INDUSTRIAL POLICIES

Industrial Policy | Meaning

Industrial policy means rules, regulations,

principles, policies and procedures laid
down by government for regulating,
developing, and controlling industrial
undertakings in the country.
It prescribes the respective roles of the
public, private, joint, and co-operative
sectors for the development of industries.
It also indicates the role of the large,
medium and small scale sector.

Industrial Policy | Meaning

It incorporates fiscal and monetary

policies, tariff policy, labour policy, and
the government attitude towards foreign
capital, and Role to be played by
multinational corporations in the
development of the industrial sector.

Industrial Policy | Objectives

Industrial policy statements have been

announced from 1948 onwards.
A number of objectives have been projected by
the Government of India while making industrial
policy declarations.
Some of the important objectives can be
identified as follows:
1.
2.
3.
4.

Achieving a socialistic pattern of society.

Preventing undue concentration of economic power.
Achieving industrial development.
Reducing disparities in regional development.

Industrial Policy | Objectives

6.

7.
8.
9.
10.

11.

12.

Providing opportunities for gainful

employment.
Achieving a self-sustained economy.
Achieving faster economic growth.
Alleviating poverty.
Protecting and developing a healthy smallscale sector.
Updating technology and modernization of
industry.
Liberalization and globalization of economy.

Industrial Policies from 1948 to1991

Industrial Policy Resolution 1948 (6 April, 1948);
Industrial Policy Resolution (30 April, 1956);
Industrial Policy Feb 2, 1973; Industrial Policy Dec
23, 1977; Industrial Policy Statement of July, 1980;
Industrial Policy, July 24, 1991.

Industrial Policy Resolution 1948 (6 April,

1948)

The Government of India announced its first

industrial policy resolution on 6 April,1948.
The policy resolution laid stress on the role of
the state in the development of industry.
The industrial activities were divided into four
broad areas:
1.

Items under central government control

Manufacture of arms and ammunition, The
production and control of atomic energy,
Ownership and management of railway
transport, etc.

Industrial Policy Resolution 1948 (6 April,

1948)
2.

3.

Items under the state government control

Coal, Iron and Steel, Aircraft manufacture,
Shipbuilding, Manufacture of telephone, telegraph
and wireless apparatus, excluding radio receiving
sets, Mineral oils, etc.
Items of basic importance (planned & regulated by
central government)
Salt, Automobiles and Tractors, Electric
Engineering, Other Heavy Machinery, Machine
Tools, Heavy Chemicals, Fertilizers and
Pharmaceuticals, Power, Cotton and Woollen
Textiles, Cement, Sugar, Paper and Newsprint, etc.

Industrial Policy Resolution 1948 (6 April,

1948)
4.

Items for Private Sector

The rest of the industrial field will be open
to private enterprise.

It also emphasised on securing a

continuous increase in production and
its equitable distribution.
Importance was given to small scale
and cottage industries.

Industrial Policy Resolution (30 April,

1956)

Industrial Policy Resolution (30 April, 1956)

was also regarded as the Economic
Constitution of India.
Major Objectives of Industrial Policy
Resolution (30 April, 1956) are as follows:
1.

2.
3.

Improving living standards and working

conditions for the mass of the people.
To reduce disparities in income and wealth.
To prevent private monopolies and
concentration of economic power.

Industrial Policy Resolution (30 April,

1956)
4.
5.

6.

7.
8.
9.

Development of transport facilities.

The State will progressively assume a
predominant and direct responsibility for
setting up new industrial undertakings
and for developing transport facilities.
Undertake State trading on an increasing
scale.
Planned and rapid development.
Expand public sector.
Disparities in levels of development
between different regions should be
progressively reduced.

Industrial Policy Feb 2, 1973

The Industrial Policy Resolution of 1956

still remained valid, but certain
structural distortions had crept in the
system.
The new policies were hence directed
towards removing these distortions.
It provided for a closer interaction
between the agricultural and industrial
sectors.
Accorded the highest priority to the
generation and transmission of power.

