BE/U3 Topic 7 Introduction to Industrial Policy Resolutions
Industrial Policy Resolution of 1956 is a resolution adopted by the Indian Parliament in April 1956. It was the first comprehensive statement on industrial development of India. The 1956 policy continued to constitute the basic economic policy for a long time. This fact has been confirmed in all the Five-Year Plans of India. According to this resolution the objective of the social and economic policy in India was the establishment of a socialistic pattern of society. It provided more powers to the governmental machinery. It laid down three categories of industries which were more sharply defined. These categories were:
Main Features of Industrial Policy Resolution of 1956
In a short period of operation of the 1948 Industrial Policy, some significant changes took place in the economic and political spheres that called for changes in industrial policy as well. The country hand launched a programme of planned economic development with the first five-year plan.
The second five- year plan gave high priority to industrial development aimed at setting up a number of heavy industries such as steel plants, capital goods industries, etc., for which direct government participation and state involvement was needed.
Further in December 1954, the Parliament adopted the ‘Socialistic Pattern of Society’ as the goal of economic policy which called for the state or the public sector to increase its sphere of activity in industrial sector and thus prevent concentration of economic power in private hands. In view of ail these developments, a new industrial policy was announced in April 1956. The main features of this Industrial Policy Resolution of 1956 were as follows:
- New Classification of industries
The Industrial Policy of 1956 adopted the classification of industries into three categories viz.,
(i) Schedule A, which contained 17 Industries. All new units in these industries, such where their establishment in the private sector has ready been approved, would be set up only be the state.
(ii) Schedule В, which contained 12 industries, such industries would be progressively state owned, but private enterprise is expected to supplement the efforts of the state in these fields.
(iii) Schedule C, All remaining industries fell in this category; the future development of these industries had been left to the initiative and enterprise of the private sector.
- Assistance to Private Sector
While the Industrial Policy of 1956 sought to give a dominant role to public sector, at the same time it assured a fair treatment to the private sector. The ‘policy’ said that the state would continue to strengthen and expand financial institutions that extend financial assistance to private industry and cooperative enterprises. The state would also strengthen infrastructure (power, transport etc.) to help private sector.
- Expanded role of Cottage and Small-Scale Industries
The Industrial Policy of 1956 laid stress on the role of cottage and small scale industries for generating larger employment opportunities, making use of local manpower and resources and reducing- regional inequalities in industrial development. It stated that the Government would continue pursuing a policy of supporting such industries through tax concessions and subsidies.
- Balanced Industrial Growth among Various Regions
The Industrial Policy, 1956 helped to reduce regional disparities in industrial development. The policy stated that facilities for development will be made available to industrially backward areas. The state, apart from setting up more public sector industries in these backward areas, will provide incentives such as tax concessions, subsidized loans etc., to the private sector to start industries in these backward regions.
- Role of Foreign Capital
The industrial Policy 1956 recognized the important role of foreign capital in country’s development. The foreign capital supplements domestic savings. Provides more resources for investment and relieves pressure on Balance of payments.
The country therefore welcomed inflow of foreign capital. But the ‘Policy’ made it clear that inflow of foreign capital will be permitted subject to the condition that major share in management, ownership and control should be in the hands of Indians.
6. Development of managerial and Technical Cadres
The Industrial Policy, 1956 notes that the programme of rapid industrialization in India will create large demand for managerial and technical personnel. Therefore, the policy emphasized the setting up and strengthening of institutions that Trans and provide such personnel. It was also announced that proper technical and managerial cadres in the public services are also being established.
- Incentives to labour
The Industrial Policy, 1956 recognized the important role of labour as a partner in the task of development. The ‘policy’ therefore put emphasis on the provision of adequate incentives to workers and improvement in their working and service conditions. It laid down that wherever possible the workers should be progressively associated with that management so that they are enthusiastically involved in the development process.
The Industrial Policy 1956 thus provided a comprehensive framework for industrial development in India. However, this policy has been criticised on the grounds that by enormously expanding the field of public sector it had drastically reduced the area of activity for the private sector.
This was expected to adversely affect the industrial growth of India by reducing private initiative and enterprise. The supporters of the 1956 Industrial Policy, however felt that there were no undue restrictions or Curbs on the private sector.
Except for 17 industries in schedule A, all other industries remained open for the private sector. Even in the case of schedule A industries, the state could permit private entrepreneurs to set up undertakings if in the interest of development it was thought to be desirable.
The expansion in the sphere of public sector was made with a view to ensuring larger state participation for achieving rapid industrial development, and for achieving the ideals of the socialistic pattern of society such as preventing concentration of economic power and protecting common people from capitalist exploitation.
The ‘Policy’ did not see any clash between public and private enterprises. The public sector, by developing basic and heavy industries, infrastructural services and capital goods industries was to help in creating an environment where private sector could expand and prosper.
The policy thus visualised a more cordial rather than the competition between public and private sectors. It aimed at better со-ordination between the two sectors and to make them work together towards achieving the goal of rapid and harmonious industrial development.