Industrial Policy Meaning, Objectives, Importance and Resolution in Detail

Table of Content:-

Meaning of Industrial Policy
Definition of Industrial Policy
Objectives of Industrial Policy
Importance of Industrial Policy
Industrial Policy Resolution

Meaning of Industrial Policy

The Industrial Policy (IP) of a nation or economy is a formally declared official plan with a strategic attempt to influence the growth of various sectors. This policy measure involves specific activities that stimulate and promote structural changes. It is a set of government schemes, procedures, principles, and rules for the regulating, growth, and control of industrial entities. For industrial development, industrial organizations like public, private, joint, and cooperative sectors are allocated specific roles.

The role of small, medium, and large sectors is also defined by IP. It involves the formulation of labour policy, tariff policy, fiscal policy and monetary policy. IP also identifies the attitude of government towards the foreign capital. It also decides the role of multinational companies in the growth of the industrial sector.

Definition of Industrial Policy

According to World Bank, “Industrial policy comprises government efforts to alter the industrial structure to promote productivity-based growth”.

As per UNCTAD, “Industrial policy is a concerted, focused, conscious effort on the part of the government to encourage and promote a specific industry or sector with an array of policy tools”.

According to Akkemik, “Industrial policy is a set of policies designed for the development of selected industries to increase the welfare of the country and to achieve dynamic comparative advantages for these industries by the use of state apparatus in resource allocation”.

Objectives of Industrial Policy

There are a few significant objectives of industrial policy which are enumerated below:

1) To Control Foreign Capital

An industrial policy provides directions for importing capital and specifies the qualifications on which such foreign capital must be allowed to operate

2) To Ensure Equal Wealth Distribution

With the help of effective monetary and fiscal policies, IP tries to stop the concentration of wealth and the formation of monopolies. This can successfully aid in restraining the evils connected with monopolies

3) To Monitor Private Industry

Using planned objectives, the IP aims to entitle or authorise the government to control the incorporation and extension of private industries

4) To Ensure Maximum Utilisation of Resources

It aims that the wasteful use of scanty resources is strictly prohibited and their preservation and prudent utilisation is ensured.

5) To Regulate the Flow of Resources

An important objective of IP is regulating the flow of inadequate resources in the most beneficial and profitable areas of investment consonantly with the priorities of the country.

6) To Define Industrial Areas

The IP looks to divide specific areas among private, public and joint sectors of the economy. It also separates industrial areas according to small, medium, and large-scale industries.

7) To Correct Imbalances

An IP rectifies the disparity in the growth of industries and assists in creating an advantageous balance and diversification in them.

8) Other Objectives

The philosophy of industrial policy or other objectives of an IP is enlisted below:

i) Accomplishing industrial development,

ii) Attaining rapid economic growth

iii) Averting unnecessary accumulation of economic power,

iv) Furnishing more gainful job opportunities,

v) Realising a socialistic pattern of society,

vi) Accomplishing rapid economic growth.

vii) Evolution of capital and heavy goods industry,

viii) Extension of the public sector for attaining socialism.

ix) Decreasing inconsistency in regional development, and

x) Accomplishing a self-sufficient or independent economy.

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Importance of Industrial Policy

The following points reflect the importance of industrial policy:

1) Prevents Duplication of Economic Resources

It helps in the conservation of resources by formulating rules to prevent excessive use of economic or scarce resources or preventing duplication of resources (uneconomic use). In this way, it ensures the sensible and relevant use of both non-renewable and renewable resources.

2) Promotes Export

The IP facilitates the rapid development of exportable products to maintain the export-import ratio. It also helps to manage regional disparities.

3) Prevents Economic Power Concentration

It prevents the concentration of economic power by designing effective industrial licensing. It is also avoided by implementing fiscal and monetary policies most productively. To limit the emergence and problems of monopoly capitalism, the wealth and economic power are not let to be concentrated in a few hands only.

4) Proper Control

The IP enables different States to have proper control over the establishment and development of private sector enterprises in compliance with national objectives. Different fields of economic activities are identified and differentiated within different sectors of the economy with the help of industrial policy.

