INDUSTRIAL POLICY

After Independence, the government adopted rules and regulations for the various industries. This
policy proved to be the turning point in the Indian Industrial history. Industrial policy is a document of
implementing, promoting & regulatory the roles of the government. It was expanding the
industrialization & uplifts the economy to its deserved heights. The main aim was to free the Indian
industry from the chains of licensing. The regulatory roles of the Indian government refer to the policies
towards industries, their establishments, functioning, expansion, growth as well as their management.
Need, Objectives and Importance of Industrial Policy
1. Deployment of Natural Resources: The industrial policy helps in full deployment of natural
resources of the country. It helps in identifying, collecting and using resources properly. It facilitates
increase in national income of the country.
2. To Augment Industrial Production: The main objective is to augment industrial production of the
country. It provides an impetus to rapid development of industries and industrial growth.
3. Modernisation: The industrial policy encourages modernisation for increasing industrial output and
productivity. It envisages the use of modem and latest production techniques m industrial sector. It
facilitates maximum output at minimum cost of production.
4. Balanced Regional Development: The industrial policy helps in balanced regional development of
the country. The industrial policy may contain provisions regarding providing facilities or
concessions for rapid development of industrially backward areas/regions of the country.
5. Coordination between Small Scale & Large Scale Industries: The industrial policy plays a vital
role in coordinated development of small scale industries and large scale industries. These industries
can be made mutually helpful to each other through the provisions of industrial policy.
6. Area Determination: The industrial policy determines the area of operation in public & private
sector. Proper direction can be shown to private sector through the country’s industrial policy.
7. Cordial Industrial Relations: An industrial policy is needed to establish cordial relations between
workers & management. Cordial industrial relations are essential for rapid & sustainable
industrialization.
VARIOUS INDUSTRIAL POLICIES IN INDIA:

1. Industrial Policy of 1948: The first industrial policy after independence was announced on 6th April
1948. It was presented by Dr Shyama Prasad Mukherjee then Industry Minister. The main goal of
this policy was to accelerate the industrial development by introducing a mixed economy where the
private & public sector was accepted as important in the development of the economy. The large
industries were classified into four categories:
a) Industries with exclusive State Monopoly/Strategic industries: It included industries engaged in
the activity of atomic energy, railways and arms and ammunition.
b) Industries with Government control: This category included industries were mentioned in this
category such as fertilizers, heavy machinery, defence equipment, heavy chemicals, etc.
c) Industries with Mixed sector: This category included industries that were allowed to operate
independently in private or public sector. The government was allowed to review the situation to
acquire any existing private undertaking.
d) Industry in the Private sector: Industries which were not mentioned in the above categories fall
into this category. High importance was granted to small businesses and small industries, leading to
the utilization of local resources and creating employment.
2. Industrial Policy Resolution, 1956: This second industrial policy was announced on April 20, 1956,
which replaced the policy of 1948. The features of this policy were:
a) A new classification of Industries.
b) Non-discriminatory and fair treatment for the private sector.
c) Promotion of village and small-scale industries.
d) To achieve development by removing regional disparity.
e) Labour welfare.
The IRDA divided industries into three categories:
• Schedule A industries: The industries that were under the monopoly of the state or government. It
included 7 industries. The private sector was also introduced in these industries.
• Schedule B industries: In this category of industries, the state was allowed to establish new units
but the private sector was not denied to set up or expand existing units e.g. chemical industries,
fertilizer, synthetic, rubber, aluminum etc.
• Schedule C industries: So the industries that were not a part of the above-mentioned industries then
it formed a part of Schedule C industries.
3. Indian Policy Statement, 1973: Indian Policy 1973 identified high priority industries with
investment from large industrial houses & foreign companies were permitted. Large industries were
permitted to start operations in rural & backward areas with a view to developing those areas &
enabling the growth of small industries around. The features of Indian Policy are:
a) The policy removing distortions it provides closer interaction between agriculture & industrial sector.
b) Priority was given towards generation and transmission of power.
c) The list of industries reserved for the small-scale sector was expanded.
d) Special legislation was made to protect cottage and household industries were introduced.
