- India started her quest for the industrial development after independence in 1947.
- The Industrial Policy Resolution of 1948 marked the beginning of the evolution of the Indian industrial policy.
- In the industrial policy of 1948, the importance of both the public sector and private sector was accepted. However, the responsibility of the development of basic industries was handed over to public sector.
- The Industrial Policy Resolution of 1956 gave the public sector strategic role in the economy.
- It categorized industries that would be the exclusive responsibility of the state or would progressively come under state control and others.
- Earmarking the pen-eminent position of the public sector, it envisaged private sector co-existing with the state and thus attempted to give the policy framework flexibility.
- The main objective to the industrial policy of 1956 was to develop public sector, co-operative sector and control on private monopoly.
- There were four categories of industries in the industrial policy of 1948. They were reduced to three in the Industrial Policy of 1956.
- In 1976, joint sector was constituted on the recommendations of the Dutta Committee.
- The Industrial Policy of 1980 was influenced by the concept of unionism and the policy of giving concession to the agriculture based industries and was implemented through in it.
- Various liberalised steps were declared at the comprehensive level, in the industrial policy declared on 24 July 1991.
- Privatisation and liberalisation are the main thrust areas in the New Industrial policy.
New Industrial Policy, 1991
This new policy deregulates the industrial economy in a substantial manner. The major features of NIP 1991 are:
- Abolition of industrial licensing:
In a major move to liberalize the economy, the new industrial policy abolished all industrial licensing, irrespective of the level of investment, except for certain industries related to security and strategic concerns, social reasons, concerns related to safety and over-riding environmental issues, manufacture of products of hazardous nature, and articles of elitist consumption.
- Entry of foreign investment and technology made easier:
i. For the promotion of exports of Indian products in world markets, the government would encourage foreign trading companies to assist Indian exporters in export activities
ii. Approval of up to 51% would be given for direct foreign investment, foreign equity in high priority industries.
- Public sector's role diluted:
i. The new industrial policy has removed all industries from the re-served list (the number of industries reserved for the public sector since 1956 was 17)
ii. Industries that continue to be reserved for the public sector are in areas where security and strategic concerns predominate. These areas are:
a. arms and ammunition and allied items of defence equipment, defence aircraft and warships
b. atomic energy
c. mineral oils and minerals specified in the schedule to the atomic energy (control of production and use) order, 1953
- MRTP Act:
i. Under the MRTP Act all firms with assets above a certain size (Rs 100 crore since 1985) were classified as MRTP firms.
ii. Firms were permitted to enter selected industries only and this also on a case-by-case approval basis.
iii. The new industrial policy scrapped the threshold limit of assets in respect of MRTP and dominant undertakings.
- Liberalisation of industrial location policy:
i. The new industrial policy provides that in locations other than cities of more than one million population, there will be no requirement of obtaining industrial approvals from the centre, except for industries subject to compulsory licensing
ii. In cities with a population of more than one million, industries other than those of a non-polluting nature will be located 25 kilometres outside the periphery.
- Abolition of phased manufacturing programmes for new project:
i. To force the pace of indigenisation in manufacturing, phased manufacturing programme have been enforced in a number of engineering and electronic industries.
- Mandatory convertibility clause removed:
i. A large part of industrial investment in India is financed by loans from banks and financial institutions. These institutions have followed a mandatory practice of including a convertibility clause in their lending operations for new projects. This has provide them an opinion of converting part of their loans into equity, if felt necessary by their management. This has often been interpreted as an unwarranted threat to private firms to take over by financial institutions.
ii. This mandatory convertibility clause put forward by the financial institutions has been abolished the new industrial policy.
iii. In the Union Budget of 1997-98, nine public sector undertakings, which performed well were given the name of Navaratna and were made autonomous. These Navaratnas included: