HISTORY OF INDUSTRIAL

POLICY
 Pandit Jawaharlal Nehru laid the foundation of
modern India.
 The goals and objectives set out for the nation by
Pandit Jawaharlal Nehru were:
• Rapid Agricultural and industrial development.
• Rapid expansion of opportunities for gainful
employment.
• Progression reduction of social and economic
disparities.
• Removal of poverty and attainment of self
reliance.
 INDUSTRIAL POLICY
 Industrial policy refers to government policy
towards industries:
• Establishment
• Functioning
• Growth
• Management
 Rules, regulations, principles, policy and
procedure.
 Reflects the government attitude.
 Defines the respective roles of different sectors.
 State must play active role in development of
industries.
 INDUSTRIAL POLICY OF INDIA

 INDUSTRIAL POLICY RESOLUTION, 6 April, 1948

 INDUSTRIAL POLICY RESOLUTION, 30th April, 1956

 INDUSTRIAL POLICY FEB 2, 1973

 INDUSTRIAL POLICY DEC 23, 1977

 INDUSTRIAL POLICY STATEMENT OF JULY, 1980

 INDUSTRIAL POLICY, JULY 24, 1991

 OBJECTIVES OF INDUSTRIAL
POLICY
 Proper flow of scarce resources.
 Correct the imbalances in the development.
 Enhancing gainful employment.
 Reducing poverty.
 Prevention of concentration of wealth in few
hands.
 Achieving economic growth.
 Liberalization and globalization.
 Updating technology and modernization of
industry.
 Attaining international competitiveness.
 INDUSTRIAL POLICY RESOLUTION
1948
(6 April, 1948)
 This industrial policy was designed to
attain the following objectives:
• To establish a social order.
• To promote standard of living
• To increase both agricultural
and industrial promotion.
• Full employment opportunities.
 MAIN FEATURES OF
` INDUSTRIAL POLICY,1948
 Acceptance of the importance of both private and
public sectors.
 Division of industrial sector:
• Industries where state had a monopoly.
- arms and ammunition
- atomic energy
- rail transport
• Mixed sector
- coal
- iron and steel
- aircraft manufacture
- ship building
MAIN FEATURE
CONTINUES…
- manufacture of telephone, telegraph
and wireless apparatus
- mineral oils.
 Field of Government control:

- automobiles, heavy machinery, heavy

chemicals, machine tools, fertilizers,

electrical engineering, sugar, paper,
cement, cotton and wooden textiles.
 Field of private enterprise
 MAIN FEATURE CONTINUES….
 Role of small and cottage industries.
 Other important features:

• The role of foreign capital in industrial

development of the economy was recognized.
• Harmonious relations between management
and labour.
- Proper working condition and fair
wages
• Labour participation in management.
 INDUSTRIAL POLICY
RESOLUTION 1956
(30 April, 1956)
OBJECTIVES
 State trading on a increasing scale

 Planned national development

 To provide opportunity to the private sector

to growth and expand

 Labour should participate in it enthusiasm

 INDUSTRIAL POLICY
RESOLUTION
Emphasis in the continuous increase in
production and its equitable distribution

Statemust play progressive role in the

development of the industries

To provide justice, liberty, equality and fraternity

DIRECTION OF POLICIES

 Men and women are equal

 Equal pay for both men and women

 Childhood and youth are protected against

the exploitation
 To develop the heavy industries

 To develop the machine making industries

 To expand the public sector

 And to built the large and growing co-

operative sector
 WHAT TO DO TO ACHIEVE THE
OBJECTIVES

 Improve the life standard and the

working condition for the people

 To prevent the private monopolies

 Concentration of economic power on

the small number of individuals
 CLASSIFICATION OF THE
INDUSTRIES
 First
 The industries whose development will be
exclusive responsibility of the state

 Second
 The industries which are progressively state
owned

 Third
 It includes the all other industries
 FEATURES
 Privatesector must fit to the framework of
social and economic policy of the state

 Government want to stress the role of small

scale industries in developing the national
economy.
{Since they provide large number of
employment }
TO PROVIDE THE STEADILY SUPPLY

OF RESOURCES

 Lack of resourses is very common due

to the lack of power supply, water , and
transport facilities .

