India’s industrial policy of 1991

The Indian Government had undertaken industrial policy reforms since 1980, but the most radical reforms have occurred since 1991, after the severe economic crisis in fiscal year 1990-91. These reforms mainly aim

 at enhancing the efficiency and international competitiveness in Indian industry. India’s industrial policy of 1991 towards liberalisation, deregulation, market orientation has been hailed as ushering in a new era of freedom from government controls, licence raj and red carpetism and one which promises greater prosperity for the Indian people.


Main Objectives of the Industrial Policy of the Government are –

  • to maintain a sustained growth in productivity;
  • to enhance gainful employment;
  • to achieve optimal utilisation of human resources;
  • to attain international competitiveness and
  • to transform India into a major partner and player in the global arena.

Till 1970’s:-

• The Indian planners emphasized the role of heavy industry in economic development and sought to build up as rapidly as possible the capital goods sector.
• The plans envisaged a leading role for the public sector in this structural transformation of the economy.
• Major investments in the private sector were to be carried out, not by the test of private profitability, but according to the requirements of the overall national plan.
• The plans emphasized technological self-reliance, and for much of the period, an extreme inward orientation in the sense that if anything could be produced in the country, regardless of the cost, it should not be imported.

India’s industrial policy of 1991 towards liberalisation, deregulation, market orientation has been hailed as ushering in a new era of freedom from government controls, licence raj and red carpetism and one which promises greater prosperity for the Indian people. Industrial licensing was liberalized or abolished. Moreover, the Monopolies and Restricted Trade Practices (MRTP) Act deregulated. The numbers of activities reserved for the public sector enterprises (PSE) were also reduced.

Promotion of Foreign Direct Investment (FDI) forms an integral part of the Industrial Policy. FDI helps in accelerating economic growth by means of infusion of capital, technology and modern management practices. Government has put in place a liberal and transparent foreign investment regime, wherein FDI, upto 100%, is allowed, under the automatic route, in most sectors/activities. The FDI policy is announced through issue of Consolidated FDI Policy Circulars.

Merits of the New Industrial policy :

1.To raise the level of industrial efficiency, time consuming hurdles of regulations, licenses and restrictions would either be done away with or made industry friendly. Inflow of FDI and foreign technology transfers would be encouraged.
2.Additions to the supply of investible resources and technology would result in increased industrial production and productivity.
3.With the abolition of licensing system in most industries except 5, the wave of liberalization would boost the entrepreneurial skills in the economy.
4.Pruning/de reservatioin of Industries for the public sector would boost professionalism in this secotr. Increased autonomy would usher in dynamism for the betterment.
5.NIP-1991 made a special mention about the role and importance of small scale industries. The state would initiate measures to promote and strengthen small, tiny and village industries, which have large potential to deal with the problems like unemployment, regional disparities, income inequalities and inflation.
6.As the government of the country is obliged to protect the interest of workers, this policy would lay special emphasis to enhance the welfare and upgrade the economic and social status of the worker. To ensure long-lasting and cordial relations between the workers and the management, they (workers) would participate in the management decisions of the enterprises.

New Industrial Policy


  • To create high quality world class infrastructure facilities in the State and enhance connectivity to the National Capital Region (NCR) and other leading markets.
  • To provide single window facilitation in the State to expedite project clearances and provide an investor friendly climate.
  • To provide and facilitate expeditious land availability for setting Industrial ventures and Infrastructure projects.
  • To promote and encourage private sector participation in the development/management of Industrial Estates/Areas, Growth 3 Centers, IIDCs, Special Economic and Commodity Zones and Parks, Theme Parks, Tourism infrastructure, development of new tourist destinations, Airports/Helipads/Airstrips, Roads, generation, transmission and distribution of power, and projects in the area of Horticulture, Floriculture, Bio-technology etc.
  • To provide assured, good quality, uninterrupted and affordable power for industries.
  • To simplify and rationalize labour laws and procedures in tune with the current day requirements
  • To promote Small scale, Cottage and Khadi and Village Industries and Handicrafts Silk and Handloom sectors
  • To address problems of sickness and incipient sickness in Industry, SSIs and facilitate required restructuring and rehabilitation, etc.
  • To promote Industries based on local resources particularly in the Areas of Agriculture, Horticulture, Agro & Food Processing and Floriculture.
  • To promote planned and scientific exploitation of the mineral resources of the State and maximize value addition within the State.
  • To promote leading edge technologies and sunrise industries in the State in the areas of Information Technology and Bio-Technology.
  • To promote public/private sector involvement in generation of power and strengthening of the transmission and distribution network.
  • To promote Tourism as a focus area and develop Uttaranchal as a premier global tourism destination.
  • To provide special attention for setting up industries in remote areas.
  • To develop and strengthen air, road, rail and other connectivity.
  • To develop Uttarakhand as a premier education and research centre.


