India Unveils Sweeping New Industrial Policy : Economy: The new reforms allow foreign investment, end some licensing procedures and discourage monopolies.

India took its largest leap away from socialist protectionism since independence, announcing Wednesday a revolutionary new industrial policy that invites foreign investment, discourages state-run monopolies and frees potential manufacturers from a dizzying array of bureaucratic licensing regulations for the first time in the nation’s history.

Viewed by most economists as a drastic, if not desperate, move to rescue India’s crisis-ridden economy, the new policy permits foreign ownership of up to 51% in many long-protected industries, particularly all fields of heavy manufacturing, high-technology, sophisticated food processing and tourism.

It scraps virtually all government licensing procedures and other “bottlenecks”--bureaucratic tangles of seemingly endless red tape that have long discouraged most multinational corporations from doing business in India.

Only those industries considered “strategic” or environmentally or socially sensitive will require bureaucratic approval.

Among those exemptions are a range of consumer products, a clear message that the government still intends to protect its nascent yet massive market of hundreds of millions of potential consumers for its own domestic manufacturers.

Included in industries that must still obtain the often-elusive licenses are: automobiles, pharmaceuticals, liquor, tobacco, stereos, televisions, video and audio equipment and most household appliances. These items are produced by Indian manufacturers at quality and price levels that cannot compete with foreign products without import duties and government regulations.

Still, the 28-page policy officially announced in the Indian Parliament on Wednesday afternoon was seen by most economic observers here as the biggest departure for India from its Nehruvian foundations, the insulated, socialist, self-sufficiency tenets laid down 44 years ago by India’s first prime minister, Jawaharlal Nehru.

The new policy--partly watered down by committed Nehruvian socialists in the government of Indian Prime Minister P. V. Narasimha Rao--included long, glowing references to India’s founding prime minister. “The goals and objectives set out for the nation by Pandit Nehru on the eve of independence . . . remain as valid today as at the time Pandit Nehru first set them out before the nation.”

It also contained broad assurances to India’s powerful labor organizations that the move toward a free-market economy will include generous welfare programs for workers who lose their jobs. And it stressed that eight of India’s biggest industries--including arms, mining, railways and mineral exploitation--will remain in the public sector and largely off-limits to foreign investors.

But the document clearly stressed that the nation’s moribund industrial sector and its super-inflated consumer economy, which have combined to saddle India with its worst foreign-exchange crisis, demand deep structural reforms.

“The winds of change have been with us for some time,” it added, declaring that, with the radical medicine prescribed by the new policy, “as a whole, the Indian economy will benefit by becoming more competitive, more efficient and modern, and will take its rightful place in the world of industrial progress.”