Major Industrial policies introduced in India since independence


  1.  MRTP (Monopolistic and Restrictive Trade Practice), 1969 (to check the expansion of industrial houses with assets > Rs. 20 cr ) Also reason for missing middle
  2.  FERA – Import export control. Before 1980 no FDI was allowed without transfer of technology. Renewals of foreign collaborations were restricted. Foreign Exchange Regulation Act, 1973 was restricted to FDI in certain core or high priority industries.
  3.  Industrial Disputes Act, 1976 (firms with > 300 workers had to take government permission before laying off workers)
  4.  Contract Labor Act, 1970 (firms can’t hire contract labor in industries where labor is seen to be essential to the main activity)
  5. Urban Land Ceiling Act, 1976 (can’t own vacant land beyond the ceiling but gave discretionary powers to the state governments to exempt from ceiling)
  6. over 800 items reserved for SSIs

In the wake of these regulations industrial growth, however  fell from 6.3% to 4.1%. Overall manufacturing fell coupled with Decline in public investment in investment followed by decline in private investment, oil shocks and wars. upturn was seen from 1980s onwards and finally in 1990s ,following the Economic Reform package.


Industrial Licensing

    • Licensing was abolished except for certain defence and strategic industries.
    •  Licenses not needed for capacity expansion as well.
    • Thus areas reserved for public sector exclusively were reduced from 18 to 3.

MRTP was kept alive (repealed and replaced in 2002 by Competition Act) but the focus is on  increasing competition. Threshold limits were abolished. Pre-approvals are no longer required. The CCI only checks monopolistic behavior and scrutinizes mergers.

Foreign and Trade

    • Automatic FDI approvals with varying participation rates
    • Foreign Investment Promotion Board FIPB constituted to scrutinize FDI in other areas.
    • Managed Floating Rate currency Which led to Led to about20% devaluation
    •  replacement of Foreign Exchange Regulation Act (FERA), 1973 with Foreign Exchange Management Act, 1999 (FEMA) reduced restriction on foreign exchange.

Public Sector

    • Disinvestment policy was adopted. Listing to bring about discipline and buybacks also allowed.(  areas  reserved for public sector exclusively were reduced from 18 to 5 and subsequently to 3.)
    • Sick industries to be referred to BIFR(Board for industrial & financial reconstruction)
    •  Focus will be on strategic, high-tech sectors where monopoly would be preserved


    • Floor limits on SLR reduced from 38% to 25% to reduce financial repression on the asset side
    • Private banks since 1990