Industrial Policy since 1991

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 1. Industrial Policy Resolution of 1948:

  • Context and Objectives: Implemented shortly after India's independence, the 1948 resolution aimed to kickstart industrial development in a mixed economy framework, blending state control with private enterprise.
  • Key Features:
    • State Monopoly: Reserved key sectors like atomic energy, railways, and arms for exclusive state control.
    • Public Sector Development: Identified industries crucial for national development to be developed by the state.
    • Private Sector: Allowed in industries not under state monopoly or control, with regulation to ensure national interest.
  • Impact: Laid the foundation for industrial regulation and public-private sector coexistence, emphasizing the role of small-scale industries and encouraging foreign investment.

2. Industrial Policy Statement of 1956:

  • Revision and Objectives: Updated to align with socialist principles post-Indian Constitution adoption and planned economic development.
  • Key Features:
    • Expanded Public Sector: Increased state participation in industries deemed critical (Schedule A).
    • Mixed Sector: Allowed private sector participation in non-critical industries (Schedule B), subject to state oversight.
    • Small-Scale Industries: Emphasized for employment generation and regional development.
  • Policy Impact: Institutionalized state control in key sectors while promoting private sector growth under regulated conditions. This policy framework persisted until significant reforms in 1991.

3. Industrial Policy of 1991:

  • Liberalization Era: Marked a shift from socialist policies to liberalization, privatization, and globalization (LPG) in response to economic challenges and global trends.
  • Key Reforms:
    • Industrial Licensing: Abolished for most industries, except for strategic sectors like defense.
    • Foreign Investment: Increased caps and eased restrictions to attract foreign capital and technology.
    • Public Sector Reform: Initiated disinvestment of state-owned enterprises (SOEs) to improve efficiency and competitiveness.
    • Trade Liberalization: Reduced tariffs and barriers to integrate Indian industries into global markets.
  • Impact: Significantly boosted industrial growth, enhanced competitiveness, and attracted foreign direct investment (FDI). However, also led to challenges such as income inequality and regional disparities.

4. Criticism and Challenges:

  • Criticism: Faced opposition for potentially favoring large corporations over small enterprises, and concerns over social equity and job losses in the public sector.
  • Impact on Economy: Transformed India into a dynamic market economy, accelerating GDP growth and modernizing industries. However, also posed challenges in equitable growth and environmental sustainability.

5. Competition Act, 2002:

  • Purpose: Replaced the MRTP Act to promote fair competition, prevent monopolistic practices, and foster a competitive market environment.
  • Key Provisions:
    • Anti-Competitive Practices: Prohibited agreements that restrict competition.
    • Dominance Control: Regulated abuse of dominant market positions.
    • Merger Control: Governed mergers and acquisitions to prevent market concentration.
  • Impact: Strengthened market dynamics, encouraged innovation, and ensured consumer welfare by promoting fair competition and preventing market distortions.

These industrial policies have shaped India's economic trajectory, transitioning from a controlled economy to a more market-driven model, fostering growth, and integrating into the global economy while addressing ongoing challenges of inclusivity and sustainability.