Geography Reference
In-Depth Information
After the trade reforms, industrial licensing was tackled in the new industrial policy on
Singh's first Budget Day. The moves were so dramatic and extensive that they sent out a
strong reform message, even though they had been opposed behind the scenes by some
cabinet members, as well as senior civil servants. Chidambaram says the opponents 'shot
them down as a betrayal' of the Congress party's early leaders. He overcame that opposi-
tion with some neat drafting that confounded the critics by harking back to the origins of
independent India. He says he inserted a tribute to Nehru's original goals in the first lines of
the policy document, and wrote that the new policy was 'inspired by these very concerns,
and represents a renewed initiative towards consolidating the gains of national reconstruc-
industry minister's portfolio, so he did not have to persuade another, possibly reluctant,
politician to give up a host of discretionary powers.
All but 18 nationally important and sensitive industries (such as defence, coal, pharma-
ceuticals, railways and sugar) were freed from industrial licensing, and the number of core
industries reserved for the public sector was reduced to eight, including railways, defence
technology projects were abolished, and automatic approval was announced for foreign
equity stakes up to 51 per cent (up from a 40 per cent basic limit) in 35 industries, with
faster approval-vetting above that level, and 24 per cent stakes in small-scale industries.
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Transfer of technology was eased, and revision of mergers and monopolies legislation was
announced along with plans for a new foreign investment promotion board. Also removed
were restrictions on the location of industry and price controls in various sectors such as
steel and aluminium. Foreign companies were allowed into some infrastructure areas (up to
100 per cent ownership in power projects), and the financial services' primary and second-
ary markets. Foreign stock brokers' activities were boosted by Indian companies gaining
access to global capital markets. Other major decisions taken with or shortly after the New
Industrial Policy included allowing the use of foreign brand names, and the abolition of the
finance ministry's Controller of Capital Issue who presided over stock market affairs.
Other changes followed, but the pace slowed when the approach of a general election
due in 1996 led Rao to decide that reforms were not good electoral politics. There were,
however, some more gradual changes such as the opening up of telecom and aviation to the
private sector, trade and electricity reforms and licensing of private sector banks and these
have continued, haltingly, through successive governments.
From 1996, when the Rao government was defeated, India had a series of coalitions and
it became difficult for the leading party to obtain agreement from its often more populist
regional partners. The Bharatiya Janata Party-led National Democratic Alliance (NDA) co-
alitions from 1998 to 2004 did continue with reforms, but parliamentary oppositions be-
came increasingly irresponsible and negative. Arun Shourie, the NDA's minister for dis-
