INDUSTRIAL POLICY

OF
INDIA
 IDFC 
•   Bandhan

Bandhan Bank MD and CEO 
Chandra Sekhar Ghosh 
Saakshi on 2/10/2015
 INTRODUCTION

• The concept of “INDUSTRY POLICY” is

comprehensive and cover all those principles,
policies, rules and regulations that control the
industrial undertakings of a country and shape
the pattern of industrialization.
• It incorporates fiscal and monetary policies, tariff
policy and the government’s attitude not only
towards external assistance but also towards the
public and private sector.
 INTRODUCTION
• In economics and political science, fiscal
policy is use by the government revenue
collection (mainly taxes) and expenditure
(spending) to influence the economy.

• Monetary policy is the process by which

the monetary authority of a country controls
the supply of money, often targeting a rate of
interest for the purpose of promoting economic
growth and stability.
 INTRODUCTION

• PROTECTIVE TARIFF DEFINITION
• A duty imposed on imports to raise their 
price, making them less attractive
to consumers and thus protecting domestic 
industries from foreign competition.
Tata Group – 1868
With INR 21,000 and nine years of experience working
in his father’s company, a young 29-year-old man started
a trading company in British India. He later went on to
buy a bankrupt oil mill at Chinchpokli and converted it
into a cotton mill. Two years later, he went on to sell the
mill for a profit. He soon set up another mill in Nagpur.
Jamsethji Tata, a pioneer, visionary and a man with
extraordinary skill and acumen, was the spearhead
behind today’s global enterprise – The Tata Group.
• Dabur – 1884
• Daktur Burman, that’s how the people would call him
with respect. Sitting in a small village in the bylanes of
Kolkata, Dr S.K. Burman would cure several Indian
villagers of their diseases with his Ayurvedic medicines.
The news of his ‘miraculous medicines’ spread far and
wide and soon ‘Daktur Burman’ became a renowned
name across the region. Dabur is derived from this very
name – ‘Daktur Burman.’
 Adi Godrej
• Godrej – 1897
•  When a lawyer quit law and took to lock-making,
little did he realise he was building a global brand. A
serial entrepreneur of those days stunned the world
when he went to make toilet soap from vegetable
oils. Especially after making one the world’s best
safes and security equipment. It was Ardeshir
Godrej’s dream to create a global Indian brand,
which was carried forward by Pirojsha Godrej.
• Rooh Afza – 1907 (Hamdard)
•  A recipe formulated by Hakeem Hafiz
Abdul Majeed of squash made of herbs,
vegetable extracts and fruits is what is
famously called as Rooh Afza in every
household. This unique recipe is
believed to combine natural cooling Hakeem Majeed was
said to be a famous
agents, thus providing the perfect physician of the
Unani form of
remedy for the harsh north Indian medicine. It is said
that from his clinic in
summers and loo winds. Today, no Old Delhi he
launched Rooh Afza. 
Falooda can be complete without
Rooh Afza.
• MTR – 1924
• Founded by Yajnarayana Maiya and his brothers, MTR
began with the restaurant that stands tall even today in
the bustling street of JC Road in Bengaluru. Legends say
that the Chief Minister of Karnataka stood in queue one
day to get a taste of the buttery scrumptious masala dosa
at MTR. It is even said to be the inventor of the Rava Idli.
• During World War II, rice, which is one main ingredients in
making idli, was in shortage. The chefs at MTR decided to
experiment making idli using semolina, and that was how
rava idli was born.  MTR today represents two entities –
the restaurant business and the pre-packaged food
business.
• Parle G – 1929
• No chai in India can be complete without a plate
of Parle G biscuits. Touted as the world’s largest
selling biscuit brand, Parle G was established in
Vile Parle Mumbai in 1929. They began
manufacturing biscuits in 1939, and after India
gained Independence, the first ad campaign of
Parle G showcased the brand as an Indian Gluco
brand of biscuits as opposed to the British
counterparts. In 2013, it was the first Indian
FMCG brand to cross the INR 5000 crore mark.
Industrial Policy resolutions

Industrial Industrial Industrial Industrial Industrial

policy policy policy policy policy
resolution resolution resolution resolution resolution
of 1948 of 1956 of 1973 of 1977 of 1980

NEW ECONOMIC POLICY 1991

INDUSTRIAL POLICY RESOLUTION- 1948
• The first important IPR resolution was issued by
the GOI on April 6, 1948, which had four
important features:
1. Acceptance of the importance of both private
and public sectors.
2. Division of industries.
3. Role of small and cottage industries.
4. Role of foreign capital.
Division of the industrial sector:

