2. LECTURE OUTLINE
Role of Industrial Development in Economic
Development
Evolution of Industrial Policy in India:
Transition from Socialist to Market Oriented
Economy
Historical Review of Industrial Development
during Various Five Year Plans
3. IMPORTANCE OF INDUSTRIALISATION
Provide Employment
Trickle Down Effect
Development of Social Overhead
Increase in Income and Saving
Increasing Economies of Scale
Increase in Farm Productivity
Better Utilisation of Raw Materials
4. INDUSTRIAL SECTOR ON
THE EVE ON INDEPENDENCE
Weak Industrial Base
Low Capital Intensity
De-industrialisation of the Country
Limited Role of Public Sector
Decline of Handicraft Industry
Iron & Steel and Jute Industries
5. STRATEGIES FOR INDUSTRIALISATION
State Intervention In Industrial Development.
Role of Public Sector
Regulations for Control and Direction of
Industrial Sector.
Industrial Licensing to Regulate Private Sector
(IDR act 1951)
Industrial Policy
6. INDUSTRIAL POLICY
Industrial policy is combination of all
government regulation aimed at regulation
and control of industrial activities in a
country.
Need of Industrial Policy:
Limited Capacity of Private Sector
Regulation of Private Sector
Regulation of Foreign Sector
7. EVOLUTION OF INDUSTRIAL
POLICY IN INDIA
Industrial Policy Resolution 1948
Industrial (Dev. & Reg.) Policy 1956
Industrial Policy 1977
Industrial Policy 1980
New Industrial Policy 1991
8. MAIN FEATURES OF IPR 1948
Industries Classification
– Public Sector – 03
– Public cum Private Sector – 06
– Controlled Private Sector – 18
– Private and Co-operative Sector
Importance of Foreign Capital
Domestic Protection
Industrial Relations
9. MAIN FEATURES OF
INDUSTRIAL POLICY 1956
Industries Classification:
- Public Sector: 17
- Public-cum-Private sector: 12
- Private Sector
Fair Treatment to Private Sector
Balanced Regional Growth
Proper Amenities to Labourers
Efficient Management of PSUs
10. MAIN FEATURES OF
INDUSTRIAL POLICY 1977
More Emphasis on SSIs
Labour Intensive Technologies
Balanced Regional Development
Limited Role of Large Industries
No Expansion of Big Industries
Efficient Management of PSUs
11. MAIN FEATURES OF
INDUSTRIAL POLICY 1980
Balanced Regional Development with
Large and Small Industries
Regularization of Excess Capacity
Installed
Development of Backward Areas
Encouragement to EOUs
12. REVIEW OF PRE-1991 POLICIES
Under Utilisation of Capacity
Concentration of Economic Power
Licensing Promoted Corruption, Rent-
seeking and Discrimination
Delay in Processing of Applications
Increased Regional Imbalances
13. GENESIS OF
NEW INDUSTRIAL POLICY 1991
Balance of Payment Crisis
License-Permit- Quota Raj
To Unshackle the Industrial Sector from
Administrative and Legal Controls.
To Make Industry Competitive by Increasing
Efficiency
14. PUBLIC SECTOR POLICY
Dilution of Public Sector Role: only 08 industries
As on Date Only 03 industries (i) Atomic Energy (ii)
Rail Transport and (iii) Radio Active Minerals
Divestment of PSUs
Greater Autonomy to PSUs
Chronically Sick Enterprises to be Referred to
BIFR.
Facilities to Labourers
15. INDUSTRIAL LICENSING POLICY
Abolition of Industrial Licensing:
Only 18 Industries Related to Security and Strategic
Concerns, Social Reasons, Hazardous Chemicals
and Items of Elitist Consumption.
As of Now Only 05 Industries (i) Alcohol (ii)
Cigarettes (iii) Hazardous Chemicals (iv) Electronics,
Aerospace and Defense Equipments, and (iv)
Industrial Explosive
Requires Industrial License.
16. FOREIGN INVESTMENT POLICY
Automatic Approval for FDI up to 51 % Foreign
Equity in High Priority Industries.
This is Subsequently Increased to 74% in Some
Industries and With the Replacement of FERA (1973) with
FEMA (1999), 100% FDI is Permitted in Many Areas.
Automatic Approval for Import of Capital Goods
(Maximum Limit 2 Crore)
17. FOREIGN TECHNOLOGY
AGREEMENTS (FTAs)
Automatic Permission will be Given for FTAs in
High Priority Industries up to a Lump-sum
Payment of Rs. 1 Crore.
5% Royalty for Domestic Sales and 8% for Exports,
Subject to Total Payment of 8% of Sales for 10 Year
Period
No Permission will be Necessary for Hiring of
Foreign Technicians and Foreign Testing of
Indigenously Developed Technologies.
