Rajiv Gandhi’s government initiated the policy of liberalization since mid-80s. The liberalization initiatives have been undertaken in India with a view to increase a production, improve quality and get access to market for products and service abroad. Radical liberalization or globalization measures have been brought in since July 1991 to make the Indian economy progressively market oriented and integrate it with the emerging global economy structure. These measures include reduction and rationalization of excise duty and customs duties, delicensing of several drug and pharmaceutical products, ready access to import of raw material and capital goods and so on.
It has created an environment conducive to an enterprise, investment and innovation. Indian industries have started to attract foreign portfolio investment and equity participation in new ventures. The government is committed to make foreign players feet at ease to invest directly and bring with it new technology and marketing skills.
There has been impressive growth in FDI inflows to India with the introduction of policy reforms. As compared to a near total concentration in manufacturing till 1991, the bulk of new inflow has come in the energy and service sector.
The New Industrial Policy, 1991
A number of significant economic changes introduced by many a number of countries all the world over, the encouraging results of the liberalization measures introduced in 1980s by the Government of India, and the precarious economic situation that prevailed during the later part 80s have encouraged and forced the then Congress government, which came back to power at the center, under the leadership of Shri. P. V. Narasimha Rao—a non - Nehru family member, to take some bold measures to rejuvenate the economy and to accelerate the pace of development. In this background, the Government of India announced its New Industrial Policy (NIP or IP) on July 24, 1991. The important objectives are: (a) to correct the distortions that may have crept in, and consolidate the strengths built on the gains already made, (b) to maintain sustained growth in the productivity and gainful employment, and (c) to attain international competitiveness. Therefore, the basic philosophy of the New IP, 1991 has been the continuity with change. Because, the new policy represents a renewed initiative towards consolidating the gains of national reconstruction at this crucial stage. But what is more important is the change (in continuity with change)—change in the attitude of the state towards the industrial society, change from centrally planned economy to market led economy, change from excessive government intervention to minimal intervention, change from nationalization to privatization, change from subsidization and cross-subsidization to gradual withdrawal of subsidy, etc. But these changes, which the government has introduced, represent a sharp departure from the earlier industrial policies. These changes pertain broadly to five areas viz., (a) Industrial licensing, (b) Public sector policy, (c) MRTP Act, 1969, (d) Foreign investment, and (e) Foreign technology agreements.
This is one of the areas in which substantial change has been made by the government. With a view to give effect to these changes, the government issued a notification [viz., Notification No. 477 (E)] on July 25, 1991 and this notification has exempted the industrial undertakings from the operation of the following Sections of Industries Development and Regulations Act, 1951 subject to the fulfillment of certain conditions. a) Section 10 (which deals with registration of existing industrial undertakings); b) Section 11 (which is concerned with the licensing for new industrial undertakings); and c) Section 13 (which is concerned with the licensing requirements for substantial expansion).