Industrial Policy. Learning Outcome… Understanding of… Concept of Industrial Policy Main objectives of industrial policy Role & functions of Department

Industrial Policy

Learning Outcome…

Understanding of… Concept of Industrial Policy Main objectives of industrial policy Role & functions of Department of

Industrial policy & promotion Industrial Policy 1991

Industrial Policy It covers rules, regulations, principles,

policies, & procedures laid down by government for regulating & controlling industrial undertakings in the country.

It prescribes the respective roles of the public, private, joint, cooperative large, medium & small scale sectors for the development of industries.

Industrial Policy Contd...

It incorporates fiscal & monetary policies, tariff policy, labor policy.

It shows the government attitude not only towards external assistance but also toward public & private sectors.

Why? (Rationale) To maintain a sustained growth in

productivity. To enhance gainful employment. To prevent undue concentration of

economic power, curb monopoly. To direct scarce resources in most

desirable areas of investment in accordance with National priorities. (optimal utilization of resources)

Why? (Rationale) To attain international competitiveness

and To transform India into a major partner

and player in the global arena

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 The New Industrial Policy of 1991

Industrial Policy Resolution 1948

Issued on April 6, 1948 Outlined the approach to industrial growth and

development Emphasized the importance of securing a

continuous increase in production and ensuring its equitable distribution.

Acceptance of importance of both private and public sectors

Industrial Policy Resolution 1948 Divided the industries into four categories

1. State monopoly: Arms and ammunition, atomic energy and railway transport

2. Mixed Sector: six industries – coal, iron & steel, aircraft manufacturing, shipbuilding, manufacture of telephone, telegraph and wireless apparatus and mineral oils.

3. The field of Government control – automobiles, heavy chemicals, machine tools, fertilizers, sugar, paper, cement, cotton and woolen textiles etc.

4. All other industries were left open for private sector though the State would also progressively participate in this field.


Role of Small and cottage industries If foreign investment is needed, Indians

should have majority ownership Policy of just labour conditions and fair

wages Labour participation in management was

stressed to maintain industrial peace.


After the adoption of the Constitution and the socio-economic goals, the Industrial Policy was comprehensively revised and adopted in 1956.

Sought to accelerate the rate of economic growth and speed up industrialization to achieve a socialist pattern of society.

Capital was scarce & the base of entrepreneurship not strong enough. Hence, it gave importance to the role of the State to assume a predominant and direct responsibility for industrial development.


Objectives: Improvement in employment opportunities, living

standards and working conditions for the mass of the people.

Reduction in income and wealth disparities Prevention of private monopolies and concentration

of economic power in different fields in the hands of small numbers of individuals.


To expand public sector, develop heavy and machine making industry

Undertake State trading on an increasing scale. Equal opportunity for the private sector to develop

and expand.


Private sector to develop on the principle of cooperation; increasing proportion of the private sector activities to develop on cooperative lines.

The adoption of the socialist pattern of society as the national objective

The need for planned and rapid development.


Public sector: All industries of basic and strategic importance, or in the nature of public utility services.

The State can undertake any type of industrial production.

Industrial Policy Resolution 1956Categorization of industries:i) Government - Set of industries the future development

of which will be the exclusive responsibility of the State Schedule A: Arms, ammunition, Defence equipment, atomic energy, iron and steel, heavy castings, heavy electrical, heavy machinery, coal and lignite, mineral oils, mining of iron ore, manganese, chrome ore, gypsum, sulphur, gold and diamonds, railway transport, aircraft, air transport, telephones, cables, generation and distribution of electricity (17 Inds.)


ii) Mixed - Category of industries which will be progressively state-owned and in which the State will, therefore, generally take the initiative in establishing new undertakings, but in which private enterprise will also be expected to supplement the efforts of the State.

• Schedule B: Aluminium, non-ferrous metals, machine tools, drugs, fertilizers, synthetic rubber, carbonisation of coal, chemical pulp, road transport, and sea transport. (12 inds)


iii) Private Sector - Rest of industries left to the initiative and enterprise of the private sector.

Stress the role of cottage and village and small scale industries in the development of the national economy.

Disparities in levels of development between different regions should be progressively reduced.

Industrial Policy 1973 Certain structural distortions called for policy

changes in IPR 1956 Provide for a closer interaction between the

agricultural and industrial sectors Highest priority to the generation and

transmission of power. Identify products to be reserved for the small scale

sector: list of industries exclusively reserved for the small scale sector expanded from 180 items to more than 500 items.

Industrial Policy 1973

Within the small scale sector, a tiny sector was also defined with investment in machinery andequipment up to Rs.1 lakh & located in townswith a population < 50,000 according to1971 census figures, and in villages.

Proposal for special legislation to protect cottage and household industries


Compulsory export obligations, merely for ensuring the foreign exchange balance of the project, would no longer be insisted upon while approving new industrial capacity.

In the areas of price control of agricultural andindustrial products, the prices would be regulatedto ensure an adequate return to the investor.