Monopoly Mixed
State Sector
FOUR
CATEGORIES
Control
Pvt.
Govt.
Enterprise
 State Monopoly

• In this the government recognized the

need for a mixed economy and reserved
national monopolies only for arms and
ammunition (missiles etc.,), atomic
energy, and rail & road industries.
 Mixed sector
• The govt. had the exclusive rights to initiate projects in
six industries.
– Coal, Iron & steel, Aircraft Manufacturing,
shipbuilding, Telephone and Telegraph and
Minerals.
– However, existing private undertakings in this field
were allowed to continue for ten years after which
the government would review the situation and
acquire any existing undertaking after paying
compensation on a “fair and equitable basis.
– even it could seek the aid of the private sector if
necessary.
Govt. Control
• The government did not undertake the
responsibility of developing these
industries but considered them of such
importance that their regulation and
direction was necessary. Some of the
industries were:
• Automobiles, heavy chemicals, heavy
machinery, machine tools, fertilizers,
electrical engineering, sugar, paper, cotton
and woolen textiles.
INDUSTRIAL POLICY RESOLUTION- 1948
Private Sector:
• The rest of the industrial field was left open to
private enterprise though it was made clear that the
State would also progressively participate in this
field.

• The main aim of the this IP was to lay the foundation

of a mixed economy in which both private and public
enterprises could march hand in hand to accelerate
the process of industrial development.
Small and cottage industries
• This IPR accepted the importance of small
and cottage industries in industrial
development.
• These industries particularly suited for the
utilization of local resources and for creation
of employment opportunities.
INDUSTRIAL POLICY RESOLUTION- 1948
INDUSTRIAL POLICY RESOLUTION - 1956

• After adoption of the 1948 IPR, significant

development took place in India. Economic Planning
proceeded on an organized basis and the FIRST FIVE
YEAR PLAN (1951-56) was completed. Also,
Parliament accepted “ the socialist pattern of the
society” as the basic aim of social and economic
policy.

• These important developments necessitated a fresh

statement of industrial policy
INDUSTRIAL POLICY RESOLUTION - 1956
• Hence, a second Industrial Policy 1956 was
adopted in the month of April. The resolution
laid down three categories, which are sharply
defined and broader in coverage the role of the
state also….

The categories were:

Schedule-A Schedule-B Schedule-C

INDUSTRIAL POLICY RESOLUTION - 1956
SCHEDULE - A

• This comprised 17 industrial areas which

are strictly under the central government.
The companies of this areas were known as
Central Public Sector Undertakings (CPSU’s).
• The CPSU’s later become popular as PSUs.
INDUSTRIAL POLICY RESOLUTION - 1956

• (i) Arms, ammunitions (Nuclear, biological, chemical, or

explosive materials, such as rockets or grenades, that are
used as weapons)and allied items of defense equipment;
(ii) Atomic energy; (iii) Heavy casting and forging of iron
and steel; (iv) Iron and Steel; (v) Heavy plants and
machinery required for basic industries; (vi) Heavy
electrical plants including large hydraulic and steam
turbines; (vii) Coal and Lignite; (viii) Mineral Oils; (ix)
Mining of iron ore, manganese ore, gypsum, sulphur, gold
and diamond; (x) Minerals for atomic energy; (xi) Mining
and processing of copper; (xii) Aircraft; (xiii) Air transport;
(xiv) Railway transport; (xv) Ship-building; (xvi) Telephones
and telephone cables; (xvii) Generation and distribution of
electricity.
INDUSTRIAL POLICY RESOLUTION - 1956

SCHEDULE - B
• The industries which were to be
progressively state-owned and in which
new enterprises were generally set up
by the state while the private enterprise
were expected only to supplement the
effort of the state. (central govt.)
• 12 industries
INDUSTRIAL POLICY RESOLUTION - 1956
SCHEDULE - B
• (i) All minerals except minor minerals as defined
in Section 3 of the Minerals Concession Rules,
1949; (ii) Aluminum and other non-ferrous metals
not included in Schedule 'A'; (iii) Machine tools ;
(iv) Ferro alloys and tool steels; (v) Basic and
intermediate products required by chemical
industries like drugs, dye-stuffs and plastics; (vi)
Antibiotics and other essential drugs; (vii)
Fertilizers; (viii) Synthetic rubber; (ix)
Carbonization of coal; (x) Chemical pulp; (xi) Road
transport and (xii) Sea transport.
INDUSTRIAL POLICY RESOLUTION - 1956

SCHEDULE - C
• All the remaining industries come under the third
category and their development, in general, has
been left open though it will be up to the state
government to start any industry in this category.

