges.

(iii) The bedrock of any such package of measures must be taken to the attainment of technological dynamism and international competitiveness requires that enterprises to be enabled to respond swiftly to fast-changing external conditions that have become characteristic of today’s industrial world.

(iv) Government policy and procedures must be geared to assist entrepreneurs in their efforts.

(v) The system of reservation for public sector undertakings has been evolved towards the ethos of greater flexibility and private sector enterprise has been gradually allowed to enter into many of these areas on a case by case basis.

(vi) This calls for bold and imaginative decisions designed to remove restraints on capacity creation, which at the same time, ensure that overriding national interests are not jeopardized.

(vii) Thus industrial licensing will henceforth be abolished for all industries, except those specified, irrespective of the levels of investment.

2. Foreign Technology and Investment:

Foreign investment in India is regulated by the Govt, from the very beginning. Therefore, for any foreign investment or technology, prior approval of the Govt, is necessary which leads to unnecessary delays.

Thus, the new industrial policy prepares a list of high invest priority and high technology in which automatic approval will be given for direct foreign investment up to 51 percent equity.

Such clearance will be available if foreign equity covers the foreign exchange requirement for imported capital goods. Moreover, in order to provide access to international markets, majority foreign equity holding up to 51 per cent equity will be allowed for trading companies primarily engaged in export activities.

Apart from this, a special Empowered Board would be constituted to negotiate with various large international firms and approve direct foreign investment in selected areas.

Regarding the foreign technology agreements automatic approval will be given in identified high priority industries up to a lumpsum payment of Rs. 1 crore, 5 per cent royalty for domestic sales and 8 per cent for exports, subject to total payments of 8 per cent of sales over a period of ten years from the date of agreement or seven years from commencement of production.

3. Public Sector:

The public sector has been the centre to the philosophy of our development. But in spite of its huge investment, public sector enterprises could yield a very low rate of return on capital investment. Numerous, public sector undertakings are incurring losses regularly.

Thus, in a bid to face the situation, the Govt, should restructure the potentially viable units. This priority area for future growth of PSEs included-essential infrastructure, technology development, exploration and exploitation of minerals and oil, products with strategic consideration etc.

Moreover, the new policy has now reduced the list of industries under public sector to 8 as against 17 industries reserved in 1956 policy. The new industrial policy also states that the govt will raise the strength of those public sector units included in the list of reserved industries.

The Govt will also review the existing public sector undertakings. Industries earning higher profits will be provided with much higher degree of management autonomy through MoU. Apart from all this, the govt has also taken a decision to disinvest the equity shares of selected public units.

4. MRTP Limit:

Under the MRTP Act, firms having assets over a certain size of Rs. 100 crores since 1985 were classified as MRTP firms. These firms were allowed to start only selected industries on a case by case approval. But now the Govt has realized that the MRTP limit has become deleterious in its effect on industrial growth.

Therefore, new policy states that the pre-enter scrutiny of investment decisions by the MRTP companies will no longer be required.

Emphasis should be on controlling and regulating-the monopolistic, restrictive and unfair trade practices. Moreover, provisions of the MRTP Act will be strengthened to enable the MRTP commission to take appropriate action in respect of these practices.

5. Location Policy Liberalized:

Regarding the location of industries in cities of less than 1 million populations, no industrial approval is required from the centre. In cities, with more than 1 million populations, industries other than those of non-polluting in nature will be located outside 25 kms. of its periphery.

6. Abolition of Phased Manufacturing Programme:

To increase the pace of indigenization, phased manufacturing programme was enforced. The new policy has totally abolished such programmes as the Govt, feels, due to substantial reforms of trade policy and devaluation of rupee, there is no need to enforce such programmes.

7. Removal of Mandatory Convertibility Clause:

Banks and financial institutions have financed a large part of industrial investment that has followed a mandatory convertibility clause.

This has provided no option to convert loans into equity this was an un-warranted threat to private firm. The new industrial policy has removed this system.