1. CRITICAL ANALYSIS OF INDUSTRIAL
POLICY

2. OVERVIEW
• INTRODUCTION
• MEANING OF INDUSTRIAL POLICY
• INDUSTRIAL POLICIES 1948-1991
• POSITIVES AND NEGATIVES OF INDUSTRIAL
POLICIES.

3. INTRODUCTION
• At the time of independence Indian economy was faced with the
problems of illiteracy, poverty, low per capita income, industrial
backwardness and unemployment. The country depended mainly on
imports from the developed countries of the world.
• To promote the industrial growth and over all economic
development of the country, the economic planners adopted a
planned industrial development , guided by a properly drafted policy
document known as “The Industrial Policy”.

4. MEANING OF INDUSTRIAL POLICY
• Industrial policy means those principles and activities which are
pursued and performed to help industrialize a country . Industrial
policy includes rules, regulations, principles and procedures to
regulate the industrial undertakings of a country in the desired
direction, in order to achieve broader objectives like industrial
development, economic development, balanced regional
development ,Increase in employment ,etc Therefore :
• “Industrial policy is an instrument with help of which the state
participates in the growth process”
• Through industrial policy the government decides that which
industry should be allowed to grow or should be shrunk through
subsidies,incentives,concessions and taxes respectively.

5. INDUSTRIAL POLICY 1948
• The Government of India announced its Industrial Policy Resolution (IPR)
on April 6,1948 whereby both public and private sectors were involved
towards industrial development. Accordingly, the industries were divided
into four broad categories:
• Exclusive State Monopoly
• State Monopoly for New Units
• State Regulation
• Unregulated Private Enterprise

6. INDUSTRIAL POLICY 1956
• This policy widened the scope of the public sector.
• It classified industries into three categories:
• The first category comprised 17 industries . These included railways, arms
and ammunition , iron and steel and atomic energy.
• The second category comprised 12 industries which were envisaged to be
progressively state owned but private sector was expected to supplement
the efforts of the state.
• The Third category contained all the remaining industries and it was
expected that private sector would initiate development of these industries
but they would open for state as well.

7. Contd..
• Despite the demarcation of industries into separate categories, the
Resolution was flexible enough to allow the required adjustments
and modifications in the national interest.
• Another objective spelt out in the Industrial Policy Resolution -1956
was the removal of regional disparities through development of
regions with low industrial base.
• Accordingly, adequate infrastructure for industrial development of
such regions was duly emphasized.

8. Contd..
• Given the potential to provide large-scale employment, the
Resolution reiterated the Government’s determination to provide
all sorts of assistance to small and cottage industries for wider
dispersal of the industrial base and more equitable distribution of
income.
• The Resolution, in fact, reflected the prevalent value system of India
in the early 1950s, which was centered around self sufficiency in
industrial production.
• The Industrial Policy Resolution – 1956 was a landmark policy
statement and it formed the basis of subsequent policy
announcements.

9. Industrial policy measures in 1960s &
1970s
• Establishment of MIC in 1964
• Also called Dasgupta commission
• To enquire into the effects of concentration of power in
pvt. Hands & prevalence of monopolistic activities &
also to suggest necessary legislations.
• There were dangers from concentrated economic
powers & monopolistic practices in large measures.

10. Contd..
• Commission recommended the govt. to minimize these dangers.
• Leading to preemption and foreclosure of capacity.
• Industrial licensing policy inquiry committee (Dutt committee) in
1967.
• Dutt committee : large business houses were those with assets of
more than Rs. 350 million.
• In 1969, Monopolies and restrictive trade (MRTP) act was
introduced to enable the govt to effectively control concentration of
economic power.

11. Contd.
• In MRTP act large industries were those with assets of Rs. 200
million & above.
• MRTP companies: large companies that were not reserved for govt
or the small scale industries.
• In 1970, new Industrial licensing policy classified industries into four
categories:
i) core sector: consisted of basic, critical &
strategic industries.
ii) heavy investment sector : where investment of
more than Rs. 50 million.

12. Contd.
iii) middle sector: where investment in the
range between Rs. 10 million & Rs. 50
million.
iv) Delicensed sector : in which investment was
less than Rs. 10 million and was exempted
from licensing requirements.
The industrial licensing policy of 1970 confined the role of
large business houses & foreign companies to the core,
heavy & export oriented sectors.

13. The industrial policy statement- 1973
• Preference to small and medium entrepreneurs over the
large houses and foreign companies in setting up of
new capacity particularly in production of mass
consumption goods.
• New undertakings of upto Rs. 10 million and hence
companies were exempted from licensing requirements.
• This exemption was not allowed to MRTP companies,
foreign companies and existing licensed having fixed
assets of Rs. 50 million and above.

