AO Dy INDUSTRIAL POLICY ig INTRODUCTION: pid industrialization ofthe nation is very necessary fr the economic development ofthe nation. The Industrial Policy plays a very significant role in shaping the industrial development a ntey. Industrial Policy means a policy of Government forthe establishment, regulation, growth and management of the industrial sector of the nation. Building on the so-called Fembay Plan’ in the pre-Independence era, the first Industrial Policy Resolution was announced in 1948. The Resolution was broad in its scope and direction. The Industral {Department and Regulation) Act (IDR Act) was enacted in 1951 with the objective of empowering the Government to take necessary steps to regulate the patter of industrial development through licensing. This paved the way for the Industrial Policy Resolution of 1956, ‘hich was the first comprehensive statement on the strategy for industrial development in India, The industrial policy in the pre-reform period i. before 1991 put greater emphasis on the state intervention in the field of industrial development. These policies no doubt have resulted into the creation of diversified industrial structure but caused a number of inefficiencies, distortions and rigidities in the system. Thus during late 70's and 80's, Government initiated liberalization measures in the industrial policy framework. The drastic liberalization measures were however, carried out in 1991 m MEANING ‘The industrial policy means the procedures, principles, policies rules, regulations and procedures which control the industrial undertaking of the country and pattern of industrialization. It explains the approach of Government in context to the development of industrial sector. In India the key objective of the economic policy is to achieve self-reliance in all sectors ofthe economy and to develop socialistic pattern of society. elante POY f NDUSTIUAL POLICY Reso ey cence eee shethacchonen staat included the Se cr Such nats aetna importing | Poe als Sere ees a ce ctr |e pment oa for industrial development ef such ne cerns mt an Soar sy tore cates fling | Stan of ne ean otc Te sea a Crmedtne bao fangs et “The iportant proven sory (©) New clasiscation of inden ire a ty exten {Rts nt four broad caegon , Monopoly included inustcs en wm and ammunia vee theeanepoies (0) Schedule A Permission of the government vwhide tor Steroid ea Government was ako empowered to conte Ie as NY rg Sete A of he Reso powered to control the distribution and prices cheese Te ‘Thee nuded ier industries listed inthe schedule. The IDR Act gave tery ade wore ee Pe and some en, sulted in mone or less complete conto by the bueatcacy oh the indus dora industees fran country o {) SchedteB tndaries ‘The main provisions ofthe IDRA, 1951 were Schedule B of the he (@) All existing undertakings at the commencement of the Act excep thse owe es Central Goverment were compulsorily required Sener eorac thiscategory of int Pulsorly required to register with te aetpeas secon wes Wt done authority feta syne (©) No one except the central Government would be permite to st up any ta © Schedule C Induste formed part of Schec ‘expected that privat industrial undertaking “except under and in accordance with a licence issued in behalf by the Central Government.” (6) Such a license or permission prescribed a variety of conditions, sch, at they would rote Ininimum standards in respect of size and techniques tobe sed, whkh he Col would facta ad stor, incor ernment may approve oo en Dy appropriate fice (d) Such licenses and clearances were also required in cases of ‘substantial expansion’ t= existing industrial undertaking. SO demarcation of indIndustrial Policy a um INDUSTRIAL POLICY RESOLUTION, 1956 ‘The Industrial Policy Resolution - 1956 was shaped by the Mahalanobis Model of growth, which suggested that emphasis on heavy industries would lead the econom| towards a lng term higher growth path. The Resolution widened the scope of the public sector. The shjective aa ig accelerate economic growth and boost the process of industrialization as a emis aahieving a socialistic pattern of society. Given the scarce capital and inadequate entrepreneurial bose, the Resolution accorded a predominant role to the State to assume lect responsibility for industrial development. All industries of basic and strategic importance and those in the le of public utility services besides those requiring large scale investment were reserved for the public sector. Industrial Policy Resolution ~ 1956 aimed at the removal of regional disparities through development of regions with low industrial base. Accordingly, adequate intastroctre for industrial development of such regions was