NEW DELHI: The government announced Wednesday it would allow foreign companies to gain as controlling interest in much Indian business marking a sharp change from longstanding protectionist policies.
Finance Minister Manmohan Singh also announced major budget cuts in agricultural subsidies and a 20% increase in gasoline prices to resolve an economic crisis that he described as the worst in India’s history.
The govt defense budget for the year ending March 311992 will total $632 billion a cut of about 30% taking into account inflation.
The crisis in the economy is both acute and deep Singh said in the Lok Sabha the lower house of Parliament. We have not experienced anything similar in the history of independent India.
The govt said the limit on foreign-equity holdings will be raised from 40% of 51% for companies engaged primarily in export in 34 industries needing large investment and advanced technology.
There shall be no bottlenecks of any kind in this process a policy statement said.
The policy will cover exporters of industrial and agricultural machinery fertilizers hotels cement automobile tires metallurgy and industrial chemicals.
Since attaining independence from Britain in 1947 India has shielded local industries from foreign competition and curtailed foreign investment.
Despite a vast potential market of 844 million people foreign investment in India has been held to less than $200 million a year because of red tape and limits on taking profits out of the country.
But a growing balance-of-payments crisis and international debt estimated at $70 billion has forced changes. Earlier this month the govt devalued the rupee by about 209% and slashed trade restrictions to increase exports.
The changes apparently were made at the behest of the International Monetary Fund which India has approached for a loan to avoid defaulting on international debt.
LONDON: The Indian budget marks a major departure from the socialist creed and the new industrial policy abolishing licensing and other regulations will open the way for the first time in 40 years to a market-oriented economy the British media reported here Thursday.
The pro-labor the Guardian said: in a drastic shakeup of its moribund industrial policy the Indian govt announced the abolition of licensing and other regulations opening the way for the first time in 40 years to a market oriented economy.
India is to jettison the restrictive economic policies patterned on the Soviet model which have been the hallmark of the country over four decades in a radical transformation announced in Parliament the pro-govt The Times said.
Article extracted from this publication >> August 2, 1991