Industrial Policy Feb 2, 1973

Special legislation to protect cottage and

household industries was also proposed
to be introduced.
It was also decided that compulsory
export obligations, merely for ensuring
the foreign exchange balance of the
project, would no longer be insisted upon
while approving new industrial capacity.

Industrial Policy Dec 23,

1977

Industrial Policy Dec 23, 1977 Highlights

on producing inputs needed by a large
number of smaller units and making
adequate marketing arrangements.
To boost the development of small scale
industries, the investment limit in the
case of tiny units was enhanced to Rs.2
lakh, of a small scale units to Rs.20 lakh
and of ancillaries to Rs.25 lakh.

Industrial Policy Dec 23,

1977

Industrial processes and technologies

aimed at optimum utilisation of energy
or the exploitation of alternative sources
of energy would be given special
assistance, including finance on
concessional terms.

Industrial Policy Statement of July, 1980

Industrial Policy Statement of July, 1980

was based on Industrial Policy Resolution
(30 April, 1956).
The major objectives are as follows:
1.
2.

3.
4.

Optimum utilisation of installed capacity.

Maximum production and achieving
higher productivity.
Higher employment generation.
Promotion of export-oriented industries.

Industrial Policy Statement of July, 1980

5.

6.
7.

Consumer protection against high prices

and bad quality.
Correction of regional imbalances.
Strengthening of the agricultural base
through agro based industries and
promotion of optimum inter-sectoral
relationship.

Industrial Policy, July 24,

1991

Government is pledged to launching a

reinvigorated struggle for social and economic
justice, to end poverty and unemployment and to
build a modern, democratic, socialist, prosperous
and forward-lookingIndia.
Such a society can be built ifIndiagrows as part of
the world economy and not in isolation.
While Government will continue to follow the policy
of self-reliance, there would be greater emphasis
placed on building up our ability to pay for imports
through our own foreign exchange earnings.

Industrial Policy, July 24,

1991

Government is also committed to development and

utilisation of indigenous capabilities in technology
and manufacturing as well as its upgradation to
world standards.
Government will continue to pursue a sound policy
framework encompassing encouragement of
entrepreneurship, development of indigenous
technology through investment in research and
development, bringing in new technology,
dismantling of the regulatory system, development
of the capital markets and increasing
competitiveness for the benefit of the common man.

Industrial Policy, July 24,

1991

The spread of industrialisation to backward areas of

the country will be actively promoted through
appropriate incentives, institutions and
infrastructure investments.
Foreign investment and technology collaboration will
be welcomed to obtain higher technology, to
increase exports and to expand the production base.
Labour will be made an equal partner in progress
and prosperity.
Workers participation in management will be
promoted.

Industrial Policy, July 24,

1991

Need to preserve the environment and ensure the

efficient use of available resources.
Maintain sustained growth in productivity and gainful
employment and attain international competitiveness.
In pursuit of the above objectives, Government have
decided to take a series of initiatives in respect of the
policies relating to the following areas:
1.
2.
3.
4.
5.

Industrial Licensing.
Foreign Investment.
Foreign Technology Agreements.
Public Sector Policy.
MRTP Act.

A.Industrial Licensing:
. Industrial licensing abolished for all projects except a short list
of 18 industries related to security and strategic concerns, social
reasons, hazardous chemicals etc. (Annex II)
. Areas where security & strategic concerns predominate,
reserved for public sector. (Annex I)
. In projects where imported capital goods are required,
automatic clearance given.
. In locations other than cities of more than 1 million population,
no requirement of obtaining industrial approvals from Central
Government.
. Incentives & investments in infrastructural development, to
promote dispersal to rural and backward areas.
. Existing units enabled to produce any article without additional
investment.

INDUSTRIAL POLICY 1991

B. Foreign Investment:
Approval upto 51 percent foreign equity in high
priority industries.(Annex-III)
Imports governed by general policy applicable to
other domestic units, payment of dividents
monitored by RBI to ensure that outflows on
account of dividents are balanced by export
earnings.
Other foreign equity proposals, not covered
above, need prior clearance.
A special Empowered Board- to negotiate with a
number of large international firms & get FDIs
approved.