duly emphasized. Given the potential to provide large-scale employment, the Resolution reiterated the Government's determination to ede ail sorts of assistance to small and cottage industries for wider dispersal of the industrial base and more equitable distribution of income. The Resolution, in fact, reflected the prevalent value system of India in the early 1950s, which was centered around self sufficiency in industrial ‘roduction. The Industrial Policy Resolution ~ 1956 was a landmark policy statement and it formed the basis of subsequent policy announcements. ‘The important provisions are as follows: (1) New classification of Industries: IPR, 1956 divided the industries into the following, three categories: (a) Schedule A Industries: The first category comprised 17 industries (included in Schedule A of the Resolution) exclusively under the domain of the Government. ‘These included inter alia, railways, air transport, arms and ammunition, iron and steel and atomic energy. The private sector was allowed to operate in these industries if national interest so required. (b) Schedule B Industries: The second category comprised 12 industries (included in Schedule B of the Resolution), which were envisaged to be progressively State ‘owned but private sector was expected to supplement the efforts of the State. In this category of industries 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. (o) Schedule C Industries: The industries not mentioned in the above category formed part of Schedule C. It contained all the remaining industries and it was expected that private sector would initiate development of these industries but they would remain open for the State as well. It was envisaged that the State would facilitate and encourage development of these industries in the private in accordance with the programmes formulated under the Five Year Plans, te infrastructure. Despite the ries, the Resolution was flexible sector, by appropriate fiscal measures and ensuring adequat demarcation of industries into separate categonin sroten ss ime ete Reduction of Regi Te industries in backward ieee et Dlspait les Fiscal concessions No Sevelop these areas, “= Public sect or enterprises were given goons more than Fc I7Erd Aegon. the Mile Sector consisted of projec ‘0f F10 million to £50 million. i one "e IV. Fourth eateg m, HY Was ‘Dulicensed Sector’, and was exempted from Heer ‘The industrial licensi ‘companies to the core, in whlch investment was es than 810 mili, ing requirements, ey and eae contin the oe one busines hoses nd foray ‘heavy and export oriented sectors ™ INDUSTRIAL POLICY STATEMENT, 1973 The Policy Statement of 1973 drew uy st finde be tte y ge sen hows tat the cmptive crt saindwaraeae ane ek smal an medium ennpescss was emaungel a nee eee cone mute tometer ie And enabling te growth of sll inte noe Wak vey ee comet of nde cpm te ehn, a to small and medium enzerencrs verte lge hase oa ae ofrecer put fc ps en on yy lat we op ag stn esi ot he nn ws mtn a anna companies and extingUeened or rage! undelings having taeda of 59 incabove pont nw PI Sete gy, Sue paca evil employ nieaton wan age Sttementcosideraiy oe in the smalls sage sector with increment 2, Restictive Approach ton, slowed in beak copia the funds from Basa development of sma ay Financing new project coe 1 Expanding Role of Pub ‘would be used at oni taintaining essential supp 4 Restitve potiy toward: policy towards foreign cap fontol should res in alto provided for close ine Priority was accorded to poner; reserved for exclusive production | stated that foreign companies that Exchange Regulation Act (FERA) Policy Siatement of 1977 also ie ‘nancial or technical nature was) = INDUSTRIAL PoLicy, The industrial policy 1960 ¢ Infrastructure for season of is 4 longer gestation periods of the y the boss of this statement. Some ofthe socio-economic o 1. optimum utitisation of 4, Higher productivity 1, higher employment lev 1. removal of regional dis ee ASeine 1 Ne at _ of public and private wore a, in order #0 strengthen then 9 terms of cheap ert wel nnconcessions WETE Banta Sprises were BiVEN BFeater nl ce into four categories, sic, erieal and strate, comprised projects involv with investment in the rang nent was les thar €10 mili business houses and for be started by lange busin (ed. The entry of compete fies. Large industries wy to developing those ae View to. prevent excesit = Statement gave preferen ign companies in seting 1 goods. New undertakito licensing requirements MRTP companies, free fixed assets of £50 milli te industries a ale ine stach category Th exclusive man siatmge eecor should Tn eating business: stated that the public ctor ne indo Poy ite parce fr ole of Fa pe sung ares But a0 #8 eet plier forthe consumer ement reiterated restrictive oe ey ante foreign copia: The policy fc nctve ects rt capital wercy the maori sere Srunership and effect ay ed eatin nian hands Oe iver btwcen industrial and agricul ec Highest wae oe trenton ane anssion. 