• The state has proposed to facilitate and

encourage the development of these industries in
accordance with the programmes formulated in
successive five year plans. They also ensured the
facilities of transport, power and other services
and all other appropriate fiscal measures.
INDUSTRIAL POLICY RESOLUTION - 1956

• These THREE SCHEDULES also called as

• 1. GOVERNMENT ENTERPRISES
• 2. MIXED ENTERPRISES
• 3. PRIVATE ENTERPRISES
ROLE OF COTTAGE AND SMALL SCALE INDUSTRIES:

• The Industrial Policy has laid special emphasis on

giving every encouragement to cottage and small
scale industries. The role of such industries has
been approved by the resolution in the
development of the national economy since they
provide immediate large-scale employment,
equitable distribution of the national income and
facilitate an effective mobilization of resources and
skill which might otherwise remain unutilized.
ROLE OF COTTAGE AND SMALL SCALE INDUSTRIES:

• The new policy supports the idea of establishing

the industrial estates and the rural community
workshops to eliminate their deficiencies.
• The state has been endeavoring to foster by
restricting the value of production in large scale
industries by giving incentives, facilities of raw
material, marketing facilities, cheap electricity
and finance etc.
INDUSTRIAL POLICY STATEMENT- 1973
• In this the term “CORE INDUSTRIES” was included,
which was referred as the 6 CORE INDUSTRIES.
1. Iron and steel industry
2. Cement
3. Coal
4. Crude oil
5. Oil Refining
6. Electricity
They were called the basic industries or infrastructure
industries.
INDUSTRIAL POLICY STATEMENT- 1973

• The private players were allowed to apply for

licensing in some industries and for that they
required 20 Crores assets or more.
• In this policy some industries were reserved for
small and medium players. The Public Private
Partnership (PPP) also was emphasized as a
prototype (model) and it was called “JOINT
SECTOR” in which a partnership between state,
centre and private sector was allowed
INDUSTRIAL POLICY STATEMENT- 1973

• The crunch (critical) of Foreign Exchange

made the government legislate a Foreign
Exchange Regulation Act 1973 (FERA).

• Limited investment by MNCs given to enter

India.
INDUSTRIAL POLICY RESOLUTION - 1977
• In December, 1977 the central government announced
a new industrial policy by way of a statement in the
Parliament. The IP, despite some desirable elements,
resulted in certain distortions viz., (twist).
• Unemployment increased
• Rural-urban disparities widened and
• Real investment stagnated
• On an average, the growth of industrial sector was not
more than to four per cent per annum.
• The incidence of industrial sickness also become
widespread.
INDUSTRIAL POLICY STATEMENT- 1977
• The main emphasis of Industrial Policy Statement,
1977 was to encourage small scale and cottage
industries as against the big industrial houses and
multinationals.
• The areas reserved for public sector were extended
further. The Policy emphasized decentralization of
industries and development of backward industrial
areas. The District Industries Centers were created
to serve as a focal point for development of small
scale units. The small scale sector was classified into
the three categories:
INDUSTRIAL POLICY STATEMENT- 1977
• The District Industries Centers were created to serve as a focal
point for development of small scale units. The small scale
sector was classified into the three categories:
• (i) Cottage and small industries providing self-employment on a
wide scale;
• (ii) Tiny sectors with investment in machinery and equipment up
to Rs.1 lakh in town areas and Rs.50, 0007- in rural areas; and
• (iii) Small scale sectors with investment of Rs.10 lakhs and in
case of ancillary units with an investment in fixed capital up to
us 18 lakhs.
• The Policy also proposed to revitalize the Khadi and-village
industries by drawing special programmes in the Khadi and
handloom sectors.
INDUSTRIAL POLICY STATEMENT- 1977
• This policy is also remembered for a very important
provision. The statement stated that foreign
companies that diluted their foreign equity up to
40% under Foreign Exchange Regulation Act (FERA)
1973 were to be treated at par with the Indian
companies.
GEORGE FERNANDES

