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Unit 17: Industrial Sector in Post-Reform Period
Pavitar Parkash Singh, Lovely Professional University

Unit 17: Industrial Sector in Post-Reform Period Notes

CONTENTS
Objective
Introduction
17.1 Industrial Sector in Post-Reform Period
17.2 Small-Scale Industries in India
17.3 Pattern of Ownership of Industries
17.4 Summary
17.5 Key–Words
17.6 Review Questions
17.7 Further Readings

Objectives

After reading this Unit students will be able to:
• Explain the Industrial sector in Post-Reform Period
Introduction

Liberalisation of industrial licensing and opening up industry to foreign investment, the amendment
to the Monopolies and Restrictive Trade Practices (MRTP) Act and restricting the role of the public
sector were some of the important policy changes made by the 1991 reforms of Industrial Policy. At
the same time, a separate set of policy measures were introduced for the promotion and strengthening
of Small-Scale Industries (SSIs) in August, 1991. The empirical studies have shown that the investment
boom of the early 1990s led to a rapid increase in demand and in profits; improvements intechnology
and efficiency probably added to this effect. Regarding the productivity front of the manufacturing
sector, the empirical evidences reflect a fall in labour productivity and capital intensity in the post-
reform period. The performance of the SSI sector in India shows that the sector is facing a tough
challenge for its survival and growth in the period of globalisation. It is seen that the growth and
contribution of the SSI has not been so impressive in the post-reform period. However, international
and national policy changes have thrown open new opportunities and markets for the Indian SSI
sector. The performance of industrial sector in the post-reform period can be discussed in the light of
changes in the industrial policy made in 1991. Moreover, the assessment also includes discussion on
structural changes in the industrial production and impact of liberalisation on profitability and
productivity of the manufacturing sector. The Small-Scale Sector (SSI) has great potential and an
importance place in the Indian economy; hence this sector shall be given special emphasis.
17.1 Industrial Sector in Post-Reform Period

The widespread regulation and controls over private economic activity by the Government had
inhibited economic efficiency and growth clearly by the late 1970s and early 1980s. Thus, systematic
deregulation was started in the mid-1980s. Moreover, taxation reform-mainly the conversion of multi-
point excise duties into a modified value added tax (MODVAT) by 1990-also influenced industrial
performance. It did so by reducing the taxation of inputs and the associated distortion. Further, the
New Industrial Policy (NIP) statement of 1991 introduced reforms in regulations governing licensing,
monopoly, foreign investment and small-scale sector industries and in the role of public sector
enterprises. An important part of the NIP statement of 1991 was liberalisation of industrial licensing
and opening up industry to foreign investment. Apart from this, the reforms process of the 1990s

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