Industrial Policy Introduction - 1947- industrial base of the economy was very small - Problems of raw material shortage,

deficiency of capital, bad industrial relations etc. - Industrial conference in December 1947 Industrial policy resolution 1948 - Acceptance of importance of both private and public sectors. o Expansion of state sector in areas where it was operating and in new lines of production o Allowing private sector to co-exist and expand but under proper direction and regulation. - Division of industrial sector o Industries where state had a monopoly Arms and ammunition, atomic energy, rail transport o Mixed sector State to have the exclusive right in the following sectors except where the cooperation of private sector was felt desirable Coal, iron and steel, aircraft manufacture, ship building, telephones, telegraph and wireless apparatus and mineral oils. Existing private sector to be allowed to continue for 10 years after which they will be acquired with fair and equitable compensation to the existing promoters. o The field of Govt. control

 18 industries of national importance were included in this category. Govt. did not take the responsibility of developing these industries They were subject to Govt. regulation and directions. o Eg: automobiles, heavy chemicals, heavy industries, fertilizers etc. o The field of private enterprise Others left open to the private sector Govt. reserved the right to take them. - Role of small and cottage industries o Important since they could utilize local resources and create employment opportunities o Their problems to be solved by the central govt., such as scarcity of resources, like cotton yarn , paraffin wax - Other important features o Role of foreign investment o Indians must have the major say o Harmonious relations between management and labor. o Policy of just labor conditions Industrial Policy Resolution of 1956 - One full five year plan had been completed - Govt. acquired the expertise to regulate the private sector - Socialist pattern of society as the goal for the country - Objectives o Accelerate the rate of growth

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To develop heavy industries and machine making industries To expand public sector To reduce disparities in income and wealth To build up a large and growing cooperative sector To prevent monopolies and concentration of wealth and income in the hands of few

- Salient features of the Industrial policy o Main areas of change from 1948 Enlarged the area of operation of public sector Dropped the threat of nationalization Otherwise shift to a more explicitly socialistic Stance o Division of the industrial sector Three categories Monopoly of the state Seventeen industries were included in this category and were listed in the schedule A o Grouped into five classes Defense Heavy industries Minerals Transport and communication power o arms and ammunition, atomic energy, railways and air transport were to be the Govt. monopolies o in the remaining thirteen all new units to be established by the state.

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o Existing private players allowed to subsist and expand within limits Mixed sector of public and private enterprises o 12 industries in schedule o State to increasingly establish new units and increase its participation o but would not deny private sector opportunity to set up, expand existing units. o Other minerals, road transport, sea transport, machine tools, Ferro alloys , basic and intermediate chemicals etc. Industries left for private sector Those not listed in schedule A and B. Mutual dependence of public and private sectors Coexistence, cooperation and help Assistance and control of private sector Govt. could participate in its risk capital and share capital Fiscal incentives Subject to Govt. Regulations and controls. Such regulations to be exercised through IDRA 1951 Importance of small and cottage industries Reduction of regional inequalities Transport facilities Power Stress on balanced development of agriculture and industry in each region.

Amendments in Industrial Policy of 1956 - Industrial policy statement 1973 o Considerable concessions to private sector and foreign multinationals. o MRTP and FERA companies were allowed to participate in core industries - Industrial policy statement 1980 o Objective Facilitate an increase in industrial production Optimum use of installed capacity Expansion of industries Solving the problem of shortages of major industrial inputs like energy, transport and coal o Extended provision of automatic growth to more industries o Special steps for export promotion o Investment limit for SSI revised o Regularization of excess installed capacity Industrial policy developments in 1980s - Exemption from licensing from Rs.3.00 crores to Rs. 15.00 crores in non backward areas and Rs.50.00 crores in backward areas. - Relaxations to MRTP ad FERA companies o Limit for MRTP from Rs.20 crores to Rs.100 crores in March 1985 o Permitting entry of FERA companies in 21 high technology items - Delicensing o 28 broad categories of industries

Only registration but no licensing necessary Re-endorsement of capacity o Regularizing actual achievement Broad banding of industries o Classification under broad categories Minimum economic scales of operation o Realization of scale economies Development of backward areas o Liberalizing entry of MRTP and FERA in backward districts o Setting up growth centers Incentives for export promotion o Liberalizing norms for MRTP companies if they were export oriented Enhancement of investment limit for SSI units and ancillary units

New Industrial policy 1991 - Deregulated the economy in a substantial manner - Abolition of industrial licensing o Abolished for all but 18 industries o Currently only 5 industries are under licensing Alcohol, cigarettes, hazardous chemicals, electronic aeroscape and defense equipment and industrial explosives. - Public sectors role diluted o Industries reserved for public sector reduced to 3 Atomic energy, minerals related atomic energy and railways

 Greater autonomy to public sectors Disinvestment of public sector - Abolishing threshold limit for MRTP categorization o Amended act gives more emphasis to the prevention and control of monopolistic, restrictive and unfair trade practices so that consumers are adequately protected. - Free entry to foreign investment and technology o Presently foreign investment up to 100 % under automatic route on permitted in most sectors subject to sectoral rules/regulations applicable o FDI is prohibited only in the following sectors Retail trading (multi brand) Atomic energy Lottery business Gambling and betting - Other liberalization measures o Industrial location policy liberalized Other than cities of 1 million population no approval required from center,. Except for industries under compulsory licensing In cities with population of more than one million industries other than those of non polluting nature required to be located 25 Kms. away from periphery o Abolition of phased manufacturing programs for new project No compulsory requirement to indigenize Incentives for increasing local content would continue o Removal of mandatory convertibility clauses Loans not compulsorily convertible to equity

Appraisal of new industrial policy - kudos o More efficient process of industrialization o Attract capital, technology and managerial experts from abroad o Improve public sector efficiency o Strengthen anti competitive practices of firms - Criticisms o Erratic ad fluctuating industrial growth o Distortion in production structure o Threat from foreign competition o Dangers of business colonization o Misplaced faith in foreign investment