2.1.1.3. Industrial Policy Resolution, 1956

Since the adoption of 1948 Resolution, significant development took place in India. Economic planning had preceded on an organised basis and the First Five-Year Plan had been completed. Parliament had accepted the ‘socialist pattern of society’ as the basic aim of social and economic policy. These important developments necessitated a fresh statement of industrial policy. A second Industrial Policy Resolution was adopted in April, 1956, replacing the Resolution of 1948. Important provisions of the 1956 Resolution were:

1. New classification of Industries: IPR, 1956 divided the industries into the following three categories:

a) Schedule A industries: The industries that were the monopoly of state or Government. It included 17 industries. The private sector was allowed to operate in these industries if national interest so required.

b) Schedule B industries: In this category of industries, the state was allowed to establish new units but the private sector was not denied to set up or expand existing units e.g. chemical industries, fertilizer, synthetic, rubber, aluminum etc.

c) Schedule C industries: The industries not mentioned in the above category formed part of Schedule C. Thus the IPR, 1956 emphasized the mutual existence of public and private sector industries.

2. Encouragement to small-scale and cottage industries: In order to strengthen the small- scale sector, supportive measures were suggested in terms of cheap credit, subsidies, reservation etc.

3. Emphasis on reduction of regional disparities: Fiscal concessions were granted to open industries in backward regions. Public sector enterprises were given greater role to develop these areas.

The basic rationale of IPR, 1956 was that the state had to be given primary role for industrial development as capital was scarce and entrepreneurship was not strong. The public sector was enlarged dramatically so as to allow it to hold commanding heights of the economy.