What the 1991 Policy Achieved, and What It Did Not

In one line

The 1991 reforms raised growth, ended shortages and made Indian firms competitive, and they did not produce the manufacturing jobs that were supposed to follow.

In the wording a student can write in an exam: the New Industrial Policy of 1991 succeeded in raising the rate of economic growth, in ending the chronic shortages produced by capacity licensing, in attracting foreign investment and technology, in improving the quality and range of goods available to consumers and in making sections of Indian industry internationally competitive; it did not, however, produce a corresponding expansion of manufacturing employment, it was accompanied by widening inequality between persons and between regions, and its benefits were unevenly distributed between sectors and States.

What it achieved

1. Growth. India's rate of growth rose after 1991 and has stayed high. The First Advance Estimates for FY26 put real gross domestic product growth at 7.4 per cent and the Economic Survey 2025-26 describes India as the fastest growing major economy for the fourth consecutive year, projecting 6.8 to 7.2 per cent for FY27. Against the three and a half per cent of the earlier decades, that is the single largest achievement.

2. The end of shortage. Capacity was fixed by licence and demand was not, so waiting lists were normal for scooters, cars, telephones and cement. With licensing abolished, capacity followed demand. This is the change an ordinary household noticed first, and it should be stated plainly because it is easy to forget how recent it is.

3. Competition, quality and choice. Firms that had sold everything they made now had to keep customers who could go elsewhere. Product quality, model ranges, warranties and after sales service in consumer goods and vehicles are the visible result.

4. Foreign investment and technology. Automatic approval up to 51 per cent equity in high priority industries, and automatic approval of technology agreements, brought capital, techniques and management practice. India also became a base for research and development and for global capability centres, which the earlier regime could not have permitted.

5. Competitiveness in particular sectors. Pharmaceuticals, automobile components, engineering goods, software and business services became internationally competitive, and [Structural Changes Since 1991: What India Buys and Sells] traces the change in the export basket that followed.

6. A capital market and a banking system that could allocate. Deregulation of interest rates, the statutory regulator for the securities market and the entry of private banks turned finance from a rationing system into an allocating one. Module III is the detail.

7. The completion of the doctrinal turn. The MRTP Act, restructured in 1991, was repealed by section 66 of the Competition Act 2002, which regulates conduct rather than size. That is the reform of 1991 carried to its logical end.