1 expanded st ea ve prodvction a ‘more than 500. It was also from ‘of small sector. ‘Begncing new projects OF XP ding Role oF also peo priority a 2 ved for exclusive the small scale sector from 180 to Sat 40 per cent under Foreign ser pon ea ce hr Foreign ety WP ‘rn ey 73 wer be wnt 2 pr wath he Indian SNP “The Bcfang Reuter nd 2 tof Induntries where oo foreign cllabouration of ft 2 td a indigenous technology was already available or technical nature Ws = INDUSTRIAL POLICY, 1980 the public sector is the pillar of economic The nds paicy 1980 emphasized that int fr rasan oft rete rebirth ioe the lage investments requined and the a i ie: Seat evelopment: The PRI9S6 forme the bas of this statement. Sette ossnei objective spel tin the Satoment were: optimum atilisation of installed. capaci 1. Higher productivity * IM higher employment levels, 1, removal of regional disparities,strengthening of agricultural base, “i Promotion of export oriented industri | MH. cons = ‘VU. Revival Pate gee a ay *gement cadres in functional fields. w8 ky deraoning ef “snPortant features ofthe poly were: | ‘fficiency of public sector Undertaking a gta aa a et ee ey at pees ey | $20 lakh and for ancillaries from €15 lakh 4. Competition: indus! pa ety usta poy, 1980 focused ateton on the need or pe Sompetiton inthe domestic mare, technolo! up eden eal eee The policy Id the foundation for an inceninglycomptiive pen beeen and for encouraging foreign invesinentinhghecaclen ee An automatic expansion of capacity up to five per cent per annum was at optimum utilization of energy and the exploitation of alternative sources to boost the development of small scale industries, the investment limit was raised te 22 milling in small scale units and € 2.5 million in ancillary units. In the case of tiny units, investment lint was raised to €02 milion ™@ MAJOR FEATURES OF PRE-1991 INDUSTRIAL POLICY 1. Protection to Indian Industries: Local industries were given shelter from intemations, competition by introducing partial physical ban on the imports of products and ‘Imports tariffs. Protection from imports encouraged Indian industry to underta manufacture of a variety of products. There wasa ready market forall these products. 2. Import Substitution Policy: Govemment used its import policy for the healt development of local industries, Barring the first few country was facing a shorlage of foreign exchange, and so save scarce foreign exchang? ror al ts substitution Saran func nstrc nemey Os Goes gin ofa eae acme oeten en coma oa pee | eed “netustres in the cot earns et arcese oa ee (sty prvi a 1 ote Soe ‘heavy machineri = NEW INDUSTRI Te Indust Poy ound poly frame Indigenous techlogy tection intel competvent indstalzaton tobe Sopropite incentives, Pay ce nf polis in terms fo Indust develop eT14.7 | mports-substitution atic ‘was initiated ite. Government encouraged the production afimported goods indigenously \ 4, Financial Infrastructure: In order to provide industry, the Government set up a ber of develo, ‘incipal ee nclooe tp number of development banks. The pring Tonetion of a a : ment bank is to provide medium and coi pce i gy have 2 al = yl a a mat Tole in promoting the growth of enterprise, With This v bjective, Government established the Industrial Finance Corporation of India (IFCI) (1948), Industrial Credit and Investment Corporation of India (ICICI) (1955), Industrial Development Bank of India (IDBI) (1964), Industrial Reconstruction Corporation of India (1971), Unit Trust of India (UTI) (1963), and the Life Insurance Corporation of, India (LIC). the financial infrastructure necessary for 4, Control over Indian Industries Indian industies were highly regulated through legislations _such_as Industrial licensing, MRIP Act, 1969 etc. These legislations resied the production, expansion and pricing of output of almost ll kinds of S increas, industries in the country Ablimit ae 5, Regulations on Foreign Capital under the Foreign Exchange and Regulation Act Way (FERA): FERA restricted foreign investment in a company to 40percent. This ensured that the control in companies with foreign collaboration remained in the hands of °F Prom Indians. The restrictions were also imposed on technical collaborations and modern repatriations of foreign exchange by foreign investors, rased indus 6, Encouragement to Small Industries: Government encouraged small-scale industries (G5ls) by providing « number of