The industrial policy resolution is vital to India’s economic planning. It is a government document that gives rules and ideas about how industries should grow in the country. This policy tells us the government’s role in the industry, what businesses can do, and how the public and private sectors will work together. India introduced this policy after gaining independence in 1947. The country faced poverty, unemployment, and a lack of industries at that time. So, the government needed to make a clear plan to build industries in a way that helps the entire nation. That is when the first industrial policy resolution came in 1948. After that, many other policy resolutions followed in 1956, 1977, and 1991. Each of them had new goals and ideas based on the needs of the time.
History and Evolution of Industrial Policy Resolutions in India
The industrial policy resolution in India has changed many times since independence. Each policy reflected the government’s view on how industries should grow and how the public and private sectors should work together. The evolution of these policies shows how India shifted from a centrally controlled system to a liberal and market-driven economy.
Industrial Policy Resolution of 1948 – The Foundation Phase
This was India’s first industrial policy after gaining independence. At that time, the country lacked modern industries, and most of the population was engaged in agriculture. The government introduced this policy to set a direction for industrial development in a newly independent economy.
Key Features:
- Created a mixed economy model with both public and private participation.
- Divided industries into four categories:
- Industries exclusive to the government (defence, atomic energy)
- Basic industries where both sectors could participate
- Industries regulated by the government
- Industries left open to private initiative.
- Emphasized planned industrial growth and regulation to prevent monopolies.
This policy laid the foundation for state participation in the industrial sector.
Industrial Policy Resolution of 1956 – The Socialist Expansion
The 1956 resolution is known as the most detailed and influential industrial policy. It supported a socialist pattern of society and was aligned with the Second Five-Year Plan. It significantly increased the role of the public sector and aimed to reduce inequality.
Key Features:
- Divided industries into three schedules:
- Schedule A: Exclusively government-controlled industries.
- Schedule B: Joint participation of public and private sectors.
- Schedule C: Open for the private sector.
- Strong focus on reducing income inequality, promoting regional balance, and establishing a strong public sector base.
- Gave special attention to small-scale industries and rural employment.
This resolution helped build heavy industries and public sector undertakings like BHEL, SAIL, and ONGC.
Industrial Policy Statement of 1977 – Focus on Small and Cottage Industries
Introduced by the Janata government, the 1977 policy shifted attention to employment generation through small and village industries. The policy aimed to reduce the dominance of big business houses and bring industries to rural India.
Key Features:
- Promoted decentralized industrial growth.
- Increased the number of reserved items for small-scale industries.
- Set up District Industries Centres (DICs) to promote entrepreneurship at the district level.
- Sought to prevent concentration of economic power.
This policy encouraged self-reliance and rural industrialization.
Industrial Policy Statement of 1980 – Rebalancing Industrial Growth
The Industrial Policy Statement of 1980 was introduced after the return of the Congress party. It aimed to promote industrial modernization while still supporting small industries. The government acknowledged the need to boost technology and increase productivity.
Key Features:
- Encouraged modernization of existing industries.
- Allowed easier expansion for high-priority industries.
- Took steps to revive sick public sector enterprises.
- Signalled early support for foreign collaborations in advanced sectors.
This policy was a middle ground between state control and industrial liberalization.
Industrial Policy of 1991 – The Liberalization Era
India’s economy was in a deep crisis in 1991. Foreign exchange reserves were very low, and the country faced economic stagnation. In response, the government introduced a new industrial policy, 1991 that forever changed India’s financial direction.
Key Features:
- Industrial licensing for most industries (except for a few, such as defence and atomic energy) has been abolished.
- Allowed foreign direct investment (FDI) in many sectors.
- Reduced the number of industries reserved for the public sector.
- Started privatization of public sector undertakings through disinvestment.
- Ended asset restrictions under the Monopolies and Restrictive Trade Practices (MRTP) Act.
- Aimed to increase global competitiveness, productivity, and private sector growth.
This policy began economic liberalization, globalization, and privatization in India.
Objectives of Industrial Policy Resolution
Every industrial policy resolution had specific goals. These goals aimed to improve the economic condition of the country. The objectives were made according to the needs of the time and the problems people were facing.
Promote Industrial Growth
One of the main objectives was to increase the number of industries in India. The policy aimed to set up factories, build machinery, and create a strong industrial base. This would reduce dependence on imports and help India become self-reliant.
Create More Jobs
Unemployment was a big problem. The policies aimed to create more jobs in cities and rural areas. By supporting small and medium industries, the government hoped to give employment to many people.
Reduce Regional Imbalance
Many parts of India were left behind in terms of development. The policy wanted to spread industries across different states. It gave exceptional support to backward areas to attract businesses.
