Industrial policy of any country is in the form of certain rules and regulations issued by the government of that country for all the industries. These guidelines need to be followed by all the industries of that country.
When India got independence in 1947, the policy makers were well aware of the fact that Indian private sector is in its infancy. So, they decided not to rely upon private sector for industrial development. Hence almost all the industries were kept under government control under the “Industrial policy of 1948”.
By the “Industrial policy of 1956” government divided industries into three categories, schedule A, B and C. Schedule A industries were exclusively under the control of state. It included 17 industries. Schedule B industries were setup by state but private sector could supplement the efforts of the state. Schedule C industries were left for Private sector but were under the strict control of the state.
Slowly and gradually government went on a nationalization spree with nationalization of general insurance, life insurance and finally nationalization of banks (14 banks in 1969). But at the same time government also slowly started releasing its grip over private sector by Industrial policy statement of 1973 and 1977.
However due to stringent licensing system, not everyone could get a license for setting up an industry and as a result of this, money started accumulating in fewer hands(a direct violation of directive principles of state policy of the constitution). This was also indicated by “Hazari committee”, “Mehelinobis committee” and “Dasgupta committee”. Finally government decided to intervene in the mergers and acquisitions. Government could ask any big business house to break, if it feel that the business house has grown to such an extent that it is depriving others from making profit or the benefit of economy are not reaching to the ground level. At the same time government had the right to “say no” to a merger between two big business houses or industrial units, if it had a negative impact on others. So, practically speaking government got the rights of “marriage and divorce” of industries. However, even this step could not bring any benefit to industrial sector and Indian industries became uncompetitive internationally. So, finally government brought about a sea change in its industrial policy and came up with Industrial policy of july1991. Under this all industrial licensing were abolished except for 18 industries (like coal, alcohol, petroleum, hazardous chemicals etc...). So, about 85% of industries were taken out of licensing framework. Also, number of industries reserved for public sector was reduced from 17(in 1956) to 8(1991), (Now only 3). MRTP was also scrapped off as it was making Indian industries uncompetitive.
But as MRTP was scrapped off, so government had to come up with an alternative. Hence in 2002 government came up with “Competition Act 2002” under which government got the right of “Marriage and Divorce” of industries from the point of view of “Abuse of Dominance”. So before 1991 government had the right to stop the growth of any industrial house if it was dominant and depriving others from profit (even if it got dominant by fair means), but now government usually take action only if an industrial house has achieved dominance by unfair means (however it is alleged that this is more or less restricted to papers. The recent controversy of Anil Ambani-congress had supported this view in which reliance was alleged to take favor of government for gaining access to 3G spectrum).
However it is clear that after 1991, Indian industrial sector has achieved tremendous progress, which is clear from social and economic progress of India. But one should not compare India with developed nations like U.S, Britain, etc. United States got independence in 1776 and took more than 150 years to become superpower. James-I signed MAGNA CARTA in 1215, but Britain got the status of developed nation only in 20th century, after the industrial revolution (and everyone knows how they did it? By ruthless killings and plundering others). China got settled in 1949, but we cannot attain status of rich economy on the dead bodies of innocents as china did by communism, which is nothing but radical form of socialism.
India is a true democracy, so we may take a little longer to get status of developed country but we will surely achieve it and current Industrial policy of India is just a step forward towards achieving this goal.
When India got independence in 1947, the policy makers were well aware of the fact that Indian private sector is in its infancy. So, they decided not to rely upon private sector for industrial development. Hence almost all the industries were kept under government control under the “Industrial policy of 1948”.
By the “Industrial policy of 1956” government divided industries into three categories, schedule A, B and C. Schedule A industries were exclusively under the control of state. It included 17 industries. Schedule B industries were setup by state but private sector could supplement the efforts of the state. Schedule C industries were left for Private sector but were under the strict control of the state.
Slowly and gradually government went on a nationalization spree with nationalization of general insurance, life insurance and finally nationalization of banks (14 banks in 1969). But at the same time government also slowly started releasing its grip over private sector by Industrial policy statement of 1973 and 1977.
However due to stringent licensing system, not everyone could get a license for setting up an industry and as a result of this, money started accumulating in fewer hands(a direct violation of directive principles of state policy of the constitution). This was also indicated by “Hazari committee”, “Mehelinobis committee” and “Dasgupta committee”. Finally government decided to intervene in the mergers and acquisitions. Government could ask any big business house to break, if it feel that the business house has grown to such an extent that it is depriving others from making profit or the benefit of economy are not reaching to the ground level. At the same time government had the right to “say no” to a merger between two big business houses or industrial units, if it had a negative impact on others. So, practically speaking government got the rights of “marriage and divorce” of industries. However, even this step could not bring any benefit to industrial sector and Indian industries became uncompetitive internationally. So, finally government brought about a sea change in its industrial policy and came up with Industrial policy of july1991. Under this all industrial licensing were abolished except for 18 industries (like coal, alcohol, petroleum, hazardous chemicals etc...). So, about 85% of industries were taken out of licensing framework. Also, number of industries reserved for public sector was reduced from 17(in 1956) to 8(1991), (Now only 3). MRTP was also scrapped off as it was making Indian industries uncompetitive.
But as MRTP was scrapped off, so government had to come up with an alternative. Hence in 2002 government came up with “Competition Act 2002” under which government got the right of “Marriage and Divorce” of industries from the point of view of “Abuse of Dominance”. So before 1991 government had the right to stop the growth of any industrial house if it was dominant and depriving others from profit (even if it got dominant by fair means), but now government usually take action only if an industrial house has achieved dominance by unfair means (however it is alleged that this is more or less restricted to papers. The recent controversy of Anil Ambani-congress had supported this view in which reliance was alleged to take favor of government for gaining access to 3G spectrum).
However it is clear that after 1991, Indian industrial sector has achieved tremendous progress, which is clear from social and economic progress of India. But one should not compare India with developed nations like U.S, Britain, etc. United States got independence in 1776 and took more than 150 years to become superpower. James-I signed MAGNA CARTA in 1215, but Britain got the status of developed nation only in 20th century, after the industrial revolution (and everyone knows how they did it? By ruthless killings and plundering others). China got settled in 1949, but we cannot attain status of rich economy on the dead bodies of innocents as china did by communism, which is nothing but radical form of socialism.
India is a true democracy, so we may take a little longer to get status of developed country but we will surely achieve it and current Industrial policy of India is just a step forward towards achieving this goal.
1 comment:
Nice Explanation & differences.It help me in My BBA Exam.Thanks
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