INDUSTRIAL POLICY
1991
C. Foreign Technology Agreements:
Automatic permissions for foreign technology
agreements in high priority industries
(Annex-III) upto a lumpsum payment of Rs.
1 crore.
For industries other than those in Annex
III, automatic permissions if no foreign
exchange is required for payment
All other proposals need specific approval
No permission for foreign technicians,
foreign testing of indigenously developed
technologies.

INDUSTRIAL POLICY 1991

D. Public Sector Policy:

Portfolio of public sector investments reviewed with a

view to focus public sector on strategic, high tech &
essential infrastructure.
Chronically sick public enterprises, referred to Board
of Industrial & Financial Reconstruction (BIFR).
A part of governments shareholding in public sector
offered to mutual funds, financial institutions, public
& workers.
Boards of public sector companies- more professional
& powerful.
MOU system- managements would be granted greater
autonomy & held accountable.

INDUSTRIAL POLICY
1991
E. MRTP Act: (Monopolistic Restrictive Trade Practices):
Removal of threshold limits of assets in respect of
MRTP Companies & dominant undertakings.
Elimination of need of prior approval of Central
Government for establishment, expanding, merger,
amalgamation & takeover.
Emphasis on controlling & regulating monopolistic,
restrictive & unfair trade practices.
Enabling the MRTP Commission to exercise punitive &
compensatory powers.

EIGHTH FIVE YEAR PLAN (1992-97)

Expectation- 7.5 per cent

Annually achieved growth rate for
industries:
1992-93 : 4.2 percent
1993-94 : 6.8 percent
1994-95 : 9.4 percent
1995-96 : 12.3 percent
1996-97 : 7.7 percent
Average Annual Growth Rate- 8.1

ELEVENTH FIVE YEAR PLAN (200712)

Fluctuating trends

2007-08: 15.5 percent

Started declining owing to global
economic meltdown
2008-09 : 2.5 percent
2009-10 : 5.3 percent
2010-11 : 8.2 percent

INDUSTRIAL POLICY 2010-2015

The Government has announced a new industrial

policy for 2010-15, enhancing the investment limit
of mega projects from Rs.100 to Rs.250crore for the
purpose of offering benefits to them.

The policy provides a 25 percent VAT reimbursement

for five years for large and medium enterprises, 50
percent for small enterprises and cent percent for
micro units.

For micro and small industries the investment

subsidy has been increased from Rs.15lakhs to
Rs.20lakhs.
33

Contd

Maximize employment opportunities, Implement self-employment

schemes effectively, and provides jobs to local people in the
upcoming industrial units in the states.(Pradhan mantri employment
generation programme launched by the government of India.)
Promote agro-based and food processing industry to make agriculture
a most profitable proposition.
In order to ensure productive uses of land, multi-stored complexes
for
micro and small enterprises/industries will be constructed either
through departments corporations or through or private sector
participation at potential sites.
Trade Related Intellectual Property Rights (TRIPR) under WORLD
TRADE ORGANISATION will be widely publicized so that these could be
used to generate more employment and trade opportunities.
Attract investments in the industry and service sector by developing
quality infrastructure.

TWELVTH FIVE YEAR PLAN (2012-17)

CHALLENGES FACING :
A.Dumping in Indian markets
B.Indian Industry needs to be cost
effective along with delivering value.
C.Ensuring that investments made in
infrastructure projects fructify quickly.
D.Growth of labour intensive industries.

ACTIVITY : POLICY
DILEMMA

Khadi, which symbolized self-reliance and emancipation during the

freedom struggle in India, has lost its sheen over the years.

In 1957, the Khadi and Village Industries Commission (KVIC) was

established to take over the work of the board. KVIC was formed as a
nodal agency to promote Khadi all over India through its exclusive
outlets known as Khadi Bhandars. There were many bogus Khadi units
operating in the country, which made it extremely difficult to claim
rebates from the Government of India for the sale of Khadi.

You are the Commerce and Industry Minister of INDIA. Prepare a

clause in the existing Industrial Policy of India to deal with the
above stated problem.