Encourage Public Sector
The policy focused on building strong public sector units in the early years. These units were trusted to run big industries like steel, power, and railways. The goal was to reduce the power of private monopolies.
Encourage Small Scale and Cottage Industries
The government wanted to protect small businesses. These include handlooms, handicrafts, and local products. Policies gave them loans, training, and help in marketing.
Attract Foreign Investment (Post-1991)
It was a complete shift in policy in 1991. The policy aimed at opening the country to foreign investments and, therefore, at modernizing technology. India was more competitive in the world.
The policy objectives were to create a mixed economy where government and private players would work together for the nation’s growth.
Key Features of Industrial Policy Resolutions
The industrial policy resolutions had some apparent features. These features showed how the Indian government wanted to manage the economy and business environment.
Role of Government in Industry
The government took complete control of key industries. This helped build heavy industries and infrastructure. These sectors needed huge investments, which only the government could provide.
For example, the public sector set up steel plants, oil refineries, and railways.
Industrial Licensing
In the beginning, you needed a license to start most industries. This system controls who can start a business and where. The idea was to avoid overcrowding and ensure fair use of resources.
However, after 1991, most licenses were removed to make business easier.
Protection for Small Industries
Small businesses were given protection from big industries. Some products could only be made by small firms. The government offered tax benefits, easy loans, and training to help them grow.
This supported local employment and preserved traditional skills.
Balanced Growth Across Regions
The policy tried to spread industries in every state. It gave extra benefits to investors who set up factories in backward areas. This reduced the gap between developed and underdeveloped states.
Foreign Investment Rules
Before 1991, foreign investment was tightly controlled. After 1991, the rules changed. India allowed foreign companies to invest directly in many sectors. This brought in new technology, capital, and global exposure.
Simplified Rules and Approvals
After liberalization, the policy tried to reduce red tape. It became easier to start a business. The government removed many restrictions and simplified approval processes.
These features together created the framework that guided India’s industrial growth for decades.
Limitations and Criticisms of Industrial Policy Resolutions
Even though the industrial policy resolution helped India grow, it had many problems, too. These limitations stopped the economy from growing as fast as it could have. Experts and economists have pointed out many drawbacks over the years.
Over-Dependence on Public Sector
In the early years, the policy gave too much importance to public sector units (PSUs). Many of these PSUs became slow, inefficient, and full of losses. They did not focus on profits. This wasted taxpayers’ money and slowed industrial progress.
Some units did not even meet their production targets. Due to this, the private sector had to wait years to enter these sectors.
License
The licensing system created problems. Entrepreneurs needed permission to start a factory, expand, or even close. This slowed down business activity. It also increased corruption and favouritism.
People called this system “License Raj” because it gave too much power to government officers instead of business owners.
Less Competition and Innovation
Due to high protection for Indian companies, they did not try hard to improve their products. Foreign companies were not allowed to enter. So, Indian industries faced no competition.
This led to low quality, poor service, and outdated technology in many sectors.
Regional Disparity Continued
Even though the policy tried to support backward areas, most industries still came up in developed regions like Mumbai, Delhi, and Bangalore. Poor states like Bihar, Odisha, and Assam saw little growth.
The extra benefits did not work because basic facilities like roads and electricity were missing in those areas.
Delay in Liberalization
India waited too long to open its economy. In 1991, the economy started a deep crisis. It had scanty foreign exchange reserves and needed to borrow money. The situation could have been avoided had the government taken the liberalisation step much earlier.
While the industrial policy contributed to the establishment of a base, delays and tight controls on the market eventually crippled India’s growth trajectory.
Industrial Policy Resolution FAQs
Q1. What is meant by industrial policy resolution?
An industrial policy resolution is a government plan that explains how industries should grow in the country. It shows the role of the government and private sector in business.
Q2. How many industrial policy resolutions have been introduced in India?
India introduced major industrial policy resolutions in 1948, 1956, 1977, and 1991. Each had different goals and reflected the country’s needs at that time.
Q3. What was the main aim of the 1956 industrial policy resolution?
The 1956 resolution aimed to strengthen the public sector, reduce inequality, and promote balanced regional development through state control over core industries.
Q4. Why was the 1991 industrial policy important?
The 1991 policy was a turning point. It brought in liberalization, privatization, and globalization. It allowed more foreign investment and gave freedom to the private sector.
Q5. What are the key features of industrial policy resolutions?
Some features are the role of the public sector, industrial licensing, protection for small industries, foreign investment control, and balanced regional growth efforts.
Q6. What are the limitations of India’s industrial policies?
Key limitations include inefficient public sector units, red tape due to licensing, low competition, continued regional gaps, and late economic reforms.
Q7. How did industrial policies help India after independence?
They helped build basic industries like steel, power, and transport. They created jobs, reduced imports, and gave India its first steps towards becoming self-reliant.
