Industrial Policy 1948, 1956, 1991 — Economic Framework
Economic Framework
India's industrial policy journey is marked by three pivotal resolutions: IPR 1948, IPR 1956, and NIP 1991, each reflecting a distinct economic philosophy and developmental stage. The Industrial Policy Resolution of 1948 laid the groundwork for a 'mixed economy' post-independence, where both the state and private sector would contribute to industrial growth.
It classified industries into four categories, reserving strategic sectors for state monopoly while encouraging private enterprise in others, albeit under regulation. This policy was a cautious first step, acknowledging the state's guiding role due to limited private capital and the need for planned development.
The Industrial Policy Resolution of 1956 represented a significant ideological shift towards a 'socialist pattern of society,' heavily influenced by the Mahalanobis model and the Second Five Year Plan.
It expanded the public sector's role dramatically, making it the 'commanding heights' of the economy, especially in heavy and basic industries. Industries were classified into three schedules, with 17 sectors exclusively reserved for the state.
This policy introduced the pervasive 'License Raj System,' requiring private firms to obtain government licenses for most industrial activities, aiming to direct investment, prevent monopolies, and reduce disparities.
While building a strong industrial base, it also led to inefficiencies and stifled competition.
The New Industrial Policy of 1991 marked a radical departure, driven by a severe balance of payments crisis and the need for economic reforms. It ushered in an era of liberalization, privatization, and globalization (LPG).
Key reforms included the abolition of industrial licensing for most sectors (delicensing), significant dereservation of industries from the public sector, and the liberalization of foreign investment norms.
The MRTP Act was amended to promote competition rather than control monopolies based on size. This policy aimed to integrate India with the global economy, enhance efficiency, and unleash the potential of the private sector, fundamentally transforming India's economic landscape from a state-controlled to a more market-oriented system.
Important Differences
vs Industrial Policy Evolution
| Aspect | This Topic | Industrial Policy Evolution |
|---|---|---|
| Policy Year | IPR 1948 | IPR 1956 |
| Key Objectives | Foundation of mixed economy, rapid growth, balanced development, social justice. | Socialist pattern of society, rapid heavy industrialization, public sector dominance, reduce disparities, prevent monopolies. |
| Economic Philosophy | Mixed Economy (cautious state intervention) | Socialist Pattern (state as 'commanding heights', Mahalanobis model) |
| Private Sector Role | Encouraged in most sectors, but strategic areas reserved for state. Subject to general regulation. | Secondary role, heavily regulated through industrial licensing (License Raj). Limited to Schedule C industries. |
| Public Sector Role | Lead role in strategic sectors (arms, railways, atomic energy). | Dominant role, 'commanding heights' of the economy, exclusive in 17 Schedule A industries, progressive expansion in Schedule B. |
| Licensing System | General regulation, IDRA 1951 enacted later to provide framework. | Pervasive industrial licensing for almost all private sector activities (License Raj). |
| Foreign Investment | Limited and cautious approach. | Highly restricted, FERA 1973 later imposed strict controls. |
| Monopoly Control | Implicit concern, but no specific law. | MRTP Act 1969 enacted to curb concentration of economic power and restrictive practices. |