Liberalisation means deregularisation of the industrial sector by cutting down to the minimum administrative interference in its operation, instead, letting the market forces operating through the profit motive of the producers and free competition among them regulate and guide the future development of the sector.

Under liberalisation new Industrial Policy was announced in July 1991 aiming at removing bureaucratic controls which thwart industrial devel­opment and at opening up a large number of indus­tries in the private sector.

This policy was again revised in March 1993. By now, the requirement of industrial licensing has been abolished for all indus­tries except for 16 products, e.g., coal and lignite, petroleum, alcohol, sugar, asbestos, plywood, chamois leather, fur skin, paper, electric, aerospace and defense equipments, industrial explosives, hazardous chemicals, drugs and pharmaceuticals and consumer electric goods.

It also opened the economy to direct foreign investment with 51 per cent equity and started with the process of reducing government subsidies. Abolition of restrictions on most import and export items, dramatic reductions in import tariffs and almost complete removal of restrictions on foreign investments are other worth mentioning features of this reform.

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The liberalisation policy also includes disinvestment of shares of public undertakings to reduce government share holding to 51 per cent. This will automatically make them unaffected from delayed decisions at government level and make them efficient for prompt decisions.

The main objective of liberalisation is to permit Indian and foreign entrepreneurs to enter the power, road and communications, as well as even petroleum sector so that the Central and State gov­ernments can lay greater emphasis upon the execu­tion of social welfare programmes.

It is encouraging that with stable democracy, well developed indus­trial infrastructure, organised software backing, re­liable economic researches, advertising agencies, stock markets, banks and financial institutions, well developed network of professional education and usage of English language etc are advantages which favour foreign investment. The reforms, though slow in implementation, are showing their impact on the industry.