The Indian industrial policies from 1948-1991 aimed to promote rapid industrialization and economic growth through a dominant public sector and restrictions on private companies and foreign investment. The 1956 policy gave the public sector a primary role in development and categorized industries into those exclusively reserved for public/private sectors. Subsequent policies expanded the small scale sector and promoted export-oriented industries. However, by 1991, India faced an economic crisis with low foreign reserves. The 1991 reforms dramatically liberalized industry by opening all sectors to private companies, removing licensing, and welcoming foreign investment to boost the economy.

1. Indian Industrial Policy

2. Introduction
• The Industrial Policy indicates the respective roles of the
public, private, joint and co-operative sectors; small,
medium and large scale industries.
• It underlines the national priorities and the economic
development strategy.
• It also spells the Government’s policy towards
industries- their establishment, functioning, growth and
management; foreign capital and technology, labor
policy, tariff policy etc. in respect of the industrial
sector.
• The Industrial Policy of India has determined the pattern
of economic and industrial development of the
economy. The Industrial Policy reflected the socio-
economic and political ideology of development.

3. Industrial Policy Resolution 1948
• Outlined the approach to industrial growth and
development
• Emphasized the importance of securing a
continuous increase in production and ensuring its
equitable distribution.

4. Industrial Policy Resolution 1948
Progressively active role for the State in the
development of Industries.
• State monopoly: Arms and ammunition, atomic
energy and railway transport
• State exclusively responsible for the establishment of
new undertakings in six basic industries-except where,
in the national interest, the State itself found it
necessary to secure the cooperation of private
enterprise.

5. Industrial Policy Resolution 1948
• Rest of the industrial field open to private
enterprise though the State would also
progressively participate in this field.

6. Industrial Policy Resolution 1956
• After the adoption of the Constitution and the
socio-economic goals, the Industrial Policy was
comprehensively revised and adopted in 1956.
• Sought to accelerate the rate of economic growth
and speed up industrialization to achieve a
socialist pattern of society.
• Capital was scarce & the base of entrepreneurship
not strong enough. Hence, the gave primacy to the
role of the State to assume a predominant and
direct responsibility for industrial development.

7. Industrial Policy Resolution 1956
• Objectives:
– Improvement in living standards and working
conditions for the mass of the people.
– Reduction in income and wealth disparities
– Prevention of private monopolies and
concentration of economic power in different
fields in the hands of small numbers of
individuals.

8. Industrial Policy Resolution 1956
– Progressively predominant and direct
responsibility for the State in setting up new
industrial undertakings and for developing
transport facilities
– Undertake State trading on an increasing scale.
– Equal opportunity for the private sector to
develop and expand.

9. Industrial Policy Resolution 1956
– Private sector to develop on the principle of
cooperation; increasing proportion of the
private sector activities to develop on
cooperative lines.
– The adoption of the socialist pattern of society
as the national objective.
– The need for planned and rapid development.

10. Industrial Policy Resolution 1956
– Public sector: All industries of basic and
strategic importance, or in the nature of public
utility services.
– The State can undertake any type of industrial
production.

11. Industrial Policy Resolution 1956
• Categorization of industries:
i) Set of industries the future development of
which will be the exclusive responsibility of the
State
• ii) Category of industries which will be
progressively state-owned and in which the State
will, therefore, generally take the initiative in
establishing new undertakings, but in which
private enterprise will also be expected to
supplement the efforts of the State.

12. Industrial Policy Resolution 1956
• iii) Rest of industries left to the initiative and
enterprise of the private sector.
• Stress the role of cottage and village and small
scale industries in the development of the national
economy.
• Disparities in levels of development between
different regions should be progressively reduced.

13. Industrial Policy 1973
• Certain structural distortions called for policy
changes in IPR 1956
• Provide for a closer interaction between the
agricultural and industrial sectors
• Highest priority to the generation and
transmission of power.
• Identify products to be reserved for the small scale
sector: list of industries exclusively reserved for
the small scale sector expanded from 180 items to
more than 500 items.

14. Industrial Policy 1973
• Within the small scale sector, a tiny sector was
also defined with investment in machinery and
equipment up to Rs.1 lakh & located in towns
with a population < 50,000 according to
1971 census figures, and in villages.
• Proposal for special legislation to protect cottage
and household industries

15. Industrial Policy 1973
• Compulsory export obligations, merely for
ensuring the foreign exchange balance of the
project, would no longer be insisted upon while
approving new industrial capacity.
• In the areas of price control of agricultural and
industrial products, the prices would be regulated
to ensure an adequate return to the investor.

16. Industrial Policy 1977
• Emphasis on
– producing inputs needed by a large number of
smaller units and making adequate marketing
arrangements.
– upgrading the technology of small units.
– Promoting the development of a system of
linkages between nucleus large plants and the
satellite ancillaries

17. Industrial Policy 1977
• Emphasis on:
– 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.
– building buffer stocks of essential raw materials for the
Small Scale Industries for operation through the Small
Industries Development Corporations in the States
and the National Small Industries Corporation in
the Centre.

