Industrial Policies in India
India is Asia’s third-largest economy, the other is China and Japan. Independence has brought a great change in the socio-economic landscape of India.
Important Industrial Policies Prior to 1991
Industrial Policy of India 1948, 1956, 1977, 1980, 1990 & 1991
The economic development of any country heavily depends on the process of Industrialization. During the time of independence, India had a weak and shallow Industrial base.
After Independence India took several measures to improve the Industrial base. The government measures on developing both the small scale industries and large scale industries are clearly stated in the resolutions of 1948 and 1956.
Industrial Policy Resolutions 1948
As said earlier, the Government of India, recognized the importance of industries, therefore the Government declared the Industrial Policy 1948 on 6th April 1948.
The importance of the 1948 industrial policy was it ushered the policy of a system of mixed economy in India.
Industrial Policy 1948
The Industries were classified into four groups: Public Sectors (Strategic Industries), Public-Cum-Private Sector (Key Industries), Controlled Private Sector, Private and Co-Operative Sectors.
The Industrial Policy 1948, endeavored to protect cottage and small-scale industries. The Central and State Governments had a virtual monopoly in railroads and exclusive rights to develop minerals, irons ore, etc.
The Union Government encouraged the significance of foreign capital for Industrialization, but the control should remain with Indian hands.
Industrial Policy Resolution 1956
The policy of 1956, is to give a dominant role to the public sector. Also fair treatment to the private sector.
To encourage cottage and small-scale enterprises by restricting the volume of production by large-scale industries and differential taxation or by direct subsidies. It emphasized the necessity of reducing the regional disparities in levels of development.
Also, the government recognized the need for foreign capital for progressive Indianisation of foreign concerns.
Large Scale Industries
Large scale industries refer to those industries that require huge infrastructure, manpower, and a lot of capital assets. All the heavy industries of India like the Iron and Steel Industry, textile industry, automobile manufacturing industry, etc fall under the large scale industry.
Currently, the IT industry also falls under large-scale industries. The Indian economy depends on large-scale industries for growth, foreign exchange, and job opportunities.
Example of large scale industry
1.Iron and Steel Industry
The first steel industry is set up at Kulti, Near West Bengal name Bengal Iron Works Company in 1870. The first large-scale steel plant name TISCO at Jamshedpur was established in 1907.
It is followed by IISCO established at Burnpur in 1919. Both TISCO and IISCO belonged to the private sector. The first public sector Steel company is Vishveshvaraya Iron and Steel Works at Bhadrawati.
All these steel plants are managed by SAIL except TISCO. SAIL is expanded as Steel Authority of India Ltd. It was established in 1974 and was responsible for the development of the Steel Industry.
Public sector steel plants
|Burnpur – West Bengal||Acquired from a private sector in 1976|
|Vishakhapatnam – Andra Pradesh||Russia|
|Salem – Tamil Nadu||Government of India (No external Assistance)|
|Bhadrawati – Karnataka||Nationalization of Vishveshvaraya Iron and Steel Ltd (Owned by Centre and State Government)|
|Vijai Nagar – Karnataka||Government of India|
Jute is an important industry in India, not only it earn foreign exchange but also provides great employment opportunities in the agriculture and industrial sectors. The modernized Jute industrial unit was established at Reshra in West Bengal in 1855 and it is tradition export-oriented in India.
India stands number one in the Raw jute and jute goods production and stands number two in exports of jute goods in the world.
Cotton and textile industry
It is one of the oldest industries in India and this industry employs a large number of people. It is the largest industry that accounts for 4% of GDP. Also, it provides 20% of manufacturing and provides one-third of total export earnings.
The first modernized cotton cloth mill in India was established at Fort Gloaster near Calcutta in 1818, and it was not successful.
The second mill was established in 1854 at Bombay by KGN Daber and it was named “Mumbai’s Spinning and Weaving Co“.
Among the Agriculture based industries in India, Sugar Industry is the second largest. Now, India is the largest producer and consumer of sugar in the world.
In India, Maharashtra produces the highest sugar and it is closely followed by Uttar Pradesh. Maharashtra produced one-third of the total sugar production in the country.
India is currently the third-largest producer of Nitrogenous fertilizer in the world.
The first mechanized paper mill in India was set up in 1812 at Serampur in West Bengal and today India is one of the top 15 producers of Paper in the world.
India is the second-largest producer of natural silk and currently, India produces 16% of silk in the World. India is the only country that produces all the five known commercial varieties of Silk such as Mulberry, Tropical Tussar, Oak Tussar, Eri, and Muga.
Petroleum and Natural Gas
India’s first successful Oilwell was dug in the year 1889 at Digboi, Assam. At present these numbers of oil reserves are identified. For the purpose of exploration, Oil and Natural Gas Commission (ONGC) was established in 1956 at Dehradun, Uttarakhand.
Small Scale Industries
SSI plays a vital role in the development of the economy and about 60 to 70% of total innovations in the country come for the Small scale industries. Many SSIs have gone to become big firms.
