January 29, 2022
Industrial Policy india

Industrial Policy: Evolution of industrial policy in India

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Industrial Policy means that Government action to influence the ownership & structure of the industry and its performance. It takes the form of paying subsidies or providing finance in other ways, or of regulation.

It includes procedures, principles (i.e., the philosophy of a given economy), policies, rules and regulations, incentives and punishments, the tariff policy, the labour policy, government’s attitude towards foreign capital, etc.

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Industrial Policy Objectives

The main objectives of the Industrial Policy of the Government in India are:
▪ to maintain a sustained growth in productivity;
▪ to enhance gainful employment;
▪ to achieve optimal utilisation of human resources;
▪ to attain international competitiveness; and
▪ to transform India into a major partner and player in the global arena.

Evolution of industrial policy in India

Evolution of industrial policy in India
Evolution of industrial policy in India

1) Industrial policy Resolution 1948

  • After independence the first industrial policy was declared on 6th April, 1948 by then union industry minister Mr. Shyama Prasad Mukherjee.
  • Resolution accepted importance of both public & private sector.
  • This policy established a base for mixed & controlled economy in India.
  • This policy divides the economy in four categories 1) Exclusive state monopoly 2) State monopoly for new units 3) State regulation 4) The field of private enterprises.
  • Exclusive state monopoly includes industries of armed & ammunition, atomic energy, railway, transport. A monopoly of central government.
  • State monopoly for new units includes coal, iron, steel, aircraft, manufacturing, Shipbuilding etc. central government look after this but after 10 years government will review the situation.
  • State regulations includes industries of machine, tools, chemicals, fertilizers, Cement, paper etc. government of India did not undertake responsibility.
  • The field of private enterprises includes industries which did not come under the above three groups. It also give importance to small and cottage industries.

2) Industries development and regulation act 1951

  • An act was passed by parliament on Oct 1951 known as industries development regulation act 1951.
  • It came in to force on 8th may 1952.
  • Main task was development and regulation of private sector.
  • Protection of small Entrepreneurs.
  • Prevention of monopoly.
  • Balanced regional development.

3) Industries policy resolution 1956.

  • Also known as economic constitution of India.
  • It was declared on 30th April 1956.
  • Basic objective was socialist pattern of society.
  • Every new policy accepted the 1956 industrial policy resolution as its base.
  • Develop heavy industries & machines institutions, speed up industrialization and excelerate rate of growth and expand public sector.
  • Reduce disparities of income and wealth, build up co-operative sectors, prevent monopoly & concentration of wealth & income in the hands of a small number of individuals’.
  • Stress was laid on co-operation between public & private sectors but more importance given to public sector.
  • Under this policy reservation of industries came.
  • Reservation of industries means clear cut clarification of industries.
  • Three schedules came under the reservation of industries
    1. Schedule A – 17 industrial areas, complete monopoly. Under this provisions known as CPSU (central public sector undertakings) which was latter known as PSU (public sector undertakings)
    2. ScheduleB- 12 industrial areas, state government review, included the compulsory licensing and transportation
    3. Schedule C – the field of private enterprises.
      • Schedule B & C industries came under the license quota permit regime.
      • Focus on small industries & khaddi and village industries.
      • This is considered as the most important industrial policy of India.

4) Industries policy statement 1969.

  • For solving the shortcomings of licensing policy which was started in 1956.
  • Experts & industrialist told that licensing policy is serving just an opposite purpose.
  • Reasons of licensing- exploitation of resources, price control of goods, checking concentration of economic power, channelizing investment in to desired direction.
  • Finally in 1969 a new industrial licensing policy was allowed.
  • Under this MRTP act came known as monopolies restrictive trade practices act with a limit of 25 crore. Green field ventures and take- over of other firms as per MRTP act came to be known as MRTP companies.

5) Industrial policy statement 1973.

  • Core industries such as iron, steel, cement, coal, electricity in future known as basic industries and infrastructure industries.
  • Schedule A is not a part of compulsory licensing policy out of 6 crore industries. Firm apply for licensing policy having assets of 25 crore or more.
  • Concept of joint sector was developed, partnership among center, state & private sector.
  • Government has been facing foreign exchange regulation so in 1973 FERA ( foreign exchange regulation act ) came, known as draconian act because it hamper the growth and modernization of industry.
  • MNCs allowed to setup their subsidiaries.