18. Industrial Policy 1977
• Emphasis on:
– Industrial processes and technologies involving
optimum utilization of energy or the exploitation of
alternative sources of energy for giving special
assistance, including finance on concessional terms.

19. The Industrial Policy Statement 1980
• Formulated wrt the Industrial Policy Resolution of 1956 to
provide for
(i) Optimum utilization of installed capacity;
(ii) Maximum production and achieving higher
productivity;
(iii) Higher employment generation;
(iv) Correction of regional imbalances;
(v) Strengthening of the agricultural base through agro
based industries and promotion of optimum inter-sectoral
relationship;
• (vi) Promotion of export-oriented industries;

20. The Industrial Policy Statement 1980
• (vii) Promotion of economic federalism through equitable
spread of investment and dispersal of returns;
• (viii) Consumer protection against high prices and bad
quality.

21. Industrial Policy upto 1991
The objective of the policy were to :
• Reduce disparities in income and wealth
• Prevent monopolies and concentration of economic
power
• Build a large and heavy public sector and manage the
same effectively
• Develop heavy and machine making industries
• Accelerate the rate of industrialization and economic
growth
• Higher employment generation
• Focus on development of small scale sector
• Optimum utilization of installed capacity
• Rural Industrialization
• Promotion of export oriented units (Industrial Policy

22. Industrial Policy upto 1991 (contd…)
The industrial policy of India prior to liberalization
in 1991 was characterized by the following
features:
• Dominance of Public Sector
• Entry and Growth Restrictions
• Restrictions on Foreign Capital and Technology
Dominance of Public Sector:
• Future development of 17 important industries
such as arms and ammunition, atomic energy,
coal, iron and steel, air transport, railway
transport etc. was exclusively reserved for the
public sector.

23. • Under the Schedule B; 12 industries such as
machine tools, fertilizers, synthetic rubber, road,
transport etc; industries were progressively state
owned and the State would take the initiative to
establish new undertakings.

24. Entry and Growth Restrictions:
• License was mandatory for establishing new units with
investments above a specified limit, for manufacturing of
new products and for undertaking substantial expansion.
• Large firms of Rs. 100 crore or above and dominant
undertakings (those with a market share of 25% or more) had
to obtain clearance under the Monopolies and Restrictive
Trade Practices Act in addition to the industrial license. There
were also restrictions on capital goods etc.
Restrictions on Foreign Capital and Technology:
• In industries where foreign capital was allowed, it was
subjected to a ceiling of 40% of the total equity although
there were certain exception. Operations of foreign
companies in India and issue of securities abroad by Indian
Companies was regulated by the Foreign Exchange Regulation
Act, FERA 1973.

25. The New Industrial Policy 1991
The Industrial Policy announced on July 24, 1991 heralded the economic
reforms in India and sought to drastically alter the industrial scenario in
our country. The most visible sign of the country’s economic crisis in early
1991 was:
• Extremely low foreign exchange reserves of Rs. 2400 crore (just enough to
buy from abroad only three weeks requirements.)
• Inflation was as high as 13.5%
This policy expanded the scope of the private sector by
opening up most of the industries for the private sector and
did away with the entry and growth restrictions. 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 welcoming approach to foreign
investments, apart from redefining the role of the public
sector.
Words like “dramatic”, revolutionary” and “drastic have been

26. Main features :Objectives of the Industrial
Policy of the Government are –
• to maintain a sustained growth in
productivity;
• to enhance employment;
• to achieve optimal utilization of human
resources;
• to attain international competitiveness
• Development of indigenous technology
through greater investment in R&D and
bring in new technology to help Indian
manufacturing units Incentive for
industrialization of backward areas

27. • Ensure running of PSUs on business lines and
cut their losses
• Protect the interests of workers
• Abolish the monopoly of any sector in any
field of manufacture except on strategic or
security grounds.
• to transform India into a major partner and
player in the global arena.
Policy focus is on –
• Deregulating Indian industry;
• Allowing the industry freedom and flexibility
in responding to market forces and
• Providing a policy regime that facilitates and

28. The New Policy has four features:
Liberalisation; privatisation, globalisation and
stabilisation
Redefinition of the role of the Public Sector:
The number of industries reserved for the public
sector was reduced to eight and it was later
pruned to two ie atomic energy and railway
transport.

29. The priority areas for growth of public enterprises
will be the
essential infrastructure goods and services
industry;
exploration of oil and mineral resources;
technology development and building of
manufacturing capabilities in areas which are
crucial in the long term development of the
economy and where private sector investment
is inadequate.
The policy also seeks selective privatization and
withdrawal of the public sector from industries.

