India’s industrial policy has evolved significantly over the decades, reflecting shifts in economic philosophy, priorities, and global economic conditions. Here’s an overview of the key policies and their impacts:

Industrial Policy Resolution, 1948

• Economic Model: Declared India as a mixed economy, incorporating elements of both capitalism and socialism.
• Focus Areas:
  • Small Scale and Cottage Industries: Emphasized the importance of these industries for employment and rural development.
  • Foreign Investments: Restricted to control external influence and encourage domestic industries.
  • Industry Classification: Industries were categorized into four groups:
    • Exclusive Monopoly of Central Government: Included arms and ammunitions, atomic energy, and railways.
    • New Undertakings by State: Covered key sectors like coal, iron and steel, aircraft manufacturing, shipbuilding, telegraph, and telephone.
    • Regulated by Government: Industries of basic importance.
    • Open to Private Enterprise: Remaining industries available for private, individual, and cooperative participation.

Industrial Policy Resolution, 1956 (IPR 1956)

• Framework: Laid the foundational framework for industrial policy, often referred to as the “Economic Constitution of India.”
• Classification:
  • Schedule A: Public Sector (17 industries), emphasizing state control over critical sectors.
  • Schedule B: Mixed Sector (12 industries), where both public and private sectors could operate.
  • Schedule C: Private Industries (remaining sectors), which were open for private enterprise.
• Provisions:
  • Public Sector: Expansion and development of public sector enterprises.
  • Small Scale Industry: Continued support and development.
  • Foreign Investment: Regulated to balance domestic and international interests.
• Modifications: Periodic updates in 1973, 1977, and 1980 to address emerging challenges.

Industrial Policy Statement, 1977

• Extension of 1956 Policy: Focused on decentralization and employment generation.
• Key Objectives:
  • Employment: Aimed at providing jobs for the poor and reducing wealth concentration.
  • Decentralization: Encouraged the spread of industries to less developed areas.
  • Priority to Small Scale Industries: Increased focus on small and tiny units.
  • Restrictions on MNCs: Imposed limitations on multinational companies to protect domestic industries.

Industrial Policy Statement, 1980

• Focus: Addressed competition, modernization, and selective liberalization.
• Key Measures:
  • Liberalization: Eased licensing requirements and supported capacity expansion.
  • MRTP Act: Introduced to prevent monopolistic practices.
  • FERA Act: Aimed at regulating foreign exchange and investments.
• Objective: To enhance industrial productivity, competitiveness, and attract foreign investment in high-tech areas.

New Industrial Policy, 1991

• Objectives: Facilitate market forces, increase efficiency, and integrate with the global economy.
• Key Aspects:
  • Liberalization: Reduced government control, eased regulations, and promoted private sector growth.
  • Privatization: Increased role of the private sector in industrial development.
  • Globalization: Integrated the Indian economy with the global market.
• FDI Policies:
  • Ceiling Increase: Foreign Direct Investment (FDI) ceiling increased from 40% to 51% in certain sectors.
  • 100% FDI: Allowed in select sectors such as infrastructure.
  • Foreign Investment Promotion Board: Created as a single-point agency for approving and facilitating Foreign Direct Investment (FDI) clearances.
• Changes:
  • Abolished: The Phased Manufacturing Programme and the Mandatory Convertibility Clause were eliminated.
  • Industrial Licensing: Abolished for most industries except 18.
  • MRTP Act: Relaxed to encourage competition.
  • Competition Act, 2000: Enacted based on SVS Raghavan Committee’s recommendations to foster competition and improve market conditions.

Review of Public Sector under New Industrial Policy, 1991:

• Public Sector Investments: Focused on disinvestment and reducing state ownership.
• De-reservation: Reduced the number of industries reserved exclusively for the public sector.
• Management: Professionalized management of Public Sector Units (PSUs).
• Sick PSUs: Referred to the Board for Industrial and Financial Reconstruction (BIFR) for restructuring.
• Memoranda of Understanding (MoUs): Strengthened agreements between PSUs and ministries to enhance performance.