4. Indian Policy Statement 1977: Indian Policy Statement was announced by George Fernandes then
union industry minister of the parliament. The highlights of this policy are:
a) Target on the development of small-scale and cottage industries.
• Household and cottage industries for self-employment.
• Tiny sector investment up to 1 Lakh.
• Small scale industries for investment up to 1-15 Lakh.
b) Large-scale sector
• Basic industries: infrastructure and development of small-scale and village industries.
• High technological industries: development of agriculture and small scale industries such as
petrochemicals, fertilizers and pesticides.
c) Role of the public sector:
• Development of ancillary industries.
• To make available expertise in technology and management in small and cottage industries.
5. Industrial Policy, 1980: The Congress government announced this policy on July 23rd, 1980. The
features of this policy are:
a) Promotion of balanced growth.
b) Extension and simplification of automatic expansion.
c) Taking over industrial sick units.
d) Redefining the role of small-scale units.
e) Improving the performance of the public sector.
6. New Industrial Policy, 1991: This Policy was launched in 1991 by P. V. Narasimha Rao. This
policy opened the door of the India Economy for the global exposure for the first time. In this Policy
P. V. Narasimha Rao government reduced the import duties, opened reserved sector for the private
players, & devalued the Indian currency to increase the export. This is also known as the LPG Model
of growth. This Policy refers to relaxation in the import tariffs, opening the markets for private &
foreign players, & reduction of taxes to expand the economic wings of the country. Former Prime
Minister Manmohan Singh is considered to be the father of New Economic Policy (NEP) of
India. Manmohan Singh introduced the NEP on July 24,1991
Salient Features of the NIP:
1. Elimination of licensing procedures: The NIP has abolished the industrial licensing require-ment
irrespective of the level of investment in all industries except those 18 industries specified in
Annexure II of Act (1951). The indus-tries where licensing will be necessary include areas like coal,
petroleum, sugar, cigarettes, motor cars, drugs & some luxury items.
2. Broad Branding Facility: Existing & new industrial units have been provided with the broad
branding facility to produce any article so long as no additional investment in plant & machinery.
The Phased Manufacturing Programme will no longer be applicable to new projects.
3. Modifications in the MRTP Act: The MRTP Act will be amended to remove the thresh-old limit of
assets in respect of MRTP companies and dominant undertakings. This would eliminate the
requirement of prior approval of the Central Government for establishment of new merger,
amalgamation, takeover & appointment of directors under certain circum-stances.
4. Foreign investment: While welcoming foreign investment with its advantage of technology transfer,
marketing expertise, introduction of modern managerial techniques & export promotion, the NIP
provides for automatic approval of foreign equity participation up to 51% in high priority industries
& include 34 areas like electrical equipment, transformer, food processing, hotel & tourism.
5. Foreign collaboration: On foreign technology agreements, the Government intends to combine the
need for updating technology in high priority areas with incentives for domestic sales & export
promotion. The stress is on foreign technology agreements in high priority areas with incentives for
domestic sales & export promotion.
6. Import of capital goods: The NIP envis-ages automatic clearances for import of capital goods
provided the foreign exchange requirement for such imports is ensured through foreign eq-uity. In
addition, with effect from April 1992, such automatic approval would be given provided the cost,
insurance and freight (c.i.f.) value of the capi-tal goods to be imported was less than 25% of the total
value of plant and machinery and subject to maximum limit of Rs. 2 crores.
7. Public sector: The preeminent place of public sector will be continued in 8 core areas. These are
arms & atomic energy, mineral oils, rail transport and mining of coal and minerals. Though the role
of the public sector has been emphasized, the Government has committed to ensure that it runs on
sound commercial lines and continues to innovate and maintain its dominant role in strategic areas.
8. Reservation for small-scale industries: The reservation of items for small-scale sector will be
continued to promote industrial and agro-industrial employment base. A package for tiny and small-
scale sector will be announced by the Gov-ernment separately.
9. Locational policy: In cities of less than 1 million populations there will be no need for ob-taining
industrial approvals from the Central Gov-ernment except for industries subject to compul-sory
licensing. In respect of cities with population greater than 1 million, industries (other than those of a
non-polluting nature such as electronics, com-puter software and printing) will be located out-side 25
kms. of the periphery, except in prior des-ignated industrial areas.