5) Establishes Coordination

IP helps to establish coordination between various areas such as industry and agricultural development, public and private sector, and capital and physical resources. All these areas influence the industrial growth and stabilisation of the economy.

6) Helps in Industrial Development

IP can modify the economic structure of a country by bringing diversification and desirable changes to it. It helps in managerial regulation and control of industrial organisations by designing effective rules and policies. Authorities also formulate different plans and programmes for industrial development.

7) Directs National Resources

Under the industrial policy, the national resources are utilised in an efficient and desired manner. Keeping national priorities above all, the flow of national resources or scarce resources can also be regulated in the desired direction.

Thus, the IP helps in designing reasonable and independent development models providing rules and regulations for the synchronisation and incorporation of various economic activities. It ensures sustainable growth of the economy with increased output level and employment.

Industrial Policy Resolution

Since India’s independence, various statements of industrial policy have been declared. All these industrial policy resolutions have incorporated different objectives which are briefly discussed below:

1) Industry Policy Resolution 1948

After the independence, India was going through issues related to the partition of the country like scarcity of food, loss of land and property, rehabilitation of people, re-formation of states, etc. The labour leaders realised the need for a policy for nationalising industries but then Indian capitalists were not in power. To get rid of this situation government formulated and implemented the IP of 1948.

2) Industry Policy Resolution 1956

Industrial policy became socialist-oriented with the resolution of 1956 which helped the public sector to wider its scope. This resolution was based on the Mahalanobis growth model. According to this model, long-term growth can only be achieved by dealing in heavy industries.

3) Industry Policy Resolution 1973

In addition to the Industrial Policy of 1956, the IP Statement of 1973 was formulated. Apart from continuing the goals of the 1956 policy, this resolution also included the ‘joint sector’ idea suggested by the Dutt Committee. Licensing was made strict and it had a strong favouritism for large and heavy enterprises like IP Resolution, 1956. On the other hand. small-scale and cottage industries were also given attention.

4) Industry Policy Resolution 1977

This IP Resolution of 1977 was prepared by Janta Party. the ruling government at that time. A new framework for industrial expansion was designed through this policy. This IP was able to correct the ineffectiveness of the past as claimed by the government. The main aim was to improve the living conditions of the people by involving the use of ideal resources. The objectives of this policy were as follows:

i) Prevention of economic power concentration and monopoly,

ii) Production of consumer goods at maximum level, and

iii) Enabling industries to respond towards society’s needs.

The main focus of this policy was to maximise the benefits provided to the masses by efficiently allocating human resources and consumption of available resources. Maintaining close coordination between agricultural activities and the industrial sector was one of the main objectives of the Industrial Policy Resolution of 1977

5) Industry Policy Resolution 1980

After defeating the Janta party government. On 23 July 1980, the Congress government introduced a new industrial policy. The main aim of Congress was to benefit the masses of society through fast and reasonable industrialisation. The main objectives of the Industrial Policy 1980 were given as follows:

i) Utilisation of the established capability up to the optimum level.

ii) Creation and maintenance of employment at a large scale.

iii) Attaining the state of increased productivity with maximum production.

iv) Supporting underdeveloped industrial regions for their development and progress.

v) Facilitating the development of the agricultural sector.

vi) Focus on the promotion of import-substitution and export-oriented industries.

vii) Protection of consumers against expensive and substandard products.

viii) The establishment and maintenance of economic federalism by spreading investment in both rural and urban areas.

ix) The revitalization of the economy by curing infrastructural issues.

6) New Industry Policy 1991

On July 24, 1991, a New economic policy 1991 was introduced by Mr P.V. Narasimha Rao, under Congress (I) Government. The implementation of this economic policy has brought major changes to the preceding industrial policy. The primary objective of this industrial policy was to liberalize Indian industries. The policy aimed to eliminate control of the bureaucracy, introduce the globalisation of the Indian economy, make the free flow of direct foreign investment in India, and remove restrictions like the MRTP Act on the domestic entrepreneur. Moreover, it also intended to discard the burden of public enterprises which were incurring losses and had a low rate of return. In this policy, the extent of the private sector was enlarged by introducing most of the industries to the private sector.

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