Industrial Policy

What is Industrial Policy in India?

The Industrial Policy in 1948 can be held to be a precursor to industrial development in India. Some of the primary objectives of the Industrial Policy are -

  • Maintenance of sustained growth in the productivity 

  • Increasing employment opportunities 

  • Human resource’s optimal utilization 

  • Spearheading international competitiveness 

Before the formulation of Industrial Policy, industrial development in India before independence was in shambles. Under colonial rule, a proper industrial base in India could not be formed. Even the cotton textile industry, the first industry in India, was in ruins under British control.

Industrial development in India started with the implementation of Industrial Policy in 1948, and took off with the Policy in 1991, with the liberalization of the economy.  

Read on to know important features of Industrial Policies in India. 

Industrial Policy Reform

1. Industrial Policy 1948

This was the first Policy that was implemented after gaining independence. It ushered in a mixed economic model in the country. Existing industries in India were categorized into the following sectors –

  • Strategic industries such as rail transport, atomic energy along with arms and ammunition 

  • Basic industries such as iron and steel, mineral oil, coal, etc.

  • Controlled private sector such as cement, paper, textile, etc.

  • The private and cooperative sector 

For the implementation of Policy resolutions, the Industries (Development and Regulation) Act, 1951 was passed. 

2. Industrial Policy 1956

The Policy of 1956 led to an enormous expansion of the public sector to restrict private monopolies. Three schedules were laid out for the classification of industries –

  • Schedule A – Included 17 industries that were entirely under the control of the State. 

  • Schedule B – Included 12 industries that had both public and private ownership.  

  • Schedule C – Included all other industries which did not fall within the ambit of the previous two categories.  

3. Industrial Policy 1977

The Policy statement of 1977 had been highly criticized for having undertaken no clear measures for socio-economic development. The Policy’s main emphasis had been, however, the propagation of cottage and small industries. 

4. Industrial Policy 1980

This Policy focused on the promotion of economic federation and restoration of the Monopolies and Restrictive Trade Practices (MRTP) Act. 

5. Industrial Policy 1991

The Industrial Policy of 1991 opened up India’s economy to the world, in the backdrop of severe economic crisis. It was this policy which led to an acceleration of economic growth in our country -

  • The public sector, with the exceptions of railways and atomic energy, was opened up for the private sector.

  • Industrial licensing was abolished barring hazardous chemicals industries, defense, aerospace, industrial explosives, cigarettes, and tobacco.

  • Substantial government stakes were sold off from public sector enterprises.

  • Foreign Direct investment as allowed.

  • Amendment of the Monopolies and Restrictive Trade Practices (MRTP) Act.

There have been certain drawbacks in the Industrial Policies as well. Some of such criticisms include – stagnation of the manufacturing sector, labour displacement, selective investment flow, and general lack of incentives for enhancing efficiency, among others. As the economy of India stands today, there is a greater need for initiatives like Startup India and Make in India.  

This topic has immense scope for study and discussion. Download Vedantu’s app today to know more about industrial development in India!

FAQs (Frequently Asked Questions)

1. What Were the Significant Aspects of the First Industrial Policy in 1948?

Ans. The first Industrial Policy was declared in 1948 right after attaining independence. India became a mixed economy under Industrial Policy 1948. One of the most critical features of the policy was to usher in the major classification of industries which eventually led to industrial development in India. 

Large industries were categorized into – (1) ‘Public Sector’ industries such as railway, atomic energy, arms and ammunition, (2) ‘Key Industries’ like ship and aircraft manufacture, iron and steel, coal, telegraph, telephone and wireless, and mineral oil, (3) ‘Controlled Private Sector’ included close to eighteen industries such as cotton textiles, heavy chemicals, electricity, fertilizer, etc., (4) ‘Private and Co-operative Sector’ included rest of the sectors that did not find mention in any of the previous categories. 

2. When the Last Industrial Policy Implemented, and What Were the Measures Adopted?

Ans. The last Industrial Policy was announced in 1991 by the Government of India, which eventually led to the liberalization of the Indian economy. The primary objective of the said Policy was to cause the acceleration of economic growth. 

The main features of Industrial Policy 1991 were – (1) public sector de-reservation, (2) industrial licensing abolished, (3) disinvestment in the public sector, (4) allowing foreign capital investment, etc. 

3. Which Were the Important Private Controlled Industries that Were Addressed in the First Industrial Policy?

Ans. In the Industrial Policy of 1948, a total of 18 industries were put under the category of Important Industries. Some of those industries included – (1) woolen and cotton textile, (2) sugar, (3) heavy chemicals, (4) paper, (5) cement, (6) salt, (7) fertilizer, (8) machine tools, (9) rubber, (10) sea and air transport, (11) tractor, (12) motor, (13) electricity, etc. 

The mandate for the initial industrial development in India was that the above-mentioned industries would continue to be operated by the private sector. However, to a certain extent, the central government would engage in consultation with the state government to retain control over such industries. 

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