Do you
know who I
am ?
INDUSTRIAL POLICY STATEMENT- 1977

• After Emergency was lifted, he won

the Muzaffarpur seat in Bihar in 1977, and was
appointed the Union Minister for Industries.
During his tenure as union minister, he ordered
American multinationals IBM and Coca Cola to
leave the country, due to investment violations.
 Industrial Policy resolutions

Industrial policy resolution of 1980

NEW ECONOMIC POLICY 1991

 Industrial Policy, 1980
The basic objectives of 1980 Policy were as follows:
(1) Optimum utilisation of the installed capacity,
(2) Maximizing production and achieving higher
productivity,
(3) Higher employment generation,
(4) A speedy promotion of export-oriented and
import-substitution units,
 Industrial Policy, 1980
(5) Strengthening agricultural base by according a
preferential treatment to agro-based industries
and promoting an inter-sectorial relationship, and
(6) Protecting consumer interest against high prices
and bad quality, certain measures were outlined to
achieve these objectives.

• These policies included re-orientation of the public

sectors, assistance for the growth of private sectors
and promotion of small scale units.
 Industrial Policy resolutions

NEW ECONOMIC POLICY 1991

 Industrial Policy - 1990

• The Janata Dal Govt.'s 1990 Policy emphasised the

growth of small scale and agro-based industries
and at the same time, made an effort to permit
blanket (extensive) liberalization with a view to
accelerate the growth of medium and large scale
units.
 NEW ECONOMIC POLICY 1991
• In June 1991, Narsimha Rao Government took
over charge and the wave of reforms and
liberalization was observed in the economy. In
this new atmosphere of economic reforms the
government declared broad changes in Industrial
Policy on 24th July, 1991.
• This Industrial Policy initiatives undertaken by the
government since July 1991 have been designed
to build on the past industrial achievements and
to accelerate the process of making Indian
industry internationally competitive.
• In this new ‘Industrial Policy of 1991’ major changes have
been introduced during the last few years is ‘new’ to Indian
economy such as:
a. Industrial licensing system has been almost abolish. No
license is required from the government except 18 industries.
b. Producers are free to decide their scale and level production.
c. Imports of almost all the goods are freely allowed without
any restriction.
d. MRTP Act has been liberalized.
e. Doors have been left open for MNC’s. These are given
automatic approval.
INDUSTRIAL LICENSING POLICY - 1991

• This policy was a comprehensive document

which was divided into 5 parts:
• Industrial Licensing policy
• Foreign Investment
• Foreign Technology Agreements
• Public Sector
• MRTP Act.
INDUSTRIAL LICENSING POLICY - 1991
• This policy abolished the industrial licensing for all projects except for
a short list of industries. They are
1. Arms and ammunition and allied items of defense equipment,
defense aircraft and warships.
2. Atomic Energy.
3. Coal and Lignite.
4. Mineral Oils.
5. Mining of Iron ore, Manganese Ore, Chrome Ore, Gypsum, Sulpphur,
Gold and Diamond.
6. Mining of Copper, Lead, Zinc, Tin, Molybdenum and Wolfram.
7. Minerals specified in the schedule to the Atomic Energy (Contorl of
Production and Use) Order, 1953.
8. Railway Transport.
• Except the 18 industries, all were de-licensed
from the B&C Schedules of the Industrial
Policy of 1956.
 INVESTMENTS

• 34 Industries were placed under the

automatic approval route for direct
foreign investment up to 51% foreign
equity.
FOREIGN TECHNOLOGY AGREEMENTS

• Automatic permission was given for foreign

technology agreements in high priority
industries up to a lump sum payment of Rs.1
Crore, 5% royalty for domestic sales and 8% for
exports, subject to total payment of 8% of sales
over a 10 year period from date of agreement
or 7 years from commencement of production
 PUBLIC SECTOR
• A promise was made to review to portfolio of
public sector investments with a view to focus the
public sector on strategic, high-tech and essential
infrastructure.

• This indicated a disinvestment of the public sector.

The PSUs which were chronically sick and which are
unlikely to be turned around were to referred to
the Board for Industrial and Financial
Reconstruction (BIFR).
 MRTP Act.
• The MRTP Act will be amended to remove the
threshold (entry) limits of assets in respect of MRTP
companies and dominant undertaking.

• This eliminates the requirement of prior approval of

Central Government for establishment of new
undertakings, expansion of undertakings, merger,
amalgamation and takeover and appointment of
directors under certain circumstances.
• The MRTP limit for MRTP companies was made 100
Crore.