Emphasis on producing inputs needed by a large number of

smaller units and making adequate marketing arrangements.

upgrading the technology of small units. Promoting the development of a system of linkages

between nucleus large plants and the satellite ancillaries


Emphasis on: the development of small scale industries, the

investment limit in the case of tiny units was enhanced to Rs.2 lakh, of a small scale units to Rs.20 lakh and of ancillaries to Rs.25 lakh.

building buffer stocks of essential raw materials for the Small Scale Industries for operation through the SmallIndustries Development Corporations in the Statesand the National Small Industries Corporation inthe Centre.


Emphasis on: Industrial processes and technologies involving

optimum utilization of energy or the exploitation of alternative sources of energy for giving special assistance, including finance on concessional terms.

The Industrial Policy Statement 1980 Formulated wrt the Industrial Policy Resolution of 1956 to

provide for (i) Optimum utilization of installed capacity;(ii) Maximum production and achieving higher productivity;(iii) Higher employment generation;(iv) Correction of regional imbalances;(v) Strengthening of the agricultural base through agro based industries and promotion of optimum inter-sectoral relationship;

(vi) Promotion of export-oriented industries; (vii) Consumer protection against high prices and bad

quality.

INDUSTRIAL POLICY 1991 Govt . recognizes the need for

social and economic justice, to end poverty and unemployment and to build a modern, democratic, socialist, prosperous and forward-looking India

India to grow as part of the world economy and not in isolation

Greater emphasis placed on building up ability to pay for imports through our own foreign exchangeearnings

development and utilization of indigenous capabilities in technology and manufacturing as well as itsupgradation to world standards.

INDUSTRIAL POLICY 1991 Sound policy framework encompassing

encouragement of entrepreneurship, development of indigenous technology through investment in research and development, bringing in new technology, dismantling of the regulatory system, development of the capital markets and increasingcompetitiveness for the benefit of the commonman.

INDUSTRIAL POLICY 1991 The spread of industrialization to backward areas

of the country will be actively promotedthrough appropriate incentives, institutions andinfrastructure investments.

Government will provide enhanced support to the small-scale sector so that it flourishes in an environment of economic efficiency and continuous technological upgradation

INDUSTRIAL POLICY 1991

Foreign investment and technology collaboration will be welcomed to obtain higher technology, to increase exports and to expand the production base.

Government will endeavor to abolish the monopoly of any sector or any individualenterprise in any field of manufacture, except onstrategic or military considerations and open allmanufacturing activity to competition.


The Government will ensure that the public sector plays its rightful role in the evolving socio-economic scenario of the country.

Government will ensure that the public sector isrun on business lines as envisaged in the IndustrialPolicy Resolution of 1956 and would continue toinnovate and lead in strategic areas of nationalimportance.


Government will fully protect the interests of labour, enhance their welfare and equip them in all respects to deal with the inevitability of technological change

Labour will be made an equal partner in progress and prosperity

Workers’ participation in management will be promoted

INDUSTRIAL POLICY 1991 Workers cooperatives will be encouraged to

participate in packages designed to turn aroundsick companies.

The major objectives of the new industrial policy package will be to build on the gains already made, correct the distortions or weaknesses that may have crept in, maintain a sustained growth in productivity and gainful employment and attain international competitiveness.


Need to preserve the environment and ensure the efficient use of available resources.

Government’s policy will be continuity with change


In pursuit of the above objectives, Governmenthave decided to take a series of initiatives in respect of the policies relating to the following areas.A. Industrial Licensing.B. Foreign Investment.C. Foreign Technology Agreements.D. Public Sector Policy.E. MRTP Act.

INDUSTRIAL POLICY 1991 • Industrial licensing:

– Modified industrial licensing policy to ease restrictions on capacity creation, respond to emerging domestic & global opportunities by improving productivity

– Abolished industrial licensing for most industries but for 18 categories

– Small scale sector reserved• Foreign Investment:

– FDI (up to 51% foreign equity) permitted in high priority industries (high investment and advanced technology) & export oriented companies


Foreign Technology Agreements: Towards technological dynamism, automatic approval for

technological agreements related to high priority industries; eased procedures for hiring foreign technical expertise

• Public Sector Policy:Restructuring pubic sector units, raise resources through pubic participation PSUs, refer sick units to Board of Industrial & Financial Reconstruction

• MRTP Act: Abolished scrutiny of investment decision of MRTP companies etc.

Current Scenario:

Substantial changes: Only six industries require compulsory licensing Only three industries reserved for the public sector Relation of restriction on FDI: FDI up to 100 % under

automatic route for most manufacturing activities in Special Economic Zones; FDI ceiling in pvt banking sector up to 74%; oil exploration (100%); natural gas and LNG pipelines (100%); telecom (74%)

Small Scale industries sector: reduced # of items reserved from 821 (1991) to 506 (2005) to 20 (2013)

Documents

Industrial Policy. Learning Outcome… Understanding of… Concept of Industrial Policy Main objectives of industrial policy Role & functions of Department