support measures for its growth. Policy measures Hea adidresied the basic requirements of the SSI like red, marketing, technology, 7 os entrepreneurship development, and fiscal, financial and infrastructural Suppor ic nO anne Nes Win 7, Emphasis on Public Sector: The Government made huge investments in providing Spaclopes sing, and basic facltes to industries. This was achieved by establishing nergy. In ods ublic sector enterprises in the Key sectors such as power generation, capital goods, raised to 8 mila ‘heavy machineries, banking, tele- communication, et, ‘its, investment lin | NEW INDUSTRIAL POLICY, 1991 az ‘The industrial Policy Statement of 1991 stated that “the Government will continue to pursue 2 sound policy framework encompassing encouragement of entrepreneurship, development of citer from internation indigenous technology through investment in research and development, bringing in new 1s of products and hg techrology, dismantling of the regulatory system, development of the capital markets and SGustry to undertake b increased competitiveness forthe benefit of common man’. It further added that "the spread of Ciucs industaization to backward areas of the country will be actively promoted. throu forall hese proucs| prope Ince, lation and inatcture investments” inrs New Inte {policy for the beste Sst for the Set Policy mnoanced in July 1994 hereafter NIP) was radical compared to i earlier industrial 135 after Indepen poids in terms of objectives and major features It emphasized onthe need o promote Further save searce foreign excast__indusial development based on consolidating the gains already made and correct the distortion save scarce foreign exch1! (iii) Referral to BIFR: Many sick public sector units have been referred to the Board Industrial and Financial Reconstruction (BIFR) for rehabilitation or, for winding up. (iv) Manpower Rationalization: In order to make manpower rationalization Volant Retirement Scheme (VRS) has been introduced in a number of PSUs to shed the surpls manpower. here neces ns Pley 1 Pir aay Pann conan tes ma te teen aga a eae Keoraing Hs compulacey agit ‘ctw Tie Heensing pce fae assets Goh intade on sproyresve liberalization an Few eases 2, Amendment of Monopo, Since 1991 MRTP Act hast with regard 0 prior approval og expansion, amalgamation, ‘ett restriction and marker ae ‘Act is now applcabe to bay “Today only restrictive ade pr hasbeen replaced by the Comes Indian maeket. The competing the practice that have an ndverse 4. Liberalized Feretgn tnve ‘The NIP radically reform important foreign investment © Repeal of FERA, 1 Management Act (FED (9) Dilution of Restic ‘sectors incading the 5. Foreign Technology A) ‘The automatic approvals ‘pecied parameters. Indian ‘ith their foreign counterpart 5 ipatie nasal Private Equity Participation: PSUs have been allowed to raise equity finance from the J) capital market, This has provide emu 1 market pressure on PSUs to improve thei i performance. (ai) Disinvestment and Privatization: Disinvestment and privatization of existing PSUs has been adopted to improve corporate efficiency, financial performance and competition amongst PSUs. It invol shanchinld es transfer of Government holding in PSUs to the \ private shareholders, 9, industrial Delicensing: gre removal of icensing requirements for indu ensing requiren ‘ties, domestic as well as foreign, commonly ‘now a5 “deticensing of industries” is another important feature of NIP elt the 1990s, Tiersing 825 compulsory for almost every industry, whi oni sndment of Monopolies and Restrictive Trade Pubic 3. Amel Practices (MRTP) Act, and ys 1968: 8) wr) Since 1991 MRTP Act has been restructured and pre-enty restrictions have been removed Pe ate ead 0 prion approval of the govemment ane stablishment of a new undertaking, Enterprises, y sion, amalgamation, merger, take over, and appointment of directors of ‘companies, The ee PSUs IB er resection and market share for defining an MRTP firm has been done away with, MRTD Sw PSUs, AM tis gow applicable ty both private ana Public sector enterprises and financial institutions tr olga, Today nly restive ade practices of companies ane montond aa sae The MRTP act '™ efficient use, pas been replaced by the Competition Act, 2002. This law aims at upholding competition in the 2PSUs to oper, Indian marke. The competition commission has been est tablished in 2008 which mainly control ‘the practice that have an adverse impact on competition 4, Liberalized Foreign Investment Policy: BRAS a pant of The NIP rally reformed foreign investment pole to atact foreign invesnen. The Fea a ne POM cd fda inwuset poly Besser are ae Sa {Repeal of FERA, 1973:FERA, 1973 has been repealed and