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27 Nov


Objective of liberalization was to
(a) Integrate Indian economy with world economy.
(b) Introduce liberalisation in Indian industries through abolition of industrial other restrictive measures:
licensing; and removing Industrial licensing had been governed by Industrial (Development and Regulation) Act 1951; though industrial licensing was liberalised from time to time; it was felt necessary that to make industrial environment in line with external globalized market government had to do away with governmental and bureaucratic interference, delays in investment decisions, red tapism, corruption, etc. Not only this, the industrial licensing policy to some extent responsible for driving away foreign companies from setting up industrial units in India. Hence in order to liberalize Indian economy government in Industrial Act 1991 removed licensing requirements for all but 18 industries. As of now, licensing is compulsory only for five industries alcohol, cigarettes, hazardous chemicals, electronic, aerospace, defence equipment and industrial explosives.
(c) To remove restriction on inflow of foreign capital and restriction pre entry with respect to MRTP Act: Under MRTP act all firms with specified assets were classified as MRTP firms; they were allowed to set up units only in select areas and that on case by case approval. In addition to control through industrial
licensing these industries also required separate approvals for additional investment. Due to prevailing globalizing economic tendencies prevailing in international market; government realized these restrictions were having
deleterious effect on domestic industries. Thus the asset restriction was removed under MRTP act. Large industries were allowed diversification and expansion of their operations
d) Industrial location Policy was liberalized: In a departure from earlier policy to locate industries, the new industrial policy provided that in locations other than cities of more than 1 million population, there will be no more requirement of obtaining industrial approvals from centre, except for industries requiring compulsory licensing. In cities with a population greater than 1 million, industries other than non polluting nature need to be located outside 25 km of periphery.

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