Salient Features:

  • Single Window Contact, Information and Facilitation by District Industries Centres and SIDCUL.
  • Single Window Clearance Mechanism
  • Time Bound Deemed Clearances.
  • Establishment of Udyog Mitra.
  • Development and Promotion of Industrial Estates by providing Land/Plots to Entrepreneurs.
  • Encouraging Private Sector Participation.
  • Professional Advice to the Projects for developing infrastructure by U-DEC
  • Mega Projects Over 50 Crores will be considered for grant of further concessions.
  • State Government and SIDCUL will provide financial credit to the entrepreneurs.
  • Enhancement of Current Power Production of State.
  • Simplification of Labour Laws.
  • Development of Remote and Hilly Powers
  • Emphasis on Khadi and Village industries
  • Development of Handicrafts, Handlooms, Wool Based Industry, Agro and Food Processing Industry, Floriculture etc.
  • Special attention to the Tea Industry and Forest Based Industry.
  • Schemes for IT industry, Biotech Industry and Industry Based on Herbal & Medicinal Plants.



  • 100% Central Excise exemption for 10 years on items other than those mentioned in the negative list in the Concessional Industrial Package announced by the Central Government.
  • 100% Income Tax exemption for first 5 years and 30% for next 5 years for the Companies and 25% for others.
  • Capital Investment Subsidy @15% with a maximum of Rs. 30 Lakhs. (Rs. 3 million).
  • Exemption from entry tax on Plant & Machinery for setting up Industry or undertaking substantial expansion and modernization.
  • Land use conversion and development charges and regime will be rationalized.
  • Stamp duty concessions will be provided in respect of land in specialized commodity parks, including I.T. parks.
  • For the purpose of Interest Incentive, Substantial Expansion shall mean additional investment of not less than 25% of the undepreciated book value of plant and machinery of an industrial unit.
  • For revival/rehabilitation of sick SSI units, interest incentive @ 3% with a maximum of Rs. 2 lakhs per annum shall be provided on the loan taken under fully tied up revival and rehabilitation package from financial institutions, banks etc.
  • In the case of sick non-SSI units, Government will sympathetically consider measures required under revival/rehabilitation package drawn by Operating Agency/Financial Institutions/Banks.
  • 100% exemption on Entertainment tax will be allowed for Multiplex projects in the State for a period of three years, and for all new amusement parks and ropeways for five years.
  • 75% of the Total Expenditure subject to a maximum of Rs.2 lakhs incurred in obtaining national/internationally approved quality marks such as ISO series certificate etc., shall be reimbursed to the entrepreneurs provided that the reimbursement / grant availed for this from all sources should not exceed the total expenditure on this head.
  • 75% of the cost subject to a maximum of Rs. 2 lakhs shall be made available to the entrepreneurs in the shape of assistance for registering their patents, provided that the total reimbursement/grant availed for this from all sources should not exceed the total expenditure on this head.
  • For educated unemployed youth, financial loan assistance for projects upto Rs. 2 lakhs in case of Manufacturing/Service Industry and projects upto Rs. 1 lakh in business sector
  • Industries generating employment opportunities shall be encouraged.
  • Purchase preference and price preference will be given to State SSIs in State purchases. Purchase preference shall be accorded to Non-SSI units within the State vis-avis units outside the State.
  • Matching State subsidy on approved projects of National Horticulture Board (NHB), Agricultural & Processed Food Products Export Development Authority (APEDA), National Medicinal Plant Board (NMPB) subject to a maximum of Rs. 20 Lakhs and subject to a total subsidy not exceeding over 50% of the project cost.



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