Industrial Policy of India

Industrial Policy of India
Industrial Policy of India

Main objectives of the Industrial Policy

➧ The primary goals of the industrial policy of the government are
◘ To maintain sustained growth in productivity.
◘ To enhance gainful employment.
◘ To achieve optimal utilization of human resources.
◘ To attain international competitiveness.
To transform India into a prime partner and participant within the global platform.

➧ To carry out these objectives, the Policy focus is on __
◘ Deregulating Indian industry.
◘ Allowing autonomy and adaptability to the industry in responding to market forces; and
◘ Providing a policy regime that facilitates and promotes the growth of Indian industry

➧ To implement the industrial policy as per the objectives, till now India announced 6 major industrial policies (1948, 1956, 1973, 1977, 1980, 1991)

➧ The first industrial policy of India started in 1948.

Source DPPIT Official Website   – Click Here

Major Industrial Policy of India

Industrial Policy Resolution – 1948 (IPR – 1948)

❒ Features of Industrial Policy Resolution – 1948
➧ It was the first Economic Policy of India.
➧ In this industrial policy India adopted the system of the Mixed Economy.
➧ The Industrial Policy Resolution of 1948 was presented in the parliament by the then Industry Minister Dr. Shyama Prasad Mukherjee.

➧ This policy was called “Socialization of vacuum”.
➧ Under this policy, the largest industries were classified into four categories, They are_
• 1. Strategic Industries (Public Sector)
• 2. Basic / Key industries (Public-cum-Private Sector)
• 3. Controlled Private Sector industries
• 4. Other industries (Private & Cooperative sector)

❖ 1. Strategic Industries (Public Sector)
◘ These were the Industries with exclusive Central government monopoly.
◘ This category included three industries ___
• Arms and Ammunitions
• Atomic Energy
• Rail transport.

❖ 2. Basic / Key industries (Public-cum-Private Sector)
◘ This category included six industries, they are _

1. Coal2. Iron and Steel3. Aircraft manufacturing
4. Shipbuilding5. Manufacture of telephone6. Telegraph and wireless apparatus and Mineral oil

▶ These 6 Industries are designated as “Key Industries” or “Basic Industries”.

❖3. Controlled Private Sector industries
◘ The Industries under this category are indirectly controlled by the central government through strong regulation.
◘ Eighteen industries were kept in the Controlled Private Sector industries including Heavy Chemicals, Sugar, Automobiles, Cotton & Woollen textiles, Paper, Salt Fertiliser, Tractor, Electricity, Machine tools, Air and sea transport.

❖ 4. Other industries (Under Private & Cooperative sector)
◘ All other industries which were not included in the above-mentioned three categories were left open to the private sector.

Industrial Policy Resolution of 1956 (IPR – 1956)

❒ Features of Industrial Policy Resolution – 1956
➧ This Policy was based on the P.C Mahalanobis model
➧ This industrial policy, is also known as the ‘Economic Constitution of India’ or the ‘Bible of State Capitalism’.
➧ Expansion of the public sector became the directive principle of state policy.
➧ Pandit Jawaharlal Nehru termed the PSUs-‘temples of modern India.
➧ IPR-1956 is also known as the ‘License-Quota-Permit’ regime.
➧ Emphasis on small industries and khadi and village industries.
➧ Most important industrial policy of India by the experts.
➧ Industrial Policy Resolution – 1956 emphasis on heavy industries.
➧ The fourfold classification of industrial policy of 1948 was changed to a threefold classification in the Industrial Policy Resolution – of 1956.

➧ The threefold classification is _
◘ Schedule A Industries

• Total 17 industries added in Schedule A.
• The Center has complete exclusive rights/monopoly over these 17 industries.
• IPR – 1956 known as the ‘Central Public Sector Undertakings (CPSUs)’. Later these were getting popularity as Public Sector Undertakings (PSUs).
• Number of PSUs set up by the Government of India went to 254 in 1991.

◘ Schedule B Industries
• Total 12 industries added in Schedule B.
• These 12 industries opened for both the public and Private sectors.
• Provisions of compulsory licensing.
• Neither the states nor the private sector had monopolies.

◘ Schedule C Industries• All other industries except those industries which were listed under Schedule A and B fall under Schedule C Industries.
• These were open to the private sector but subject to license.

