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.
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