Foreign Exchange eee ‘Management Act (FEMA) has come into force with effect from June 2000, Lanes ii) Dilution of Restrictions on Foreign Direct Investment (EDI): FDI is allowed in all referred to the Board Sectors including the services sector except atomic energy and railway wansport. ation or, where neces S. Foreign Technology Agreement allowed 0 industries within jonalization Volust The automatic approvals for technology agreement are allow «(10s Weel telnet inca ee negotiate the tems of technology Wanser ‘ith their foreign counterparts according to their own commercial judgment. (athe mates concteTEONe Brads, mbes Shenson, a ep oust so or namely tchnole mm, TS escatvely for al inane Si poche yon tome ‘oa Ge waa oe Tentage of ___MSME: Investment Limite Tnveatment in Plant & Machinegy— (Manufacturing Enterprises) ane [28 Tacs _SGrore —2Srere se ™ ASSESSMENT OF THE NEW ECONOMIC POLICY ‘The NEP has been largely welcomed because it has abolished many unnecessary con which delayed and in a large number of situations inhibited investment, both domestic = snus ley ri Wes ben ce {So hene cred (orgy rae and ge ber pa oe ete aa on eee on et Se perma men ta Pa i nt Sat anaes say mk = IMPACT OF REFOR seen meee ipower paki ae “Theimpacof hens 2 Deregulation ote 3. Permission was ge 4. Permission was 5 securities tn ted 5. Wide range off rocesing uit an compete ah (6 There was an in Investment prop = concLUDING Ry “Toconeude,itmay Inmplementation of prom: Policy Resstions 0154 sacency in india Investments i indusre the onset of reform pre investments, contig Industrial Poticy 991d ‘wchnology ters NeEI ee ce it publi sector was notable to acral production in {te Te et better products ay en emMensely in an open market. They have greater Ny gies and pale ioe heaper prices, Under the NED, given the climate in which eft st at the mua cn dee poost. Several Indian ¢ ‘estment freely, production will get a finite OOS: 0 7 ° de thee Pas especially in. information technology and amaceuticals, have made their marks in the world market. The critics of NEP agree that 7 e siey of liberalization would lead to incre . ld te ase in investment and in supply, in an oligopolistc iN attet structure that prevails in Indi, excessive dependence on market mechanism to channel SX Meiment in socially desirable Channels may prove to be a failure. The NEP encourages ‘sagt consumerism among the affluent sections instead of marking investment in wage goods and GA Jeng Which ate very esential for raising social and conceit Lastly, the NEP does N . Sy “Totseriously attack the problem of pov ° erty in India in an effective and practical way x By Pent ia = 1g IMPACT OF REFORMS ON BUSINESS Boye Business environment was directly affected by the reforms undertaken in 1990s. The main S waayie| aim was to Teduce regulatory obstacles to ind a stralization, enhancing greater competition, ester participation of foreign capital, and improving industry environment. ‘The impact ofthe reforms can be seen as follows: ea 1, New Economic Policy abolished many unnecessary controls which eater inhibited 3 ay BAY investment, both domestic and foreign, fs Pa Som, 2, Deregulation ofthe industry gives greater scope and freedom to private enterprise. and aut 3. Permission was granted to reputed India companies to float ‘equity abroad. sash 4, Permission was granted to foreign institutional investors to take in Government petitive securities and treasury bill, aater dome 5, Wide range of facilites and incentives was provided to export oriented unis, export ste ‘processing units for producing products at competitive prices, so that Indian products can compete at the international market. 6, There was an increase in the number areas for automatic approval to foreign direct westment proposals. imentin tags, investment prop ae aoa @ CONCLUDING REMARKS: “To conclude, it may be remarked that a sound Industrial Policy is very much needed forthe —— implementation of promotional and regulatory role of the Government In Indi the Industrial Ser Policy Resohutions of 1948 andl 1956 reflected the desire of the Indian Government to achieve self S Crore sufceney in industrial production by encouraging domestic production and making huge investments in industries. This basic strategy guided industrialization unt the mid-1980. Till the onset of reform process in 1991, industrial licensing played a crucial roe in channelling investments, controlling entry and expansion of capacity in the Indian indastal set. The any unnecessary Gt _jysrilPoicy 1991 dispensed with industrial licensing and facilitated foreign investment and estment, both domes: egnulogy wafers Now Indias noe considered a big indus ation of he wor