INDUSTRIAL POLICY

OF INDIA
Vasu Singla
Nikhil Aggarwal
Akash joshi
Jagseer singh
Gagandeep nain
History
In 1948, immediately after Independence,
Government introduced the Industrial Policy
Resolution. This outlined the approach to
industrial growth and development.
After the adoption of the Constitution and the
socio-economic goals, the Industrial Policy was
comprehensively revised and adopted in 1956.
To meet new challenges, from time to time, it was
modified through statements in 1973, 1977 and
1980.


2
Continuing. . .
In 1956, capital was scarce and the base of
entrepreneurship not strong enough. Hence, the
1956 Industrial Policy Resolution gave primacy to
the role of the State to assume a predominant and
direct responsibility for industrial development.
The Industrial Policy statement of 1973 identified
high-priority industries where investment from
large industrial houses and foreign companies
would be permitted.
3
Continuing . . .
The Industrial Policy Statement of 1977 laid
emphasis on decentralisation and on the role of
small-scale, tiny and cottage industries.
The Industrial Policy Statement of 1980 focussed
attention on the need for promoting competition in
the domestic market, technological upgradation
and modernisation.
4
The policy laid the foundation for an increasingly
competitive export based and for encouraging
foreign investment in high-technology areas. This
found expression in the Sixth Five Year Plan
which bore the distinct stamp of Smt. Indira
Gandhi.

Continuing . . .
These policies created a climate for rapid industrial
growth in the country. Thus on the eve of the Seventh
Five Year Plan, a broad-based infrastructure had been
built up.
The Seventh Plan recognized the need to consolidate
on these strengths and to take initiatives to prepare
Indian industry to respond effectively to the emerging
challenges.
6
A number of policy and procedural changes were
introduced in 1985 and 1986 under the leadership
of Shri Rajiv Gandhi aimed at increasing
productivity, reducing costs and improving
quality.

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.
Main Objectives
To maintain a sustained growth in productivity
To enhance gainful employment
To prevent undue concentration of economic power
To achieve optimal utilization of human resources
To attain international competitiveness and
To transform India into a major partner and player
in the global arena

Industries Development and Regulation Act
Industries Development and Regulation Act
Development Provisions Regulatory Provisions
Advisory Council &
Development Councils
Regulation of Conduct &
Management of business
Regulation of entry into
& growth of business
Regulation of production,
Supply, price & distribution
Supervision,
Investigation & Inspection
Take over of Management
Salient features of the Act
a) Development Measures: The IDRA seeks to
ensure planned industrial development of the country
by regulating, controlling and developing industries
that have been included in the Schedule to the Act.
These industries are known as Scheduled Industries.
The Act provides for the establishment, by the
Central Government of a Central Advisory Council,
consisting of representatives of the owners of
industrial undertakings, employees, consumers,
primary suppliers etc. for the purpose of advising the
Central Government on matters relating to the
development of industries.





It also provides for the establishment, for any
scheduled industry or group of scheduled
industries, a Development Council consisting of
members having special knowledge of matters
relating to the technical or other aspects of the
industries, for purposes such as recommending
measures for improving the performance of
industries.



b)Registration of Existing Industrial
Undertakings:

The owner of every existing industrial
undertaking is required to register the
undertaking in the prescribed manner and within
the prescribed period. Registration of an
undertaking is not necessary if :

It is a small scale industrial undertaking
It is otherwise exempt from the licensing /
registration provisions of this Act
Where the undertaking concerned is not
satisfying the definition of the term factory
under the Act.



Salient features of the Act (contd.)
c) Regulation of Entry and Growth: The IDRA
empowers the Central Government to regulate the
development of industries by means of licensing with
suitable exemptions as decided by the Government.
A license is a written permission from the
Government to an industrial undertaking to
manufacture specified articles included in the
Schedule to the Act. It contains the particulars of the
industrial undertaking, its location, the articles to be
manufactured etc. It is also subject to a validity
period within which the licensed capacity should be
established.

A license is necessary under the following
circumstances:
For establishing a new industrial
undertaking
For taking up the manufacture of a new
article in the existing undertaking
For substantial expansion of an undertaking
For change in location of an undertaking.


Salient features of the Act (contd.)
Prior to the economic liberalization in 1991, the
licensing was a means to help achieve the following
objectives:
Achieving the desired pattern of industrial
dispersal especially promoting the backward
regions
encouraging new entrepreneurs
prevention of concentration of economic power
protecting the small scale sector
Contd..
regulating foreign capital and technology
ensuring the use of proper technology and
economies of scale
controlling industrial pollution
ensuring demand-supply equilibrium
export promotion and import substitution
conserving foreign exchange by proper
allocation
ensuring employment generation and socio
economic equilibrium.



Licensing under New Policy:
The Industrial Policy, 1991 has abolished industrial
licensing except for certain industries related to
security and strategic considerations, hazardous
chemicals and environmental concerns. Now all
industrial undertaking are exempt from obtaining
an industrial license except for:
Industries reserved for the public sector
Industries retained under compulsory licensing
Items of manufacture reserved for the small scale
sector
Proposals involving locational restrictions
Industrial undertakings exempt from obtaining an
industrial license are required to file an Industrial
Entrepreneur Memoranda (IEM) with the
Secretariat of Industrial Assistance (SIA) and
obtain an acknowledgement. No further approval
is required.