Role of SSIs in Economic Development
It provides Employment, Brings balanced regional development, It Mobilizes of local resources, Optimisation of Capital, Promotion of Exports, Entrepreneurship development, etc
Small scale industries are using labor-intensive methods, thus they give large employment opportunities and reduce unemployment to great extent.
It also gives jobs to artisans, technicians, and professionals. Also provides jobs in unorganized sectors and people in villages. The employment-capital ratio is high for the Small Scale Industries.
Balanced Regional Development
SSI decentralizes the development of industries and most of the Small scale industries has their base in the rural areas. This reduces the regional disparities by Industrializing the rural areas.
Solutions to Urbanization
As Small scale industries provides job opportunities in Village, and small town, the pressure on the Cities are reduced. It helps to reduce the problems of congestion, sanitation, and pollution in the cities.
Also, it helps in improving the standard of living of people in rural and suburban areas in India.
Talent Village recruitment
SSI recruits a lot of talents from the villages and small towns. The entrepreneurial talent is tapped in various regions and the income is also distributed instead of tapped into a few hands or few business families.
It helps mobilization of local resources utilize the local resources like small savings, local talents, etc, which others could have remained underutilized.
SSI also promotes traditional family skills and handicrafts and there is great demand for Indian handmade handicraft goods in foreign countries.
Optimization of Capital
It paves for optimization of Capital as SSI requires less capital per unit output. It provides a quick return on investment due to a shorter gestation period and the payback period is less.
Its functions as a stabilizing force by providing a high output-capital ratio as well as a high employment capital ratio. It also channelizes rural people into industrial activities.
The small scale does not need advanced machinery and thereby import of Machines are not necessary. Thus they reduce the pressure on the Nation’s Balance of Payment.
SSI earns valuable foreign exchange. But a current lot of SSI are vanishing as Large Scale Industries draws loans from Bank at low-interest rates and produces goods at a cheaper price with mass quantities, which were earlier made by the Small scale industries.
Support to Large Scale Industries
It complements Large industries and supports them by providing parts, accessories and also to meet the requirements of large scale industries. Often SSI is set up near the large industries to support them.
Shortly, SSI’s serve as ancillaries to the large-scale unit.
Meet Customer Demands
SSI’s make a wide range of products that are used by consumers daily such Soaps, Shampoo, Bakery Items, Pencil, Eraser, etc. Hence, SSI serves as an anti-inflationary force.
It helps to develop a class of entrepreneurs in the rural, small towns, and Cities, this makes job seekers become job givers. This promotes self-employment and self-reliance in society.
SSI’s help to increase the per capita income of the country and facilitate the development of weaker sections of society and also develop the areas where the development is low.
Micro, Small and Medium Enterprises (MSMEs)
The monetary limits are used for defining different types of industrial units. But these limits are changed from time to time.
Micro Manufacturing Enterprises – An Enterprise is said to be Micro Manufacturing Enterprise if the investment in the plant and machinery does not exceed Rs 25 Lakhs.
Small Manufacturing Enterprises – An Enterprise is said to be a Small Manufacturing Enterprise if the investment in plant and machinery is more than 25 Lakhs rupees but does not exceed 5 crores.
Medium Manufacturing Enterprise – An Enterprise is said to be a Medium Manufacturing Enterprise if the investment in plant and machinery is more than 5 crores but not exceeding Rs 10 crores.
Micro Service Enterprises – A service enterprise where the investment in equipment does not exceed Rs 10 lakhs is said to Micro Service Enterprise.
Small Service Industries – A service enterprise where the investment is more than Rs 10 lakhs but does not exceed Rs 2 crores is said to be a Medium service enterprise.
Medium Service Enterprise – A service enterprise where the investment is more than Rs 2 crore and doe not exceed Rs 5 crores is said to be a Medium service Enterprise.
Public Sector and Private sector banks
Public Sector Banks
Public sector Banks are ones where the government holds the majority of the shares. Example: SBI where the government holds 58.87% of the shares, PNB where the government holds 58.87% of the shares.
Normally, in Public sector banks, the government holds more than 50% of the shares. The Public sector banks are classified into two, they are Nationalised banks, State banks, and their associates.
Nationalized Banks – The government controls and regulates the functions of the bank entity. Examples are SBI, PNB, BOB, OBC, Allahabad Bank, etc.
In recent years, to Adhere to its privatization policy, the government keeps reducing the stake in PSU banks and sells its shares to an extent so that the government can become the minority shareholders in these banks.
Private Sector Banks
In Private Sector Banks, most of the equity is owned by Private bodies, corporations, institutions, or individuals rather than the government.
The private sector banks are controlled and managed by the Private entity by following the guidelines of the government. In India Public Sector Banks constitutes 72.9% of shares.
There are 27 Public Sector banks and 22 private sector banks. RBI is the apex banking body that controls all the banks in India.
RBI also give license to Payments Banks and Small Finance Banks (SFBs), as an attempt to boost the government’s Financial Inclusion drive