 It is one of the national aims of the

nation
 ESSENCE

 Government of India trust that this

statement of the industrial policy will receive
support from all section of the people and
promote the rapid industrialization
 INDUSTRIAL POLICY
RESOLUTION
FEBRUARY 2, 1973

1. The Industrial Policy Resolution of 1956 still

remained valid, but certain structural
distortions had crept in the system.

2. The new policies were hence directed

towards removing these distortions.

3. It provided for a closer interaction between

the agricultural and industrial sectors.
4. Accorded the highest priority to the generation
and transmission of power.

5. An exhaustive analysis of industrial products was

made to identify products which are capable of
being produced in the small scale sector.

6. The list of industries exclusively reserved for the

small scale sector was expanded from 180 items
to more than 500 items.
7. Within the small scale sector, a tiny sector
was also defined with investment in
machinery and equipment up to Rs.1 lakh
and situated in towns with a population of
less than 50,000 according to 1971 census
figures, and in villages.

8. Special legislation to protect cottage and

household industries was also proposed to
be introduced.
 INDUSTRIAL POLICY
RESOLUTION
23 Dec, 1977S.
Industrial policy highlights on producing input needed by a
large no of smaller units and making adequate marketing
arrangement.

The nucleus plant would also work for upgrading the

technology of small units.

The government would promote the development of a

system of linkage between nucleus large plant and the
satellite ancillaries.

To boost the development of small scale industries.

The investment limit in the case of tiny limits was enhanced

A Scheme for building buffer stocks of essential
raw materials for the small scale industries was
introduced for operation through the small
industries development corporation in the states.

The national small industries corporation in the

centre.

Industry process and technology amid at optimum

utilization of energy or the exploitation of
alternative sources of every would be given special
assistance .

 And also including finance on concessionary

 INDUSTRIAL POLICY
RESOLUTION
Jul, 1980S.
It
was based on the industrial policy resolution of
1956.

Optimum utilization of installed capacity.

Maximum production and achieving higher

productivity.

Higher employment generation.

 Collection of regional imbalances.

Promotion of export oriented industries.

Strengthen of the agriculture base through agro
based industries and promotion of optimum
intersectorol relationship.

Promotion of economic federalism through

equitable spread of investment and dispersal of
returns.

Consumer protection against high price and bad

quality.
 INDUSTRIAL POLICY
RESOLUTION
24 Jul, 1991
 On 24th July 1991, the government head Mr.
P.V.Narasimha Rao, announced a new industrial policy
which sought to drastically alter the industrial scenario
in our country.

 There are several fundamental departures in the new

policy. The most important initiatives are with respect
to the virtual scrapping of industrial licensing and
registration policies, an end to the monopoly law and a
more welcoming approach to foreign investments,
apart from redefining the role of the public sector.
These measures, long overdue, are welcoming as they
would free the industry from regulations, most of
which have outlived their utility.
 OBJECTIVES
 The objectives of the New Industrial Policy are:
 Encouragement to Indian entrepreneurship, promotion of
productivity and employment generation.
 Development of Indigenous technology through greater
investment in R&D and bringing in new technology to help
Indian manufacturing units attain world’s standards.
 Removing the regulatory system and other weaknesses.
 Increasing the competitiveness of industries for the benefit
of the common man.
 Incentives for the industrialization of backward area.
 In pursuit of the above objectives, the
Government has decided to take a series of
initiatives in respect of the policies relating
to the following areas:

A. Industrial Licensing
B. Foreign Investment
C. Foreign Technology Agreements
D. Public Sector Policy
E. Monopolies and Restrictive Trade Practices
A. INDUSTRIAL LICENSING POLICY

 Industrial licensing policy and procedures have also been

liberalized from time to time. A full realization of the
industrial potential of the country calls for a continuation
of this process of change.