Salient features of the Act (contd.)
d) Supervision and Control: The Government under
this Act can make a complete investigation if it is
of the opinion that:
In respect of any scheduled industry or undertaking
there has been or is likely to be a substantial fall in
the volume of output or a deterioration in the
quality of output or an unjustified rise in price of
the good
Any scheduled undertaking is managed in a manner
highly detrimental to the scheduled industry or to
the public interest.

Thereafter depending upon the results of the
investigation, the Government is empowered to
issue direction to the industrial undertaking for
any of the following purposes:
Regulating the production of any article and
fixing the standard of production
Requiring the industrial undertaking to take
steps that the Government may consider
necessary to stimulate the development of the
industry.
Prohibiting the industrial undertaking from
resorting to any act which might reduce its
production, capacity or economic value
Controlling the prices or regulating the
distribution, of any article which has been the
subject matter of investigation.

For the purpose of investigation, any person
authorized by the Central Government on
its behalf can:
Enter and inspect any premises
Order the production of any document,
book, register or record
Examine any person having the control of
or employed in connection with, any
industrial undertaking.



Salient features of the Act (contd.)
e) Take over of Management: The power of control
entrusted to the Central Government under the IDRA
extends to that of the take over of the management of
the whole or any part of the industrial undertaking
which fails to comply with any of the directions. The
Government can also take over an industrial
undertaking which is being managed in a manner
detrimental to the industry or to public interest. In
respect of the industrial undertaking the management
of which the Central Government has taken over the
IDRA empowers the Government to take steps in
appropriate cases, to liquidate or reconstruct the
company concerned.

f) Price and distribution control: For securing
equitable distribution and availability of fair prices
of any article related to any scheduled industry,
the Central Government is empowered to control
its supply, distribution and price.
Exemptions: The Central Government is
empowered to exempt any industrial undertaking
from all or any provision of the Act in certain
cases in the public interest.

Introduction of DIPP
The Department of Industrial Policy & Promotion
was established in 1995 and has been reconstituted in
the year 2000 with the merger of the Department of
Industrial Development.

Role & Function of DIPP
Encouragement to foreign technology collaborations
at enterprise level and formulating policy parameters
for the same;

Administration of Industries (Development &
Regulation) Act, 1951
Role & Function of DIPP
Formulation of policies relating to Intellectual
Property Rights in the fields of Patents,
Trademarks, Industrial Designs and Geographical
Indications of Goods and administration of
regulations, rules made there under
Role & Function of DIPP
Promoting industrial development of industrially
backward areas and the North Eastern Region
including International Co-operation for industrial
partnerships and

Promotion of productivity, quality and technical
cooperation.
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 1991
Policy focus is on
Deregulating Indian industry;
Allowing the industry freedom and flexibility in
responding to market forces and
Providing a policy regime that facilitates and
fosters growth of Indian industry.
Industrial Policy 1991
In pursuit of the industrial objectives, Government
decided to take a series of initiatives in respect of
the policies relating to the following areas:
Industrial Licensing
Foreign Investment
Foreign Technology Agreements
Public Sector Policy
MRTP Act
Industrial Licensing Policy
The Industrial Policy Resolution of 1956 identified
the following three categories of industries:
Those that would be reserved for development in
public sector.
Those that would be permitted for development
through private enterprise with or without State
participation.
Those in which investment initiatives would
ordinarily emanate from private entrepreneurs.
Industrial Licensing Policy
Industrial Licensing is governed by the Industries
(Development & Regulation) Act, 1951.
Industrial licensing was abolished for all industries,
except those specified (18 industries), irrespective of
levels of investment.
Foreign Investment
Limit on foreign equity holdings raised from 40% to
51% in a wide range of industries
Foreign Equity Proposals need not to be
accompanied by Foreign Technology Transfer
Agreement
Procedure for FDI streamlined by creating a Foreign
Investment Promotion Board to consider individual
application case by case
Foreign Technology Agreements
Foreign technology agreements in high-priority
industries up to Rs.1crore were given automatic
permission.
No permission was required for hiring foreign
technicians and foreign testing of indigenously
developed technologies.
Public Sector Policy
List of industries reserved for the public (Schedule A)
reduced from 17 to 8

List of sector reserved for dominance by public sector
(Schedule B) effectively abolished

Disinvestment in selected public sector enterprise to
raise finance for development, bring in greater
accountability & help create a new culture in their
working for improved efficiency
MRTP Act
Removed the threshold limits of assets in respect of
MRTP companies and dominant undertakings

Eliminated the requirement of prior approval of
Central Government for
Establishment of new undertakings
Expansion of undertakings
Merger, Amalgamation and Takeover
Appointment of Directors under certain
circumstances.

The newly empowered MRTP Commission will
be authorized to initiative investigations on
complaints received from individual consumers or
classes of consumers in regard to monopolistic,
restrictive and unfair trade practices.

Current Scenario
Liberalization has diminished the importance of
this Act.
In the current scenario, most of the entry and
growth restrictions and reservation of industries for
public sector has been dismantled
Responsibility for the development and to promote
industries has now shifted to the State
Governments
Thus, several people argue that the Act has lost its
relevance and it should be repealed.