2. Industrial Delicensing

The removal of licensing requirements for industries, domestic as well as foreign, commonly known as “de-licensing of industries” was another important feature of NIP. Till the 1990s, licensing was compulsory for almost every industry, which was not reserved for the public sector. This licensing system was applicable to all industrial enterprises having investment in fixed assets (which include land, buildings, plant & machinery) above a certain limit. With progressive liberalization and deregulation of the economy, industrial licenses, which are regulated under the Industries (Development and Regulation) Act 1951, are required in very few cases.

With a few exceptions, investors are free to set up a new industrial enterprise, expand an industrial enterprise substantially, change the location of an existing industrial enterprise and manufacture a new product through an already established industrial enterprise. The objective of industrial delicencing is to enable business enterprises to respond to the fast changing external conditions. Entrepreneurs are free to make investment decisions on the

basis of their own commercial judgment. This facilitates technological dynamism and international competitiveness. Further industries have the freedom to take advantage of ‘economies of scale’ as well as ‘economies of scope’ in the existing industrial policy environment.