6) Industrial policy statement 1977

  • Established by janta government.
  • This statement is opposite of industrial policy statement 1973.
  • Foreign investment were prohibited which promote foreign investment through technology transfer.
  • In 1977 concept of tiny enterprises came.
  • Redefinition of small and cottage industries and emphasis on village industries.
  • DIC (district industries center) were set up to promote small & cottage industries.
  • Democratic decentralization at khadi and village industries
  • Attention on prices of essential commodities of everyday use.

7) Industrial policy resolution 1980

  • Revised of industrial policy statement 1977.
  • Foreign investment through technology transfer allowed.
  • MRTP limit 50 crores.
  • DIC continued.
  • Licensing was simplified, liberal attitude towards expansion of private sector.

8) Industrial policy resolution 1985& 1986

  • foreign investment further simplified, equity holding of MNCs in Indian subsidiary 49% with Indian partnership holding 51% share.
  • MRTP limit 100 crores.
  • Compulsory licensing of industries.
  • Sunrise industries such as telecommunication, computerization & electronics.
  • Modernization & profitability of public sector.
  • Imported raw materials got boost, use of foreign exchange permits in area of FERA.
  • Many new technologies & scientific approach for agriculture.


  • In June 1991 Narsimamh Rao government took over charge and new industrial policy came under the liberalized form.
  • Sever BOP crisis, gulf of war higher oil prices, depleting fastly foreign reserves, inflation peaking and gross fiscal deficit also.
  • Financial support from IMF.
  • Government declared broad changes in industrial policy on 24th June 1991.
  • De reservation of industries came of three industries-
    1. Atomic energy ( nuclear, mining, fuel fabricant)
    2. Arms ammunition, Defense equipment and warship
    3. Railway transport
  • Delicensing of industries came 1) Distillation & brewing of alcoholic drinks 2) Cigar cigarettes and other substitutes of prepared tobacco 3) Electronic, aerospace and all types of defense equipment 4) Industrial explosive including match box, detonating fuses, safety fuses, gunpowder and nitrocellulose. 5) Hazardous chemicals
  • Liberalized policy of FDI (foreign direct investment) 1991, FPI (Foreign portfolio investment) 1994
  • Government announced its policy towards small scale sector on 6th august 1991.
  • Micro small medium enterprise development act 2006.
  • Small and medium enterprises development bill 2005 was introduced in parliament on 12th may 2005 approved by parliament and named as small medium enterprises development act 2006 effective from 2nd oct2006.
  • Manufacturing 1) Micro- 25 lakh 2) Small- 5 crore 3) Medium- 10 crore
  • Service equipment 1) Micro- 10 lakh 2) Small- 2 crore 3) Medium- 5 crore
  • Foreign exchange regulation act was liberalized on 8th January 1993.
  • FERA was replaced by FEMA (foreign exchange management act) in Dec 1999
  • BIFR (Board for industrial and financial reconstruction) was established under sick industrial companies act 1985. The board started its functions from 15th may 1987
  • Process of disinvestment started in public sector in 1991-1992
  • To minimize the financial burden on public sector enterprises the government has started voluntary retirement scheme for the employees by giving full compensation to employees. This is called golden handshake scheme.
  • To evaluate the problems of financial sickness of small industries the government had constituted Nayak committee which submitted its report in September 1992.
  • NELP- New exploration licensing policy 1999
  • Government has granted MINI RATANA status to three public sector units-
    1. IRCTC (Indian railway catering and Tourism Corporation)
    2. Satluz hydro power corporation
    3. National hydro power corporation
  • SIDO- small industries development organization 1954
  • MAHARATNA STATUS given to these public sector units:-
    1. ONGC- oil and Natural Gas Corporation.
    2. NTPC- national thermal power corporation.
    3. Steel authority of India.
    4. Coal India ltd.
    5. Indian Oil Corporation.
    6. BHEL- Bharat heavy electrical ltd
    7. GAIL- Gas authority of India ltd
  • In 1985 Tiwari committee recommendations government introduced SICA sick industrial companies act later on 1st Jan 1987 a statutory institution named BIFR( board for industrial & financial reconstruction was setup) later on Omkar committee gave recommendations to modify SICA & role of BIFR.
  • Disinvestment commission appointed in august 1996 under the chairmanship of GB Ram Krishna. Commission was reconstituted under the chairmanship of RM Patil in 2001 objectives- to protect interest of employees.



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