18. INDUSTRIAL LOCATION POLICY
In Cities with Less Than 1 Million population,
No Requirement of Obtaining Location
Clearance (Except for Industries Subject to
Compulsory Licensing)
In Cities with more than 1 Million Population,
Industries will be Located Outside 25 kms (other
than Non Polluting Industries such as Electronics,
Computer Software and Printing)
19. OTHER IMPORTANT FEATURES
Threshold Limit of Assets in MRTP
Companies Removed
Abolition of Phased Manufacturing
Programme
Reservation for SSIs
Removal of Mandatory Convertibility Clause
Encouragement to Industries in Backward
Areas
20. IMPLEMENTATION OF NIP 1991
Contraction of Public Sector
Liberalisation of Industrial Licensing Policy: Only
Five Industries are under Compulsory Licensing
Introduction of Industrial Entrepreneurs'
Memorandum (IEM) for industries not requiring
compulsory licensing
Liberalisation of the Location Policy
Five Year Tax Holidays to Power Generation
Industries
….cont’d
21. Increase in Lending Limit of Banks
Amendments in SICA in 1993 and 2003
Increase in Investment Limit of Small
Enterprises
Micro Enterprises – 25 Lakh (10 Lakh)
Small Enterprises – upto 5 Crore (5 Crore)
Medium Enterprises – upto 10 Crore (5
Crore)
MRTP act Replaced with Competition Act
Tax Holidays for Industries in Backward
Areas
22. Encouragement to Private Sector Participation in
Infrastructure
Reimbursement Scheme for Technology
Upgradation.
Setting up of Foreign Investment Promotion
Board (FIPB)
Permission to Raise Capital from Foreign Markets
Encouragement to Foreign Investment
Disinvestment of PSUs
23. POSITIVE IMPACT OF NIP 1991
Increase in Production
Removal of Bureaucratic Hurdles
Increase in Competition
Increase in Efficiency of Public Sector
Increase in Foreign Investment
Increase in Exports
Balanced Regional Development
Less Economic Burden on Government
24. CRITICISM OF NIP 1991
Concentration of Economic power
Increase in Unemployment
No Evidence of Positive Effect on
Productivity
Ignore Social Objectives
Distortion in Production Structure: Growth of
Capital Goods Industries Declined
25. Adverse Effect of Small Scale Industries
Misplaced Faith in Foreign Investment
Danger of Business Colonization.
Personalized Relationship and Corrupt Practices
still Continue
Increase in Regional Imbalances
27. IMPORTANT HIGHLIGHTS
OF DIFFERENT PLANS
First Five Year Plan (1951-56): Many Basic
and Heavy Industries, Set Up, Namely: Sindri
Fertiliser, Chitranjan Locomotive, HMT, U.P. Cement
Industry, Indian Telephones, Indian Cables, DDT and
Penicillin Factories.
Second Five Year Plan (1956-61): Based on
IPR 1956 and Mahalanobis Model; Major Industries:
Steel Plants at Bhilai, Durgapur and Rourkela.
28. Sixth Five Year Plan (1980-85):
Main Objective: Optimum Utilisation of
Existing Capacity and to Increase Productivity. Focus:
Capital Goods Industries Specially Electronic Industry,
Adoption of New Technologies.
Seventh Five Year Plan (1985-90):
Main Objective - Increasing Production of
Consumer Goods and to Increase Productivity. Focus:
Achievement of Self Sufficiency in Defense
Production, Development of Sunrise Industries
like Electronics.
29. Eighth Five Year Plan (1992-97):
More Importance to Private Sector, Public Sector in Core
and Basic Industries only; Top Priority to Capital Goods
Industries.
Ninth Five Year Plan (1997-2002):
More Importance to Private Sector, Development of
Backward Areas, Increasing Industrial Efficiency, MRTP
Ceiling Removed.
Tenth Five Year Plan (2002-07):
Focus on Infrastructure Development, R&D, Technical
Development and Modernization. Special Concessions to
EOUs.
30. ELEVENTH FIVE YEAR PLAN(2007-12)
Focus On Pharmaceuticals, Auto-Components and
Textiles
Strengthening Manufacturing Sector, Making Indian
Industries more Competitive, strengthening
infrastructure,
Special Concessions for MSME and Labour
Intensive Industries
Emphasis on Technological Improvement
Wider Role for Private Sector
Flexible Labour Laws
31. ACHIEVEMENTS
DURING PLANNING PERIOD
Vast Network of Infrastructure Developed
Increase in the Share of Industrial Sector
in National Income: 16% to 25.9%.
National Defense and Self independence
Development of Public Sector
Moderanisation
Increase in Foreign Collaboration
Increase in Government Income
33. WEAKNESS OF INDUSTRIAL
DEVELOPMENT DURING PLANS
Under-utilisation of Capacity
Irregular Increase in Industrial Production
Increase in Monopoly Power
Poor Performance of Public Sector
Industrial Sickness
Industrial Disputes
Poor Quality Production
Regional Imbalances