Industrial Policy Statement – 1969 (IPS -1969)

❒ Features of Industrial Policy Statement – 1969
➧ Aimed at solving the shortcomings of the licensing policy.
➧ Through this industrial policy, the Monopolistic and Restrictive Trade Practices (MRTP) Act was introduced.
➧ To regulate the trading and monopoly and concentration of economic power the MRTP act was passed.
➧ As per the MRTP act any firms with assets of 25 crores or more were put under obligation of taking permission from the Government of India before any expansion, greenfield venture, and takeover of other firms.
➧ Such firms came to be known as the ‘MRTP Companies’.
➧ The upper limit (known as the ‘MRTP limit’) for such companies was revised upward to 50 crores in 1980 and 100 crore in 1985.
➧ In the year 2002, the MRTP Act was abolished and was replaced by Competition Act, 2002.

Industrial Policy Statement, 1973

❒ Features of Industrial Policy Statement – 1973
➧ In this industrial policy 6 core industries were created.
➧ These 6 industries are the fundamental importance for the development of all other industries.
➧ These 6 core industries are_

1. Iron and steel2. Cement3. Coal
4. Crude oil5. Oil refining6. Electricity

➧ Above industries are known as basic industries or infrastructure industries.
➧ The concept of ‘joint sector’ was introduced in which a partnership among the Centre, State, and Private sectors was allowed.
➧ Foreign Exchange Regulation Act (FERA), 1973 passed.
➧ The Industrial Policy Statement – 1973 also known as the ‘draconian’ Act.

Industrial Policy Statement – 1977

❒ Features of Industrial Policy Statement – 1977
➧ This Industrial Policy was introduced by the Janata Government in 1977.
➧ The Industrial Policy Statement of 1977 emphasized on _
• Small scale and Tiny industries.
• Resurrection of Khadi and village industries.
• Power generation and transmission sector.
• Prohibition of Foreign investment in unnecessary areas.

Industrial Policy of India (1)
features of the Industrial Policy of India

Industrial Policy Resolution – 1980 (IPR – 198

❒ Features of Industrial Policy Resolution – 1980
➧ Foreign investment via the technology transfer route was allowed again (similar to the provisions of the IPS, 1973).
➧ The ‘MRTP Limit’ was revised upward to Rs/- 50 crore to promote the setting of bigger companies.
➧ Industrial licensing was simplified.
➧ Overall liberal attitude followed towards the expansion of private industries.

Industrial Policy Resolution, 1985 & 1986 (IPR – 1985 , 1986)

❒ Features of Industrial Policy Resolution, 1985 & 1986
➧ Foreign investment was further simplified, the equity holding of the MNCs in the Indian subsidiaries could be up to 49 percent with the Indian partner holding the rest of the 51 percent shares.
➧ The ‘MRTP Limit’ was revised upward to Rs/ – 100 crore.
➧ Promoting the idea of bigger companies.
➧ Only 64 industries bring under compulsory licensing.
➧ Highly focused on sunrise industries such as telecommunication, computerization, and electronics.
➧ Industries based on imported raw materials got a boost.

New Industrial Policy, 1991

❒ Features of New Industrial Policy, 1991
➧ This policy was introduced to revitalize the distortions and weaknesses of the industrial structure of the country.
➧ It focuses on the development of the country rather than regulations.
➧ Most of the shortcomings of the past industrial policy were amended in the industrial policy of 1991.
➧ Deregulation of the industrial sector.

De-reservation of Public sector
◘ The 17 industries which are reserved for the central government by the IPR, 1956, were cut down to only 8.

◘ These 8 industries include_

1. Arms & Ammunition2. Atomic energy3. Coal4. Mineral Oils
5. Railway Transport6. Mining of Iron Ore, Manganese Ore, Gold, Silver7. Mining of Copper, Lead, Zinc,8. Mining of Atomic Minerals

➧ At present there are only two industries under the central Govt.
◘ I. Atomic energy and nuclear research and other related activities (mining,  management, fuel fabrication, export-import, waste management.)

II. Railway Operations (like Mass rapid Transport systems, High-speed train projects, Locomotives and coach manufacturing, Dedicated freight lines, Railway electrification, etc.)

 De-licensing or the end of red-tapism
◘ The compulsory provision of licensing belonging to Schedules B and C as per the IPR, 1956 was cut down to only 18.

