Economic liberalization in India started with substantial changes in industrial licensing policy.

In the early 1990s, India initiated a series of economic reforms aimed at liberalizing and opening up its economy. These reforms were introduced in response to a balance of payment crisis and the need to revitalize the Indian economy.

One of the key aspects of economic liberalization was the substantial changes made to the industrial licensing policy. Prior to the reforms, India had a complex system of industrial licensing that heavily regulated and restricted the establishment and expansion of industries. The licensing system required businesses to obtain government approvals and meet various criteria, leading to a highly controlled and protected economy.

As part of the economic reforms, the government implemented policies to dismantle the licensing regime and promote greater industrial freedom. The process of industrial de-licensing began, allowing businesses to operate without the need for government approvals and permits in many sectors. This change aimed to encourage entrepreneurship, increase competition, and attract domestic and foreign investments.

While other aspects mentioned in the options, such as convertibility of the Indian rupee, procedural formalities for foreign direct investment, and reduction in tax rates, were also part of the economic reforms, the substantial changes in industrial licensing policy marked the starting point of economic liberalization in India.

Therefore, the correct statement is that economic liberalization in India started with substantial changes in industrial licensing policy.