INSTITUTE OF BUSSINESS MANAGEMENT,C.S.J.M.

AN ASSIGNMENT ABOUT INDUTRIAL POLICY

COMPARISON BETWEEN PRE-1991 & CURRENT INDUSTRIAL POLICYGROUP-10

2010

SUBMITTED TO-:
SUDESH SIR

(B.E)

M.F.C FIRST

SEMESTER

INDUSTRIAL POLICY
The industrial policy indicated the respective roles of the public ,private , joint & cooperative sectors; small, medium & large scale industries & underlined the national priorities & the economic development strategy. it also expressed governments policy towards foreign capital & technology, labour policy, tariff policy etc. in respect of the industrial sector .In short we can say that , the industrial development ,& thereby the economic development to a very significant extent, has been guided, regulated & fostered by the industrial policy.

The industrial policy of government of India & the regulatory measures introduced to achieve the policy objectives had been matters of severe controversy . While the industrialists & many others in India & abroad & many foreign governments & international development organizations regarded the policy as too restrictive & procedures too cumbersome & prelexing ,the leftists in india had been demanding a more restrictive regime. The Industrial policy & regulation had grown more & more restrictive until about mid 70s . Having realized the deleterious effects of the restrictive regime ,the 1980s saw a very slow process of liberalization .In tune with the economic reforms

ushered in 1991, the industrial policy too underwent a drastic change. The era deregulation ushered in by the Narasimha Rao government in 1991 is an open acknowledgement of the failure of the control regime to deliver the goods .The Indian planners were fascinated & influenced by the Russian model so that the development strategy in India was directed towards creating socialist pattern of society.

INDUSTRIAL POLICY UP TO 1991

The industrial policy of india prior to the liberalisation ushered in 1991 was characterised by the following features

Reservation of Industries1. Future development of most of the import industries was exclusively reserved for the public sector. 2. Manufacture of a large number (over 850 in 1991) of items was reserved for the small scale sector .

Dominance of Public sectorThe policy of the government was to ensure

that the public sector gained control over commanding heights of the economy. The Industrial policy Resolution of 1948 established public sector monopoly in 9 industries. The Industrial Policy Resolution of 1956,brought out in the light of the adaption by the parliament of the socialist pattern of society as the national goal & the second five year plan model which gave emphasis to the basic & heavy industries , further expanded substaintially the role of the public sector.

Entry & growth restrictionsThere were a number of entry & growth restrictions on the private sector(particularly on the large firms & foreign firms) even in respect of industries where the private sector was allowed . A licence was mandatory for establishing new units with investments above a specified limit, for manufacturing new products & for substantial expansion of existing undertakings . Large firms (having assets, including those of interconnected undertakings, of Rs. 100 crore or

more) & dominant undertakings (i.e, those having a market share of 25% or more) had to obtain clearance under the Monopolies & Restrictive Trade Practices (MRTP) Act, in addition to the industrial licence, for establishing new undertakings , substantial expansions & manufacture of new items. There were also restrictions on import of capital goods etc.

Restrictions on Foreign Capital & TechnologyThe scope of use of foreign capital & technology was limited. Even in industries where foreign cpital was allowed, it was normally subject to a ceiling of 40% of the total equity ,although exceptions were allowed in certain cases.Operetions of foreign companies in India & issue of securities abroad by Indian companies were regulated under the Foreign Exchange Regulation Act(FERA),1973.

THE NEW INDUSTRIAL POLICY

The Industrial policy announced on July 24,1991, which heralded the economic reforms in india, has enormously expanded the scope of the private sector by opening up most of the industries for the private sector & substantially dismanding the entry & growth restrictions. The industrial policy reforms have reduced the individual licensing requirements, removed restrictions on investment & expansion, & facilitated easy access to foreign technology & foreign direct investment. The salient features of the new policy are the

Objectives-as follows
1. To build on the gains already made. 2. To correct the distortions or weakness that may have crept in. 3. To maintain a sustained growth in productivity & gainfull employment. 4. To attain international competitiveness.

Redefinition of the role of public sectorThe role of the public sector was redefined & the scope of the public sector has been drastically abridged. The number of industries reserved for the public sector was reduced to eight & it was later pruned ,in stages,to two(atomic energy & railway transport).