Industrial Policy

Industrial policy

Meaning  Industrial policy means rules, regulations , principles ,

policies , and procedures laid down by government for regulating , developing and controlling industrial undertakings in the country. It prescribes the respective roles of the public, private joint and cooperative sectors for the development of industries.  It also indicates the role of the large , medium , and small sector . It incorporates fiscal and monetary policies, tariff policy , labour policy and the government attitude towards foreign capital, and role to be played by multinational corporations in the development of the industrial sector.

General Objectives of Industrial policy  Accelerating the overall rate of growth through industrialization  Expanding the industrial base in relation to industrialization needs of        

the country. Generating employment and reducing poverty. Reducing regional disparities in industrial development Preventing monopolies and concentration of industrial power Creating competitive conditions and encouraging the growth of entrepreneurship Promoting balanced industrial development Promoting linkages with others sectors of the economy. Assisting small enterprises Encouraging the growth of industrial research and development.

What does an industrial policy contain ?  Comparative roles of public , private , joint and      

cooperative sectors in the economy Categorization of industries from the point of view of assistance , market entry , control and regulation Jurisdiction Structure of control of the private sectors Role , attitude and policy towards foreign investment of the companies Thrust or priority areas of industrialization Role of cottage and small industries vis a vis large industries

Industrial policies  Industrial policy resolution of 1948  Industrial policy resolution of 1956  Industrial policy resolution of 1973  Industrial policy resolution of 1977  Industrial policy resolution of 1980  Industrial policy resolution of 1991

Industrial policy resolution of 1948

Four categories  The manufacture of arms and ammunition , the production

and control of atomic energy , and the ownership and management of railway transport were to be the exclusive monopoly of the Central Government.  The second category covered coal , iron and steel , aircraft manufacture , ship building , manufacture of telephone and wireless apparatus etc. New undertakings in these industries could henceforth be undertaken only by the state .  The third category was made up of industries of such basic importance that the central Government would feel it necessary to plan and regulate them.  A fourth category , comprising the remainder of the industrial field ‘, was left open to private enterprise , individual as well as cooperative.

Industrial policy resolution of 1956

Objectives  Speeding up the processes of industrialisation in India  Developing heavy and capital goods industries  Expanding an effective public sector  Accelerating the rate of economic growth  Building up a large and growing cooperative sector  Encouraging private sector industries  Preventing private monopolies  Developing small scale , village and cottage industries  Achieving balanced economic development  Participation of workers in management.  Maintenance of industrial peace

Classification of Industries Schedule “A”- seventeen industries  Arms and ammunition and defence equipments  Atomic energy  Heavy castings and forging of iron and steel  Iron and steel  Heavy plant and machinery required for iron and steel production , Mining machinery tools and other basic industries  Heavy electrical plants  Coal and Lignite  Mineral oils  Mining of iron ore , manganese ore , chrome ore , gypsum gold diamonds and sulphus  Mining and processing of copper , zinc , tin , wolfram and molybdenum  Minerals as per atomic energy Order, 1953  Aircraft  Air transport  Railway transport  Shipbuilding  Telephone and Telephone cables , telegraphs and wireless instruments excluding radio reviewing sets  Generation and distribution of electricity.

Schedule B  Other mineral excepting minor minerals defined in the          

minerals Concession rules , 1949, Section B Aluminum and other non ferrous metals not included in Schedule “ A” Ferro alloys and tools steels Manufacture of dugs , dye stuffs , plastics and other basic and intermediate products required by chemical industries Antibiotic and other essential drugs Fertlisers Synthetic rubber Carbonization of coal Chemical pulp Road transport Sea transport

 Schedule A industries were treated as the

exclusive responsibility of the state  Schedule B industries progressively state owned  Schedule c industries were left for private sector

Industrial Policy 1973  Extension of the industrial policy resolution

1956  Basic objectives growth, social justice and self reliance

Features  State would be directly responsible for the future       

development of industries Role pf PSUs further stresses in attaining socialistic pattern of society Both PSUs and private sectors assigned specific role Initiatives towards development of Joint sectors –they were supposed to function under direction of Government FI allowed only in Specific sectors All proposals were screened subject to FERA and FE,MA requirement SSI and cooperative sectors were assigned to play a special role In the area of agriculture cooperatives were encouraged

Industrial Policy Statement 1977 Janta Part came to power in March 1977 Objectives 3. Preventing of monopoly and concentration of economic poor 4. Maximising production of consumer goods 5. Making industry responsive of social needs 

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Aimed at making use of the available human resources for maximum benefit of the masses It was consumption oriented and labour intensive policy Thrust was to generate rural employment opportunities

Basic Elements  Development of SSI , cottage industries, tiny sectors units ,     

village and household industries Encouraging the large scale industrial units for meeting the minimum needs of the population Public Sector was to be used as a producer and supplier of essential consumer goods Import of technology only in high priority areas Restricted foreign collaborations – the ownership and control were to remain in Indian Hands An important contribution of 1977 policy was the setting up of District Industries Centre ( DIC) in every district for the development of SSIs. It continues to function effectively

New Industrial Policy 1980  Congress came to power again in 1980  Committed to rapid and balanced industrialization for

benefiting the common masses  Growth oriented policy  Factors considered by the policy were import , export , labour relations , pollution control, ecological balance, merger and amalgamation , correcting industrial sickness, pricing policy, take over of sick units , foreign collaboration and investment.

Objectives Optimum utilization of the installed capacity Higher employment generation Achieving higher productivity and maximum production Development of industrially backwards areas Promotion of agro based industries Faster promotion of export oriented and import substitution industries  Consumer protection against high prices and bad quality  Promoting economic federalism with spread of investment in rural as well as urban areas.  Revival of economy by overcoming infrastructural gaps      

NIP 1991  Despite the impressive growth performance of the new

Industrial policy Statement of 1980, serious budgetary and Fiscal deficits of the government and BOP crises led India to a critical economic and financial situation. There was no other alternative but to introduce a new regulatory and liberal economic reign

Major Aspects 1. 2. 3. 4. 5. 6. 7. 8. 9.

Industrial Licensing dispensed with except in 18 items Direct foreign investment up to 51 per cent of equity allowed in high priority industries The threshold of the assets of MRTP companies and dominant undertakings removed Automatic clearance introduced for import of capital goods , provided foreign exchange requirement for such import are met through foreign equity Automatic permission for foreign technology agreements in high priority industries up to sum of Rs 1 crore granted Foreign equity proposals need not be accompanied by foreign technology agreement Pre eminent role of Public sector in eight core sector areas including arms and ammunition , mineral oils , rail transport and mining of coal and mineral Part of government’s shareholding in public sector is proposed to be disinvested which will be offered to mutual funds , financial institutions , general public and workers Chronic loss making public sector units to be referred to the Board of Industrial and Financial Reconstruction ( BIFR) for formulation of revival schemes.

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A simplified procedure for new projects was introduced to manufacture goods not covered by compulsory licensing . Even a substantial expansion of a project requires submitting a memorandum in the prescribed form to the secretariat for industrial approvals. Decisive contribution was expected from foreign investment including foreign corporate bodies , foreign individuals and non resident Indians Industrial policy for the small scale sector announced on August 6, 1991 provided a four point scheme to provide financial support to this sector.

Areas Covered  Industrial Licensing  Foreign Investment  Technology transfer and import of foreign

technology  Public sector policy  Policy relating to MRTP act  An exclusive small sector policy.