➧ At present there are only five industries that require industrial licensing. They are_
• 1. Aerospace and defense-related electronics.
• 2. Gunpowder, industrial explosives, and detonating fuse.
• 3. Dangerous chemicals such as Isocyanates, Hydrocyanic acid, Phosgene, etc.
• 4. Tobacco, cigars & cigarettes, and related products.
• 5. Distillation & brewing of alcoholic drinks.

➧ Disinvestment of Public Sector
• Government stakes in Public Sector Enterprises were reduced to enhance their efficiency and competitiveness.

➧ Foreign investment
• Government promoted foreign investment (FI) in both its direct and indirect forms.
• Indirect form of foreign investment was called the portfolio investment scheme (PIS)
• To promote FDI the Foreign Investment Promotion Board (FIPB) was established.

➧ Amendment in 1969 MRTP act
• This amendment permitted the MRTP Act to be extended to the public sector and government-owned companies.

• After this amendment, private firms with assets above a certain specified limit were no longer needed to take special permission from the government to invest in de-licensed industries.

• This amendment to the MRTP Act diluted the restriction of the License Quota Raj which restricted the growth of the Indian economy.

➧ Foreign Technology Agreement
• Under this agreement the government will provide automatic approval for a technology agreement related to high-priority industries within specified parameters.

Most repeated questions on Industrial Policy

♦ 1. In which industrial policy did India adopt the system of Mixed Economy?
(recently asked in WBCS Prilms 2021)
• Answer – The Industrial Policy Resolution of 1948

♦ 2. When the first industrial policy of India was started?
• Answer – 6th April 1948

♦ 3. Which Industrial Policy was called “Socialization of vacuum”.
• Answer – The Industrial Policy Resolution of 1948

♦ 4. Under the Industrial Policy Resolution of 1948, the industries were classified into
• Answer – 4 categories

♦ 5. The Industrial Policy Resolution of 1956 was based on which model?
Answer – P.C Mahalanobis model

♦ 6. The Industrial Policy Resolution of 1956 is known as the?
• Answer – ‘Economic Constitution of India’ or the ‘Bible of State Capitalism’.

♦ 7. Which Industrial Policy of India is known as the ‘Licence-Quota-Permit’ regime.?
• Answer – Industrial Policy Resolution of 1956

♦ 8. Who termed the Public sector undertakings (PSU’s) as the “Temple of modern India”?

♦ 9. The fourfold classification of industrial policy of 1948 was changed to a  —– classification in the Industrial Policy Resolution – 1956.
• Answer – threefold classification

♦ 10. The Monopolistic and Restrictive Trade Practices (MRTP) Act was introduced in which industrial policy?
• Answer – The Industrial Policy Resolution of – 1969.

♦ 11. In the year 2002, the MRTP Act was abolished and was replaced by the?
• Answer – Competition Act, 2002

♦ 12. In which industrial policy of India the 6 core industries was created?
• Answer – Industrial Policy Statement – 1973

♦ 13. Foreign Exchange Regulation Act (FERA), 1973 passed in which industrial policy of India?
• Answer – Industrial Policy Statement – 1973

♦14. The Industrial Policy Statement – 1973 also known as _?
• Draconian Act

♦ 15. Which industrial policy focuses on the Small scale and Tiny industries.?
• Answer – Industrial Policy Statement – 1977

♦ 16. When did LPG reforms start?
• Answer – 24 July 1991

♦ 17. Who introduced the LPG policy in India in 1991?
• Answer – Dr. Manmohan Singh.

Frequently Asked Questions

♥ Which is the first industrial policy of India?
• Answer- The Industrial Policy of 1948 is the first industrial policy of India.

♥ Who announced the industrial policy of India?
• Shyama Prasad Mukherjee.
• The first industrial policy of India started on 6th April 1948. It was announced by Shyama Prasad Mukherjee.

♥ What is meant by the industrial policy?
• The Industrial Policy is a set of initiatives to encourage economically
transformation, that focused on the optimal utilization of human resources,
increasing sustained productivity, enhancing employment generation, etc.

♥ What is the new industrial policy of 1991?
• On July 24, 1991, the Government of India announced its new industrial policy.
• It brings the LPG (Liberalisation, Privatisation and Globalisation) reformation by correcting the distortion and the weakness of the Industrial Structure of the country that had developed in 4 decades.

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