Industrial Policies in India – Geography – UGC NET – Notes

Introduction

• The Industrial Revolution, which began in Europe and later spread worldwide, was a landmark event that transformed production through large-scale manufacturing in shorter time.

• Industrialised states promoted exports of manufactured goods using policy support and fiscal incentives, strengthening their global economic position.

• Intense competition among European nations and later other regions compelled governments to encourage innovation, science and technology.

• Expansion of education systems and technical institutions helped create skilled human capital and supported infrastructure development.

• These changes enabled countries to accumulate wealth, achieve technological advancement and emerge as industrially advanced (First World) economies.

Industrial Policy Resolutions

• During the colonial period, India exported raw materials to Britain, which were processed there and sold back as finished goods, leaving India with a weak industrial base after Independence.

• At Independence, inherited industries were inefficient and lacked export capacity, creating an urgent need for industrial restructuring.

• Jawaharlal Nehru viewed industrialisation as the key to India’s development and economic self-sufficiency, favouring large-scale industries over village-based production.

• There has long been consensus in India on the role of the government in providing infrastructure and maintaining macroeconomic stability.

• Policy initiatives during early planning, especially the Second and Third Five Year Plans, laid the foundation for a diversified industrial base, making India a major industrial economy today.

• Despite progress, manufacturing strength in countries such as China, South Korea and Thailand remains more advanced.

• Industrial Policy refers to deliberate state action to promote structural transformation by shifting resources from low to high productivity sectors.

• It involves selective government interventions to reshape the structure of production in favour of growth-oriented industries.

• Industrial policy serves as a vision document, setting standards, targets and timelines to guide manufacturing-led economic growth.

• Common objectives of industrial policy include sustained productivity growth, employment generation, effective use of human resources and acceleration of GDP growth.

Industrial Policy Resolution, 1948

• The Government of India set out in their Resolution dated 6 April, 1948 the policy which they proposed to pursue in the industrial field. The Resolution emphasised the importance to the economy of securing a continuous increase in production and its equitable distribution.
• It pointed out that the State must play progressively active role in the development of Industries. It laid down that arms and ammunition, atomic energy and railway transport would be the monopoly of the Central Government.The State would be exclusively responsible for the establishment of new undertakings in six basic industries.
• If the State realises the necessity to secure the cooperation of private enterprise in the national interest, the state may do so. The rest of the industrial field was left open to private enterprise though it was made clear that the State would also progressively participate in this field. Some of the important take away points this resolution were as follows:
• • Mixed Economy: The Industrial Policy Resolution, 1948 was first major policy of independent India which was launched to lay the foundation of a mixed economy.In mixed economy both private and public enterprises would march hand in hand to accelerate the pace of industrial development. It means there would be co-existence of public sector and private sector. The decision regarding price determination, resource allocation and distribution in public sector shall be taken by the government. Tata Steel, Hero Motors and Hindustan Unilever fall under the domain of public sector. However, the market shall take all economic decisions in case of the private sector. Hinduja, Tata and Birla are examples of the private sector.
  • Priority to Small scale and cottage industries: Small scale and cottage industries were given the importance due to their wide spread, labour intensive nature and low capital and low skill requirements.
  • Restrictions on foreign investments: The government restricted foreign investments to protect domestic industries from global competition.