The process of liberalisation was further accelerated with the announcement of the new industrial policy in July 1991. Some important factors of the new liberalisation are detailed below:
1. Industrial licensing will be abolished for all projects except for a short list of industries related to security and strategic concerns, social reasons, hazardous chemicals and overriding environmental reasons and items of elitist consumption.
2. In projects where imported capital goods are required, automatic clearance will be given in cases where foreign exchange availability is ensured through foreign equity or where the CIF value of imported capital goods required is less than 25 per cent of total value of plant and equipment up to a maximum value of Rs. 2 crore.
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3. The system of phased manufacturing programmes run on an administrative case by case basis will not be applicable to new projects. Existing projects with such programmes will continue to be governed by them.
4. Existing units will be provided a new broad banding facility to enable them to produce any article without additional investment.
5. The exemption from licensing will apply to all substantial expansions of existing units.
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6. All existing registration schemes will be abolished.
7. Entrepreneurs will henceforth only be required to file an information memorandum on new projects and substantial expansions.
8. The mandatory convertibility clause will no longer be applicable for term loans from the financial institutions for new projects.
A new development has been the introduction of a measure of stability to the policy framework via long-term fiscal policy and medium term trade policy commitments.
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The policy issues described above for improving industrial performance involve a considerable measure of deregulation and therefore may be called economic liberalisation.
There is considerable internal deregulation aimed at strengthening the more efficient domestic firms and encouraging them to invest and expand. This will inject much more competition into the system, creating incentives for reducing costs.
The internal liberalisation has been accompanied by a policy of maintaining a sufficiently open access to imports to permit modernisation and technological up gradation of Indian industry which will reduce costs and promotes international competition.
As far as trade liberalisation is concerned, a broad direction has been given about the desirability of switching from quantitative controls to tariffs. Let us discuss trade liberalisation in greater detail.