Industrial policies and their evolution

Introduction #

Industrial policies in India have undergone significant evolution since independence, shaping the country’s economic landscape and industrial development. These policies have aimed to promote industrial growth, modernization, and self-reliance, while addressing various challenges and adapting to changing global and domestic economic conditions. This section provides an overview of the key phases in the evolution of India’s industrial policies and their impacts.

Pre-Independence and Early Post-Independence Era #

1. Colonial Industrial Policy

   • Focus on raw material extraction for British industries.
   • Limited development of indigenous industries and infrastructure.
   • Introduction of some modern industries like railways, textiles, and steel under British rule.

2. Initial Post-Independence Period (1947-1956)

   • Emphasis on self-reliance and industrialization as key to economic development.
   • Industrial Policy Resolution of 1948: Mixed economy model with a significant role for both public and private sectors.
   • Focus on establishing basic industries and infrastructure.

Era of Planning and Public Sector Dominance (1951-1991) #

1. First Industrial Policy Resolution (1956)

   • Emphasis on the development of heavy industries and the public sector.
   • Categorization of industries into three schedules: those exclusively owned by the state, those in which both public and private sectors could operate, and those left to the private sector.
   • Objective of reducing regional disparities and promoting balanced industrial growth.

2. Five-Year Plans and Industrial Development

   • First Five-Year Plan (1951-1956): Focus on agriculture, infrastructure, and basic industries.
   • Second Five-Year Plan (1956-1961): Mahalanobis model emphasizing heavy industries and public sector enterprises (PSEs).
   • Subsequent plans continued the focus on industrialization, self-reliance, and import substitution.

3. Industrial Licensing and Regulation

   • Introduction of the License Raj: Need for licenses for setting up and expanding industries.
   • Industrial (Development and Regulation) Act, 1951: Framework for industrial licensing and regulation.
   • Objective of controlling industrial capacity and ensuring planned development.

Liberalization and Economic Reforms (1991-Present) #

1. Economic Crisis and Structural Adjustment (1991)

   • Severe balance of payments crisis leading to the need for economic reforms.
   • Adoption of structural adjustment policies and liberalization to stabilize the economy.

2. New Industrial Policy (1991)

   • Abolition of the License Raj: Deregulation of industries and reduction in the number of industries requiring licenses.
   • Liberalization of foreign investment policies: Allowing automatic approval for FDI in various sectors.
   • Privatization and disinvestment of public sector enterprises.
   • Emphasis on enhancing competitiveness, efficiency, and integration into the global economy.

3. Industrial Policy Reforms (1991-2000)

   • Reduction in import tariffs and non-tariff barriers.
   • Simplification of procedures for establishing and operating businesses.
   • Promotion of exports and creation of Special Economic Zones (SEZs).

4. National Manufacturing Policy (2011)

   • Objective of increasing the share of manufacturing in GDP and creating jobs.
   • Establishment of National Investment and Manufacturing Zones (NIMZs) with world-class infrastructure.
   • Focus on technological upgradation, skill development, and innovation.

5. Make in India Initiative (2014)

   • Aim to transform India into a global manufacturing hub.
   • Simplification of regulations, improved ease of doing business, and investment promotion.
   • Target sectors including automotive, electronics, textiles, pharmaceuticals, and defense manufacturing.

6. Recent Developments and Policies

   • Production Linked Incentive (PLI) Scheme (2020): Financial incentives to boost domestic manufacturing and attract investments in key sectors.
   • Atmanirbhar Bharat Abhiyan (Self-Reliant India Mission) (2020): Emphasis on self-reliance and reducing import dependence.
   • Focus on promoting MSMEs (Micro, Small, and Medium Enterprises) through various support measures.

Impact of Industrial Policies #

1. Economic Growth and Industrialization

   • Significant growth in industrial output and diversification of the industrial base.
   • Development of key industries such as steel, automobiles, chemicals, and IT.

2. Employment Generation

   • Creation of jobs in manufacturing and allied sectors.
   • Enhanced skill development and training programs to meet industry needs.

3. Technological Upgradation and Innovation

   • Adoption of advanced technologies and innovation in manufacturing processes.
   • Growth of research and development activities.

4. Global Integration

   • Increased foreign direct investment (FDI) and participation in global value chains.
   • Expansion of export-oriented industries and improved trade balance.

5. Challenges and Criticisms

   • Regional disparities in industrial development.
   • Issues related to environmental sustainability and resource management.
   • Need for continuous policy adjustments to address emerging challenges and global competition.

Conclusion #

The evolution of industrial policies in India reflects the country’s journey from a regulated, state-controlled economy to a more liberalized, market-oriented one. These policies have played a crucial role in promoting industrial growth, technological advancement, and economic development. However, ongoing challenges such as regional disparities, environmental concerns, and the need for innovation require continued focus and adaptive policy measures to sustain industrial growth and competitiveness in the global economy.

References #

• Government of India, Ministry of Commerce and Industry. (1991). New Industrial Policy, 1991.
• National Institution for Transforming India (NITI Aayog). (2018). Strategy for New India @ 75. Retrieved from https://niti.gov.in/writereaddata/files/Strategy_for_New_India.pdf
• Ahluwalia, I. J. (1985). Industrial Growth in India: Stagnation since the Mid-Sixties. Oxford University Press.
• Panagariya, A. (2008). India: The Emerging Giant. Oxford University Press.
• World Bank. (2021). Doing Business 2021: Comparing Business Regulation in 190 Economies. Retrieved from https://www.doingbusiness.org/en/reports/global-reports/doing-business-2021