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A major shift in the industrial policy was made by the Congress Government, led by P.B. Narasimha Rao onjuly 24, 1991. The main aim of this policy was to unshackle the country’s industrial economy from the cobwebs of unnecessary bureaucratic control, induced liberalisation with a view to integrate the Indian economy with the world economy, to remove restrictions on direct foreign investment and also to free the domestic entrepreneur from the restriction of M RTF (Monopolies and Restrictrive Practices Act). Moreover, the policy aimed at shedding the load of public enterprises which have shown a very low rate of return or incurred losses over the years. The salient features of the 1991 industrial policy were:
1. Except some specified industries (security and strategic concerns, atomic energy, coal, social reasons, environmental issues, railways, atomic minerals, hazardous projects, and articles of elitist consumption), industrial licensing would be abolished.
2. Foreign investment would be encouraged in high priority areas upto a limit of 51 per cent equity.
3. Government would encourage foreign tr ade companies to assist Indian exporters in export activities.
4. With a view to inject desired level of technological dynamism in Indian industries, the government would provide automatic approval for technology agreements related to high priority industries.
5. Relaxation of MRTP (Monopolies and Restrictive Practices Act) which has almost been rendered non functional.
6. Dilution of Foreign Exchange Regulation Act (FERA) making Rupee fully convertible on trade account.
7. Disinvestment of Public Sector Units’ shares.
8. Closing of such public sector units which are incurring heavy losses.
9. Abolition of C.C.I. and wealth tax on shares.
10. General reduction in custom duties.
11. Provide strength to those public sector enterprises which fall in reserved areas of operation or in high priority areas.
12. Constitution of special boards to negotiate with foreign firms for large investments in the development of industries and import of technology.