Indian Industrial Policies

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Indian industrial policies: Industrial policies are the steps taken by the government to uplift the manufacturing units and to improve the condition of manufacture and exports in the country. Promoting the industries of the country is important for overall growth of the country and for increasing exports and reducing imports to the country.

When India got independence on 15 august 1947, production in the country was very low and the population was increasing. It became necessary for the government to look after the production and thus they took the major steps and formed several policies. Soon after independence, our goal was to become self-reliant nation and thus improving production was of utmost importance.




India being a country where both the public sector and private sector co-exist, it becomes important for the government to regulate the sector.

Importance of industrial policies:

  1. Industrial policies help in growing productivity.
  2. They help in avoiding monopoly of single industry.
  3. Helps in deployment of natural resources.
  4. Proper utilisation of human resource and thus generating employment.
  5. Helps in regional development.
  6. Helps in matching the competition from foreign goods.
  7. Helps in increasing local production and increasing exports.
  8. Helps in modernization.
  9. Leads to growth of economy.

The various industrial policies of India are as under:

INDUSTRIAL POLICY RESOLUTION, 1948

First industrial policy framed after independence was the industrial policy resolution of 1948 which focused on:

  1. Making India a mixed economy where both private and public sectors would be present.
  2. It aimed at protecting the small and cottage industries and they were given importance.
  3. It also imposed restrictions on foreign investments.




In this, industries were broadly classified into four categories:

  1. Complete monopoly of government: these industries included the arms and ammunition industries, railways and atomic energy activities. These solely lied in hands of the government and private sector could not take part into it.
  2. Industries having government control: these were industries of national importance and thus were regulated by the state and central government. These included the chemical industries, cement industries, sugar industries, cotton and woollen textile industries etc.
  3. Mixed sector industries: the new industries were to be set up by the government but the already present industries in these sectors were allowed to function for next 10 years and after that their nationalisation was to be decided. This included iron and steel industry, aircraft manufacturing units etc.
  4. Private industries: the industries which were not part of above mentioned categories came in this category and private sector could set up industry of this kind but government can interfere here also if it finds the working of the industry unsatisfactory.

INDUSTRIAL POLICY RESOLUTION, 1956

New and improved policy was announced in April, 1956. This policy focused on:

1. New classification of industries:

  • Schedule A industries: these were the industries that were under control of the state and central government. This included important industries like air transport, atomic industries, heavy machinery industry, electricity generation and distribution etc.
  • Schedule B industries: these industries were under the control of state government but private sector can supplement the efforts of the government. These industries included fertilizers, road and sea transport, drug industries etc.
  • Schedule C industries: these industries were open for participation by private sector.




2. Balanced regional growth: this renewed policy focused on the backward areas and tried to balance the regional growth. Government not only started setting up industries in these areas but provided incentives such as tax concessions for setting up industries in these areas.

3. Recognising labour: this policy recognised the labour as important part in development process. They put emphasis on providing incentives to the government and improving working conditions of the workers.

4. Provided assistance to private sector: there was main role of public sector but at the same time private sector was also given importance by providing financial assistance and improving infrastructure.

Industrial policy statement , 1977

Another policy was introduced in 1977. Main focuses of this policy were:

  1. Importance to small scale industries: main focus was on small scale industries and new ‘tiny units’ were introduced whose investment was less than 1 Lakh and was located in the area with population less than 50,000. Under this policy district industries centre was established to meet the needs of industries in that particular district. Separate cell was also set up in IDBI to fulfil the needs of cottage and small industries along with helping them set up marketing strategies.
  2. Use of indigenous technology: this policy focused on use of labour and already available technology and restricted the use of foreign technology. Only in the areas where there is need for improved or foreign technology there the government would allow purchase of technology from abroad.
  3. Restriction of foreign investment: this policy further restricted the foreign investment as it was stated by the Indian government to restrict the ownership and control to Indians and allow foreign investment only in the areas where it is extremely required like export oriented or technological areas.




INDUSTRIAL POLICY STATEMENT, 1980

With further changes and with the concept of socio-economic growth this new policy was laid in 1980. Following were the main focuses of this policy:

  1. Improving public sector enterprises: from past many years public sector enterprises were given importance but still they were not working efficiently and thus this policy had a view in mind to closely examine each unit and find out the reason for below average performance.
  2. Merger and takeover of sick units: sick units were the industries which were running in losses from a long time. These units were proposed to be merged or to be taken over by healthy units as they have the capacity to manage these sick units and restore their viability.
  3. Promotion of export oriented industries: promotion of export oriented industries and import-substitution industries was done. This was done to improve the economy through self sufficiency and increased exports.
  4. Relaxations: this policy had witnessed the major relaxations, simplifications and streamlining of licensing procedures. Relaxations were given under monopolistic and restrictive trade practices (MRTP) Act and foreign exchange regulation act (FERA) guidelines.

NEW INDUSTRIAL POLICY,1991

This policy brought in major changes in the industrial culture in the country.

  1. This policy removed the asset limit from monopolistic and trade practices (MRTP) industries. Pre- entry scrutiny of investment decisions was not needed now.
  2. Abolished licensing: this policy abolished licensing with some exceptions and made the setting up of industries more liberal. Licensing was still compulsory for 18 industries.
  3. Foreign direct investment: this policy allowed the foreign direct investment up to 51% in the high priority industries.
  4. Reduced red-tapism: this policy significantly reduced the bureaucratic red-tapism which helped in industrial and economic growth.

This is called the LPG policy.

L– Liberalisation, this means the procedures were liberalised and government control was reduced

P– Privatisation, more role of private sector will be seen

G– Globalisation, Indian economy will be integrated with the world economy.

Overall changes in Indian industrial policies have improved the country’s economy and industrial situation. There was industrial growth of 1.9% in 1990-91 and it later on increased in 2000’s to 8%

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