14. INDUSTRIAL POLICY OF 1977
Janata party govt. announced a new industrial
policy in 1977.
Main features of the Industrial Policy of 1977
• Small Scale industries:- In this policy emphasis
will be placed on the successful development
of small scale and tiny industries.

15. Contd.
• Role of large scale industries:- it emphasis on
following areas for large scale industrial
sector:
1. basis industries
2. capital goods industries
3. high technology industries
• Expanded role of public sector;

16. Contd.
• Indigenous and foreign technology:- It
prohibited to grant a permission for import of
technology, but will be allowed in cases that
are important for the growth and
development of country.
• Licensing policy :- Its main objective to
regulate the activities of big industrial houses.

17. Contd.
• Foreign trade:- To encourage export industries
will given concession in custom and excise
duties.
• Participation of worker’s in public & private
sector;

18. Industrial policy 1980
As a industrial policy 1977 ignored the large scale & public sector
industries so there is a need for more balanced industrial policy
which was then announced in 1980. Its main objective is :
a. Strengthening of agro-based industries.
b. Maximizing production to achieve high productivity.
c. Development of industrially backward areas.
d. Faster promotion of export & import industries.

19. Main features
• Investment limit of small scale units
increased;
• Khadi and village industries, handicraft and
handloom industries encourged;
• Balanced growth: This policy put emphasis on
the setting up the industries in backward
areas .

20. Contd..
• Effective management of public sector;
• Industrial sickness: The govt. encourage the merger of sick
units with healthy units. Sick units are provided with text
concession.
• Encourage the development of export oriented industries;
• Development of backward regions: This policy put
emphasis to promote suitable industries in rural areas in
order to generate higher employment.

21. Industrial Policy Statement- 1991
• The Industrial Policy Statement of 1991 stated that “the 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, and increased competitiveness for the
benefit of common man".
• It further added that "the spread of industrialization to backward
areas of the country will be actively promoted through appropriate
incentives, institutions and infrastructure investments”.
• The objective of the Industrial Policy Statement -1991 was to
maintain sustained growth in productivity, enhance gainful
employment and achieve optimal utilization of human resources.
• Quite clearly, the focus of the policy was to unshackle the Indian
industry from bureaucratic controls.

22. POSITIVE ASPECTS OF NEW
INDUSTRIAL POLICY:
• Increased competition: Liberal licensing, easy entry of multi-
national companies, privatization, elimination of monopolistic,
restrictive and unfair trade practices etc. has increased competition
in the economy. Increase in competition will result in lower prices
which will result in benefit to the consumer.
• Increasing production:
1. Foreign Investments and foreign technology agreements are
designed to attract capital ,technology and managerial expertise
from abroad.
2. Industrial production will increase both through higher
productivity of these resources as well as through additional
inflow.

23. Contd..
• Simplified process for import of technology in India:
High priority industries have been granted automatic
permission for import of technology.
• Increase in exports: In the new policy export oriented
units are given various concessions like liberal loans, setting
up of special economic zones ,liberal imports of capital
goods, raw materials, technology, etc.It has resulted in more
exports.
• Balanced regional development: Industries located in
backward regions are given various incentives to promote
balanced regional development.

24. Contd..
• Significance to small scale industrial:
1. For the first time the New Industrial provided a
separate strategy for the growth of small scale cottage
industries.
2. In 2006, the investment limit in plant and machinery
of small industries has been increased to Rs 5 crore
and that of micro enterprises to Rs 25 lakh.
• Labour welfare:
Government will protect the investment of
labour,enhance there welfare and train them to learn the
method of using new technology.

25. NEGATIVE ASPECTS OF NEW
INDUSTRIAL POLICY
• Over emphasis on foreign investment:
1. Large amount of incentives and concessions are provided
to multi-national companies to encourage foreign
investments in India.
2. If the same are provided to indigenous industrial houses,
better results can be expected without taking the risk of
foreign capital even.
3. If not controlled multi-national companies will dominate
certain growing areas of our country and restrict the
growth of Indian concerns.

26. Contd..
• Exploitation of domestic resources:
1. Multinational companies will utilize the natural resources of our
country to produce the products belonging to non-priority
categories for serving the world market.
2. It will lead to the early depletion of available natural resources of
the country.
• Reduced role of public sector:
1. Reduction in the number of industries reserved for the public
sector and closure of some public sector enterprises has reduced
the area of public sector.

27. Contd..
• Unhealthy foreign competition:
1. Opening up of economy to the foreign capital has created
unhealthy competition in the economy.
2. Domestic industries are suffering from the constraints of size,
finance, poor human capital, poor quality of production and
obsolete technology.They are not equipped to handle foreign
competition.
• Increase in unemployment:
Liberal import of foreign technology and use of capital intensive
technology has reduced the employment opportunities in our country.

28. Contd..
• Fall in the production of industrial goods: In the initial years of
liberalization the growth of industrial goods has shown even
negative figures. It has defeated the main purpose of New Industrial
Policy.