30. Also, in respect of public sector enterprises, the
following measures were adopted:
• Portfolio of public sector investments to be
reviewed periodically with a view to focus the
public sector on strategic, high tech and
essential infrastructure.
• Public enterprises which are chronically sick
and unlikely to be turned around to be
referred to the Board for Industrial and
Financial Reconstruction (BIFR) for
formulation of revival / rehabilitation schemes

31. • In order to encourage wider public
participation, a part of the Government’s
shareholding in the public sector would be
offered to mutual funds, financial institutions
and the general public.
• Board of PSU to be more professional and
have greater powers.
• Thrust to be on performance improvement
and management would be granted more
autonomy in operation.

32. Industrial Licensing:
• Industrial Licensing was governed by the Industries
Development & Regulation Act, 1951.
• Industrial Licensing policy and procedures have
been liberalized and continuously changed.
Industrial licensing has been abolished for all
projects except for a short list of industries All
excepting 18 industries were freed from licensing.
The number was later reduced to five. Distillation
and brewing of alcoholic drinks; cigars and
cigerattes; electronic aerospace; hazardous
chemicals and industrial explosives

33. • The industries subject to compulsory
industrial licensing account for a very small
share of the value added in the manufacturing
sector.
• Industries are free to select the location of the
industry. However, in cities with a population
of over 1 million, the industries are to be
located in the areas designated as “industrial
areas” or 25 kms away from the Standard
Urban area limits of the city. However,
industries of a non polluting nature were
exempt. The locational policy was abolished in
2008.

34. Liberalisation of Foreign Investment: Policy
towards foreign capital and technology has been
modified very significantly. Foreign investment
will bring advantages of technology transfer,
marketing expertise, introduction of modern
managerial techniques and new possibilities for
promotion of exports.
• FDI is allowed in all industries, except industries
falling in a small negative list.
• Approvals for FDI upto 51% in high priority
industries requiring large investments and
advanced technology will be provided.

35. • Since 1992-93, the Indian stock market is
open for investment by Foreign
Institutional Investors (FII’s) and Indian
companies satisfying certain conditions
may access foreign capital market.
• Some of the recent initiatives taken to
further liberalise the FDI regime, include
opening up of sectors such as Insurance
(upto 26%); development of integrated
townships (upto 100%)

36. Removal of MRTP Restrictions:
• Most of the MRTP restrictions pertaining to
concentration of economic power (those
requiring permission for establishment of new
undertaking, substantial expansion, manufacture
of new items and mergers and acquisitions) were
scrapped.
• Existing units will be provided a new broad
branding facility to enable them to produce any
article without additional investment.
• The thrust of the policy is on controlling and
regulating monopolistic, restrictive and unfair
trade practices.

37. Evaluation of the New Industrial Policy
Positives of the new policy are:
• Delicensing of most industries will help
entrepreneurs to quickly seize business
opportunities.
• Removal of controls under the MRTP Act will
facilitate expansion and growth.
• There will be greater inflow of foreign capital
and technology due to easing of restrictions.
• Burden on the public sector will be reduced
and reforms relating to the public sector like
transferring sick units to BIFR will help
improve their performance.

38. Watch- outs :
• The policy environment is much more
conducive for both domestic and foreign
investment than in the past. However, a
host of countries are now trying to woo
foreign investment with a much more
conducive economic environment than in
India.
• cultural factor do also tend to tilt the
balance in favor of other nations.

39. • Foreign investors still regard the policy and procedural
system in India confusing. Rather many feel that policy
and development environment in China is superior to
India.
This Policy has been criticized on the following grounds:
• The policy is a total departure from Nehru’s model of
socialism.
• It will lead to domination of MNC on the Indian Economy.
• Trade Unions oppose the policy due to fear of
unemployment which may arise due to privatization.

40. • Monopolies and concentration of economic power in a
few hands is likely to increase.
• Distortion in industrial pattern would occur due to slow
pace of investment in few basic and strategic industries.
Absence of a mechanism would slow down the
development of backward areas.
• Government is silent about tackling the growing
industrial sickness. The Government has not announced
a clear exit policy for sick units.

41. Second Generation Reforms
• The 1991 reforms have considerably helped in
improving the economic growth of the country. Yet
much more needs to be done to reap the full
benefits. There is a need for Second Generation
Reforms:
• A. Exploiting the Knowledge based Global Economy:
– Revolutionizing the telecom sector to help integrate
India’s economy into the world economy.
– Build institutes for higher education
– A system of intellectual property rights to reward
innovations adequately.
– Venture capital funds to finance risk projects of the
knowledge based economy.

42. B. Growing Indian Transnational Corporations:
– Indian firms to enjoy flexibility in entry and exit.
Freedom to diversify and close down unsuccessful
units.
– Liberalize and move towards capital account
convertibility.
C. High Growth of Agriculture:
– State to ensure that adequate investments are made in
irrigation, agricultural research and infrastructure
• D. Empowering the Poor:
– Integrate and consolidate anti poverty measures.
– Set up a system for old age security.

43. E. Human Development
– Primary education made compulsory.
– Involve private sector to provide better primary
education.
F. Clean Environment:
– Arrest damage to environment
– Promote clean and healthy environment.
H. Improvements to Governance