In this section, we will learn about the Industrial policy introduced in 1948 and 1951. India’s independence brought with it a slew of new challenges. One such obstacle was to get the country on the road to economic progress, which necessitated industrialization. To industrialise the country and accomplish economic growth goals, an industrial policy that was effective in achieving those goals was a must. As a result, the Industrial Policy of 1948 was created to guide the country’s industrial movement.
Industrial Policy of 1948
The Industrial Policy of 1948 broadly divided industries into four categories such as:-
First Category: The first category enlisted (a) arms and ammunitions (b) production and control of atomic energy, and (c) the ownership and management of rail transport. These three were the exclusive monopoly of the Central Government.
Second Category: The second group featured six basic industries, and all new ventures in these areas were reserved for the state unless the state judged it necessary to assure private enterprise cooperation in the national interest. Such industries included: – Coal (the India Coal Fields Committee’s proposal will be generally followed), (b) Iron and Steel, (c) Aircraft manufacture, (d) Shipbuilding, (e) Manufacture of telephone, telegraph, and wireless apparatus (excluding ratio sets) and (f) Mineral oils.
Third Category: Eighteen industries in the third category were delegated to the private sector, but their operation was regulated and supervised by the government. These were:- (a) Salt, (b) Automobiles and Tractors (c) Prime movers, (d) Electric Engineering, (e) Other heavy machinery (f) Machine tools, (g) Heavy chemicals, fertilizers and pharmaceuticals and drugs, (h) Electrochemical industries (i) Non-ferrous metals (j) Rubber manufactures, (k) Power and industrial alcohol, (l) Cotton and woolen textiles, (m) Cement, (n) Sugar (o) Paper and Newsprint (p) Minerals (q) Air and Sea transport, and (r) Industries related to defense.
Fourth Category: The remaining industries were left available to private businesses, both individual and cooperative. When the progress of any industry under private enterprise was deemed to be unsatisfactory, the state would step in.
Industrial Act 1951
The Industrial (Growth and Regulation) Act of 1951 was passed to govern the industry and encourage planned industrial development in accordance with the Industrial Policy of 1948. The main goal of the Industries (Development and Regulation) Act of 1951 was to provide the government enough authority. The important provisions of the Act were-
- Without a licence from the Central Government, no new industrial units could be established or substantial extensions to existing plants could be made, and while granting the licence for the new undertaking, the Government could impose conditions such as location, minimum size, and so on if necessary;
- The government could conduct an examination of specific industries or undertakings in industries – (a) that have seen a decrease in production, a deterioration in product quality, or a rise in product price, or that have shown tendencies in these areas. (b) that employed national-level resources and (c) that were administered in a way that was likely to undermine the interests of shareholders or consumers, and give necessary directives for correcting the flaws.
- The government could take over industries that fail to follow the government’s recommendations for better management and policy.
- The act gave the government the authority to set pricing, methods, production volumes, and distribution channels.
- The act also gave the government the authority to create Development Councils for certain industry or groups of industries.
- Industrial businesses with fewer than 100 employees and fixed assets of less than Rs 10 lakh were exempt from obtaining a licence.
In the Industrial Policy of 1948, it was decided that the small-scale industrial sector should be developed cooperatively as much as feasible. The 1948 Industrial Policy also acknowledged the importance of attracting foreign finance and enterprise participation, notably in areas like as industrial technology and expertise.
The 1948 Industrial Policy’s principal goal was to build the groundwork for a mixed economy in which both private and public firms were valued and worked together to improve the economy and accelerate industrial development.
The Industrial Policy of 1948, despite being very effective and concrete, was not without criticism. The initial criticism was directed at the Act’s provisions for retaining government control over private firms, which was to be held by the government via the Industries (Development and Regulation) Act 1951. This was summed up by prominent economist A.H. Hanson, who stated that at the time, the government was more concerned with controlling private firms than with maintaining the public-private balance. The Industries (Development and Regulation) Act of 1951, for example, gave the government the power to control the private sector.
It was plainly stated in the Industries (Development and Regulation) Act 1951 that no new industrial units or considerable extensions to existing facilities could be constructed without first getting a licence from the Central Government. The Act also stated that when awarding licences for new businesses, the government could impose requirements such as location, size, and other factors if appropriate. The Act also gave the government the authority to set pricing, methods, production volumes, and distribution routes. This plainly indicates that the government had complete control over the private sector.
The Industries (Development and Regulation) Act of 1951 created a sense of unease among industrialists because it provided the government the right to investigate any company if it had sufficient reason to believe that output or quality had declined or prices had increased abnormally. Following such investigations, the government may issue orders to such businesses, and failure to implement them may result in the government taking control of management. This was in direct opposition to the view that in an independent India, industry should be permitted to develop without restraint. The Industries (Development and Regulation) Act of 1951 disproved this assumption.
Despite this critique, the 1948 Industrial Policy shaped the character and direction of industrial development for the next eight years.