Which of the following was the focus of the Industrial Policy Statement, 1991?
I. Allowing foreign investment by lowering controls and regulations
II. Exit policy for the sick units in private sector for a smooth exit without affecting welfare of labour
Show answer & explanation
Correct answer: C
Explanation
The New Industrial Policy of 1991 was a watershed in India's economic history, known as the LPG (Liberalization, Privatization, and Globalization) reforms.
Statement I: The main objective of this policy was to reduce red-tapism and open the Indian market to foreign direct investment (FDI).
Statement II: The government proposed a streamlined exit policy for sick private sector units to ensure better utilization of resources, and established a National Renewal Fund to protect the interests of workers.
Both Statements I and II were key pillars of the 1991 policy, so option 3 (both I and II) is the correct answer.
Key features of the Industrial Policy Statement, 1991:
Abolition of industrial licensing: The requirement for licensing was abolished for most industries (except for a few strategic sectors).
Reduction in the role of the public sector: The number of industries reserved for the public sector was reduced from 17 to just 8 (now even fewer).
Foreign Investment (FDI): Automatic foreign direct investment of up to 51% was allowed in high-priority industries.
Amendment to the MRTP Act: Investment limits under the Monopolies and Restrictive Trade Practices Act (MRTP) were removed to allow companies to expand.
Sick units and worker welfare: Sick public sector undertakings were handed over to the Board for Industrial and Financial Reconstruction (BIFR), and a social safety net was ensured to protect workers.