Industrial Policies (1948-1991)


During the pre-independent period the industrial sector was very small and the country did not have any significant industrial policy. After independence, the first formal initiative towards industrialization was the declaration of the Industrial Policy Resolution of 1948.
However, the more comprehensive, concerted and real planned effort  towards industrialization commenced from the era of First Five Year Plan (FFYP) 1951-1956. The major step towards industrialization has been attributed to Industries (Development and Regulation) Act 1951.
Through this Act, the Union Government brought many key and basic industries under its control. The sectors of national importance namely atomic energy, arms and ammunition, aircraft, ship building, telephone and telegraph, iron and steel, coal, minerals, oils etc. have been brought under the exclusive sphere of government.
The Second Five Year Plan (SFYP) made a marked shift in the industrial policy and development of the country. The main aim of the second plan was to accelerate the growth of the economy through rapid industrialization.
The basic framework and direction for such rapid industrialization was laid down by the Industrial Policy Resolution of 1956 in tune with many provisions of the 1950’s Constitution.
The resolution of 1956, having declared “the adoption of the socialistic pattern of society as the national objective” urged that all industries of basic and strategic importance or in the nature of public utility services should be in the public sector for planned and rapid development. Thus, the State has, therefore, to assume direct responsibility for the future development of industries.
Another strategic dimension of the 1956 resolution was its emphasis on basic and heavy industries and capital goods industries to attain selfreliance in important sectors. This strategy also believed that rapidevelopment within a limited span of time is possible through the development of capital goods industries rather then the consumer goods industries. The
Plan created a strong foundation for the future economic development and provided support to the agriculture, village and small-scale industries and infrastructures.
Public Sector Restructuring
The macro economic policy reforms launched from 1991 onwards have restructured the public sector enterprises to a significant extent. The new policy reforms are expected to alter drastically the basic parameters of erstwhile Indian economic policies that were followed since Independence. The national economy has been weaned away from regime of state controls and towards a market dependent one. The process of macro economic stabilization through which a planned economy is changed into a market driven competitive economy is called as economic policy reforms.
The process includes liberalization, privatization and globalization (LPG). These new set of polices reduced the then dominant role of public sector through various policy measures like new Industrial Policy 1991, disinvestment, promotion of private and foreign investment. All these policy initiatives have restructured the Indian public sector thoroughly. The employment generation, income distribution and welfare objectives of public sector have been replaced by profit maximization objectives.
The performance of the sector has been criticized on various grounds; particularly the question of efficiency is measured in terms of profit and not by employment and labour welfare. The welfare oriented pricing policy has also been subjected to criticism.
New Industrial Policy 1991
The New Industrial Policy declared was on July, 1991 with the major aim of loosening the barriers to entry for private firms to encourage competition in the industrial sector. The industrial policy acted to consolidate the earlier gains and to build further by correcting the distortions that might have crept in the Industrial structure developed in the earlier decades. It also aims to sustain growth in the productivity and gainful employment and to attain international competitiveness.
The specific reforms related to the restructuring of public sector enterprises are as follows.
(i) To encourage private participation in the economy. The areas of industry reserved for the public sector has been considerably reduced from 17 to 8. In particular, telecommunication, power, air transport, petroleum, sectors were opened for private sector.
(ii) The disinvestment of shares of some public sector enterprises in order to raise the resources and to encourage private participation in the public sector enterprises.
(iii) Public enterprises which are sick, will be referred to the Board of Industrial and Financial Reconstruction for rehabilitation or reformulation.
(iv) An improvement of performance and accountability has to be ensured through new rules and only potentially viable public sector undertakings (PSUs) can be revived.
(v) Budgetary support to sick public sector industries will be reduced drastically.
(vi) Only potentially viable PSUs can be revived and others will be closed down.
In 1998-99, another two sectors were removed from the exclusive public sector domain and subsequently only 3 sectors have been left under the public sector domain leaving the rest open for private and foreign investments. Thus the Industrial Policy of 1991 has dismantled the industrial controls, regulations in a significant way to restructure the public sector and
to promote private sector.

Friday, 18th Mar 2016, 06:54:52 AM

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