The system of obtaining government approvals has been progressively liberalised over the 1990s, commencing with the watershed changes in the industrial policy announced on 24 July, 1991. This abolished industrial licensing substantially, announced measures for facilitating foreign investment and technology transfers and opened most areas which were earlier reserved for the public sector. The Industrial Policy Resolution of 1956 and the Statement on the Industrial Policy of 1991 provide the basic framework for the overall industrial policy of the government.

The requirement of obtaining an industrial license for manufacturing activities is now limited only to the following:

Industries reserved for the public sector

Five industries of strategic, social or environmental concern. These are:

Distillation and brewing of alcoholic drinks

Cigars and cigarettes of tobacco

Electronics aerospace and defence equipment

Industrial explosives

Hazardous chemicals

Manufacture of items reserved for the small scale-sector (SSI Units) by non-small scale industrial units or by units in which foreign equity is more than 24%. A list of items reserved for the small scale sector is available at www.smallindustryindia.com

All other industries are exempt from licensing subject to certain locational restrictions in metropolitan areas. In the event, locational restrictions are not adhered to, the unit is required to obtain an industrial license.

Industrial licence requirement narrowed: only public-sector reserved, strategic sectors, reserved small-scale items and locational breaches need permits. The industrial license requirement is now confined to industries reserved for the public sector, a defined group of strategic or socially/environmentally sensitive industries (including alcohol distillation, tobacco products, electronics/aerospace/defence equipment, explosives and hazardous chemicals), and cases where non-small scale or foreign equity units produce items reserved for the small-scale sector; most other manufacturing is exempt unless locational restrictions in metropolitan areas are breached.