Industrial Policies – 1948, 1956, 1991
🟠 Topic 31: Industrial Policies – 1948, 1956, 1991
📌 Introduction
Industrial Policy refers to the set of government strategies designed to promote industrial development, economic diversification, employment generation, and regional balance. India’s industrial policies have evolved significantly over the decades — from a state-dominated, regulated system to a liberalized, market-driven economy after 1991.
1️⃣ Industrial Policy Resolution, 1948
📖 Context
- First comprehensive industrial policy statement after Independence.
- Outlined the role of the state and private sector in industrial development.
🔎 Key Features
1️⃣ Mixed Economy Model – Coexistence of public and private sectors.
2️⃣ Strategic Industries (Schedule A) – Key industries like defense, atomic energy, railways were state monopolies.
3️⃣ Other Key Industries (Schedule B) – Government would progressively take over industries like coal, steel, aircraft manufacture, etc., though private sector participation was allowed initially.
4️⃣ Private Sector Role – In consumer goods and small-scale industries, the private sector was encouraged to operate freely.
5️⃣ Labour Welfare Focus – Emphasis on worker rights, fair wages, and working conditions.
✅ Significance
- Laid the foundation for India’s mixed economy model.
- Set the ideological direction for state-led industrialization.
2️⃣ Industrial Policy Resolution, 1956
📖 Context
- Considered the Magna Carta of Indian industrial policy.
- Introduced during the Second Five-Year Plan period.
- Emphasized state-led industrial development based on socialist principles.
🔎 Key Features
1️⃣ Classification of Industries
- Schedule A – Exclusively state-owned sectors like defense, atomic energy, railways.
- Schedule B – State-dominated sectors, but with limited private participation (machine tools, chemicals).
- Schedule C – Open to private sector, with state playing a regulatory role.
2️⃣ Focus on Heavy Industries
- Priority to capital-intensive basic and heavy industries like steel, heavy machinery, and chemicals.
3️⃣ Regional Balance
- Promote industries in backward regions to reduce regional disparities.
4️⃣ Small-Scale Industries (SSI)
- Encouragement of cottage and small industries for employment generation.
5️⃣ Import Substitution
- Emphasis on self-reliance through import substitution in key industrial goods.
✅ Significance
- Established the dominant role of the public sector in industrial development.
- Formed the basis for the License Raj, where industries required extensive government approvals.
3️⃣ New Industrial Policy, 1991
📖 Context
- Triggered by the Balance of Payments (BoP) crisis of 1991.
- Shift from a state-controlled system to a market-driven liberalized economy.
🔎 Key Features
1️⃣ Delicensing
- Most industries were exempted from industrial licensing, except for a few related to security, health, and environment.
2️⃣ Reduced Role of Public Sector
- Public sector reserved area reduced to strategic industries like atomic energy, defense, and railways.
- Emphasis on disinvestment and privatization.
3️⃣ Foreign Investment Liberalization
- Automatic approval for FDI up to 51% in specified sectors.
- Foreign technology agreements were liberalized.
4️⃣ Abolition of MRTP Act Provisions
- Removed restrictions on large business houses for capacity expansion, mergers, and acquisitions.
5️⃣ Global Integration
- Focus on export promotion, integration with global markets, and boosting competitiveness.
6️⃣ Level Playing Field
- Equal treatment for private, public, and foreign enterprises.
✅ Significance
- Ended the License Raj.
- Opened India to global capital, technology, and markets.
- Triggered rapid economic growth, especially in the services and export sectors.
🔹 Evolution of Industrial Policy – Timeline Summary
| Year | Policy | Focus |
|---|---|---|
| 1948 | Industrial Policy Resolution | Mixed economy, public sector dominance in key areas |
| 1956 | Industrial Policy Resolution | Socialist planning, heavy industries focus |
| 1977 | Industrial Policy | Emphasis on small-scale industries |
| 1980 | Industrial Policy | Focus on competitiveness and export growth |
| 1991 | New Industrial Policy | Liberalization, privatization, globalization (LPG) |
🔹 Impact of Industrial Policies
| Era | Key Impact |
|---|---|
| 1950-1980 | Growth of public sector, slow private sector development |
| 1980-1990 | Gradual liberalization, easing of licensing |
| Post-1991 | Rapid growth in services, manufacturing, and FDI inflows |
🔹 Key Challenges in Industrial Development
1️⃣ Infrastructure Deficit
- Power shortages, poor logistics, and land acquisition issues hamper industrial growth.
2️⃣ Low Manufacturing Share
- Manufacturing contributes only 16-18% of GDP.
- Limited success in Make in India.
3️⃣ Environmental Concerns
- Industrial pollution and ecological degradation in industrial belts.
4️⃣ Regional Disparities
- Concentration of industries in western and southern states, while eastern India lags.
🔹 Industrial Policy & Make in India
- Launched in 2014, Make in India aims to: ✔️ Increase manufacturing share in GDP to 25%.
✔️ Promote FDI and technology transfer.
✔️ Boost ease of doing business. - Key sectors: Automobiles, electronics, textiles, pharmaceuticals, defense production.
📊 Summary Table – Key Differences
| Parameter | 1948 Policy | 1956 Policy | 1991 Policy |
|---|---|---|---|
| Approach | Mixed economy | Socialist planning | Liberalization |
| Public Sector Role | Dominant in strategic sectors | Extensive | Strategic only |
| Licensing | Required | Extensive licensing | Abolished for most sectors |
| Private Sector | Limited | Controlled | Encouraged |
| Foreign Investment | Restricted | Minimal | Liberalized |
📚 Practice MCQ
1️⃣ Consider the following statements regarding Industrial Policy Resolution, 1948:
- It introduced the concept of a mixed economy in India.
- It reserved strategic industries for the public sector.
- It abolished industrial licensing in all sectors.
Which of the above statements are correct?
✅ Options:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
2️⃣ Which Industrial Policy is considered the Magna Carta of Indian Industrial Policy?
✅ Options:
(a) 1948
(b) 1956
(c) 1977
(d) 1991
3️⃣ The New Industrial Policy of 1991 aimed to:
- Liberalize foreign investment.
- Reduce the role of the public sector.
- Increase state control over private industries.
✅ Options:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