 Major policy initiatives and procedural reforms are called

for in order to actively encourage and assist Indian
entrepreneurs to exploit and meet the emerging
domestic and global opportunities and challenges.

 The industrial licensing system has been gradually

moving away from the concept of capacity licensing. The
system of reservations for public sector undertakings has
been evolving to the ethos of greater flexibility and
private sector enterprise has been gradually allowed to
enter into many of these areas on a case by case basis.
B. FOREIGN INVESTMENT
 Foreign investment would bring attendant
advantages of technology transfer, marketing
expertise, introduction of modern managerial
techniques and new possibilities for the promotion
of experts.
 In order to invite foreign investment in high
priority industries, requiring large investment and
advanced technology, it has been decided to
provide approval direct foreign investment upto
51% foreign equity in such industries
 Promotion of exports of Indian products calls for a
systematic exploration of world markets possible
only through intensive and highly professional
marketing activities.
C. FOREIGN TECHNOLOGY AGREEMENTS

 There is a great need for promoting an

industrial environment where the acquisition
of technological capability receives priority.
In the fast changing world of technology, the
relationship between the suppliers and the
users of technology must be a continuous
one.

 With a view to injecting the desired level of

technological dynamism in the Indian
industry, the Government will provide
automatic approval for technological
agreements related to high priority industries
within specified parameters.
D. PUBLIC SECTOR POLICY

 The Industrial Policy Resolution of 1956 gave

the public sector a strategic role in the
economy.

 After the initial exuberance of the public

sector entering new areas of industrial and
technical competence, a number of problems
have begun to manifest themselves in many
of the public enterprises. The most striking
example is the take over of sick units from
the private sector. Public sector units
accounts for almost one-third of the total
losses of central public enterprises.
E. MONOPOLIES AND RESTRICTIVE
TRADE PRACTICES ACT (MRTP ACT)

 With the growing complexity of the industrial

structure and the need for achieving
economies of scale for ensuring high
productivity and competitive advantage in
the international market.

 Pre-entry scrutiny of investment decision not

required.

 MRTP act is restructured by eliminating the

legal requirements.
 INDUSTRIAL
LICENSING POLICY
 INDUSTRIAL LICENSING
 License is a written permission issued
by the central government to an
industrial undertaking stating such
details as the location, the article to be
manufactured, production capacity
and other relevant particulars.

 Ours is one of the few countries in the

world where an entrepreneur is
required to obtain an industrial license
from the government before venturing
into new business.
 OBJECTIVES OF INDUSTRIAL
LICENSING

• Planned industrial development through
appropriate Regulations and controls.
• Directing industrial investment in
accordance with plan Priorities.
• Ensuring government control over
industrial activities In India.
• Regulating the industrial capacity as per
targets set for Planned economy.
• Preventing concentration of industrial and
economic Power and monopoly.
• Checking unbalanced growth of industrial
establishments and ensuring economic size of industrial
units.

• Utilizing full capacity of large scale industries .

• Utilizing appropriate technology .

• Protecting of small scale industries against undue

competition of large scale industries .

• Broadening the industrial base in India through new

entrepreneurship development and ensuring industrial
dispersion.

• Encouraging healthy entrepreneurship .

 THE INDUSTRIES
(DEVELOPMENT &
REGULATION) ACT , 1951.
 To implement the industrial policy.

 To ensure regulation and development

of important industries.

 To
ensure planning and future
development of new undertakings .
PROVISIONS OF INDUSTRIES (D
& R) ACT , 1951

Provisions of IDRA

Preventive Provision

Curative Provision

Creative Provision
 PREVENTIVE PROVISIONS

Three types of provisions are included in the

preventive provisions .

