2.1.1. Industrial Policy Regime in the Pre-Reform Period

Industrial development in India was governed by licensing policies that came into being in 1948. The first comprehensive Industrial Policy Resolution of 1956 classified industries into three categories with the state being given the primary role of industrial development and the private sector expected to supplement the efforts of the state. Industrial Policy Resolution of 1970 classified industries into four categories: core sector, heavy investment sector, the middle sector, and the de-licensed sector with the first three categories confined to large business houses and foreign companies.

The Industrial Policy Statement of 1973 gave preference and thrust to the growth of small and medium enterprises (SMEs) while that of 1977 further promoted decentralization with an increased role for small-scale, tiny, and cottage industries.

However, the Industrial Policy Statement of 1980 placed greater thrust on promotion of competition in the domestic market, technological upgradation, and modernization of industries.

2.1.1.1. Industrial Policy, 1948

The first important industrial policy statement was made in the Industrial Policy Resolution (IPR), 1948. The main thrust of IPR, 1948 was to lay down the foundation of mixed economy whereby the private and public sector were accepted as important components in the development of industrial economy of India. The policy divided the industries into four broad categories:

♤ Industries with exclusive state monopoly: It included industries engaged in the activity of atomic energy, railways and arms and ammunition.

♤ Industries with government control: It included the industries of national importance and so needed to be registered. 18 such industries were put under this category; for e.g. fertilizers, heavy chemical, heavy machinery etc.

♤ Industries in the mixed sector: It included the industries where private and public sector were allowed to operate. Government was allowed to review the situation to acquire any existing private undertaking.

♤ Industries under private sector: Industries not covered under any of the above categories fell in this category.

IPR, 1948 gave public sector a vast area to operate. The Government took the role of catalytic agent of industrial development. The resolution assigned complementary role to small-scale and cottage industries.