1. Industrial policy usually means government action to influence the ownership & structure of industry and its performance and it takes the form of paying subsides of providing finance in other ways or of regulation.
2. Any government action aimed at affecting industry may be considered to be part of industrial policy, which makes it a limitless field.
3. A country must formulate industrial policy as an instrument of industrialization
· Protection and development of small and medium enterprises.
· To maintain a sustained growth in productivity and have a balanced growth.
· To enhance gainful employment.
· To attain international competitions.
· To achieve optimal utilization of human resources.
· To transform India into a major partner and player in the global arena.
· Government of India adopted a policy resolution on 30 April 1948 called the first Industrial Policy Resolution of 1948, which made it clear that India was going to have a mixed economy.
· On the basis of ownership, the industries were classified into four categories.
· Basic and strategic industries such as arms and ammunition atomic energy, railway etc. shall be the exclusive.
· In the case of industries like coal, iron, steel, ship building, manufacture of telegraph, telephone, wireless apparatus mineral oils etc. the state took over the exclusive responsibility of all future development and the existing industries were allowed to function for 10 years after which the state would review the situation and explore the necessity of nationalization.
· In the 3rd group, 18 industries including automatable, tractors, machine tools etc. were allowed to be in the private sector, subject to government regulation and supervision
· All other industries were left open to the private sector. However the state might participated and /or intervene if circumstances so demanded.
· The Industries (Development and Regulation) act was passed in 1951 to implement the IPR, 1948.
· On 30 April 1956, the Government revised its first IPR of 1948 and announced the Industrial Policy (IP) of 1956
a) Introductions of the Constitution of India.
b) Adoption of a planned economy.
c) Declaration by the parliament that India was going to have a socialist pattern of society.
1. The IPR 1956 has been known as the “Economic constitution of India” or “the Bible of state capitalism”.
2. IPR 1956 classified industries into three categories : they were:
3. Schedule A consisting of 17 industries would be the exclusive responsibility of the state.
4. Out of these 17, four states industries, namely arms and ammunition atomic energy, railways and air transport would be central Government monopolies.
5. New units in the remaining industries would be developed by the state governments.
6. Schedule B, consisting of 12 industries would be open to both the private and public sectors and such industries would be progressively state owned.
7. All the other industries not included in these two schedules constituted the third category which was left open to the private sector. However, the state reserved the right to undertake and by type of industrial production.
8. The IPR 1956 stressed the importance of cottage and small scale industries for expanding employment opportunities and for wider decentralization of economic power and activity.
9. Features of the new policy that distinguishes it from the previous policy are
· Expansion of role of the state
· Reduced threat of nationalization
· More meaningful approach to the concept the of a “mixed economy”
· The long awaited liberalized industrial policy was announced by the government of India on 24 July 1991.
· This policy has dismantled all needless irksome bureaucratic controls on industrial growth.
· The new policy considered that big and monopoly business houses and foreign capital and multinational corporations (MNCS) are no longer “fearsome” and in fact they are begin to this policy has decided to take a series of this policy has decided to take a series of initiatives in respect of the polices relating to
* industrial licensing
* MRTP act.
* Public sector policy
* Foreign investment
* Foreign technology agreements.
· Industrial licensing will be abolished for all projects except for schedule a industries (18 industries).
· At present there are only 5 industries which carry the burden of compulsory licensing.
* Aerospace and defense related electronics
* Gun powder, industrial explosives and detonating fuse
* Dangerous chemicals
* Tobacco, cigarette related products.
* Alcoholic drinks.
· The policy provider for automatic clearance for import of capital goods in cases where the foreign exchange availability is ensured through foreign equity.
· As per the MRTP Act, the policy states that the pre - entry scrutiny of investment decisions by the so called MRTP companies will no longer be required.
· The policy intends to scrap the asset limit of the MRTP companies.
· De reservation of industries:
· The industries which were reserved for the central government by the IPR, 1956 were cut down to only eight. At present there are only two industries which are fully or partially reserved for that.
* Atomic energy and nuclear research and other related activities
* Railways [Many of the functions related to the railways cannot the sector as a fault fledged railway service provider.]
· In order to invite foreign investment in high priority industries requiring large investments and advanced technology it has been decided to provide approval for direct foreign investment up to 51 p.c. (percent) foreign equity in such industries
· The policy provides that in locations other than cities of population of more than one million, there will be no requirement for obtaining industrial approvals except industries subject to compulsory licensing.
· This new policy has been hailed as a “landmark” in the opening up of the Indian economy. This policy is a great leap towards privatization.
· Competition among firms is the essence of the new industrial policy.
· In order to improve competition and thus contain the distortions caused by monopoly power, the competition act, 2002 was passed in December 2002.