 Registration and licensing policies

 Investigation provisions

 revocation of license provisions.

 CURRATIVE PROVISIONS

 Taking over the management or control of

industrial enterprise.

 Control of supply, price ,and distribution of

certain commodities.
 CREATIVE PROVISIONS

Creative provisions are positive in nature and

involves cooperation between central government
, industry, labor and consumers of goods
produced by scheduled industries.
 EXEMPTIONS FROM LICENSING

 Items relating to an industries which is not

included in the first schedule of the act .
 Items to be manufactured in an undertaking
which does not come under the definition of
a “factory” under the industries (D and R )
Act , 1951.
 Expansions which does not come under
substantial expansion ,that is ,up to 25% of
the existing capacity.
 Small scale units subject to certain
conditions .
 Items which do not fall under the definition of
“ new article”.
 CRITICISMS OF INDUSTRIAL
LICENSING
 Issue of licenses tends to give an
exaggerated picture of industrial capacity.
 The process of consideration of applications
at various levels and at various times
contributes to delays and higher costs.
 There is very little follow up of licensing to
see that approved projects fructify in a
satisfactory phased schedule.
 One of the important purposes of industrial
licensing of achieving regional dispersal of
industries has not been achieved.
 Industrial Licensing Policy
The industrial Licensing Policy in India can
be studied in the following ways

1.The Industries (Development and

Regulation) Act, 1951
2.Industrial Licensing Policy 1951-60
3.Industrial Licensing Policies for 1960-70
4.Industrial Licensing Policies 1970-77
5.Industrial Licensing Policy 1980-90
 INDUSTRIAL LICENSING POLICY
1951-60
Industrial Licensing prior to 1960 aimed at
achieving the following among others

1. Development of industries and encouraging

industrial activity in accordance with the plan
priorities
2. Checking the concentration of economic power
3. Reduction of regional disparities
4. Proper allocation of foreign exchange
5. Development, protection, and encouragement of
small scale industries
6. Modernization of technology and achievement of
industrial growth
INDUSTRIAL LICENSING POLICY
1960-70

The Industrial Licensing policy came in for sharp

criticism from various committees. The main
criticism leveled against it were

 promotion of large industrial houses and

 Usage of some unethical practices followed by a

section of large business houses
INDUSTRIAL LICENSING POLICY
1970-80

 Licensing policy of 1970

Government of India banned the entry of large
industrial houses and foreign companies into any
field except core industries, heavy industries,
heavy investment projects, and export oriented
projects. Several other restrictive policies followed
 Licensing policy of 1977

A new policy statement was announced by the

government on December 23, 1977
The 1977 licensing policy provided thrust
mainly in two respects:
1. Priority to small-scale, village, and tiny
sector industries in future industrialization
and
2. Geographical dispersal of industries from
metropolitan centers to rural and backward
areas.
 INDUSTRIAL POLICY
STATEMENT 1980-90
 Inpursuance of this policy, a new
licensing policy was adopted, aiming
at reviving the economic infrastructure
inhibited by the infrastructural gaps
and inadequacies in performance.

 The basic objective was to transmit the

fruit of industrialization and economic
progress to maximum number of
people, both in urban and rural areas.
In order to make Indian industry more competitive,
the government felt the need for releasing the
industry from bureaucratic obstructions and
reducing the number of clearances.

• all new units with an investment upto Rs 75

crore in Centrally notified backward areas and Rs
25 crore in other areas were exempted from
licensing.

• Import of capital good was allowed to the ttune

of 30 percent of the plant and machinery.

• Export oriented units and units located in Export

Processing Zones with an investment upto Rs 75
crore were de- licensed
 Conclusion
In a planned economy, adequate
control measures have to be exercised
by the government for providing
necessary direction to the industries,
especially the private sector, to
contribute their best towards the socio-
economic objectives of the nation.
Hence, the government control
measures should be viewed in this
light.