Industrial Policy Resolutions: 1948 and 1956

An industrial policy is the set of principles and rules through which the government decides the role of the public and private sectors, the priority industries, and the regulatory framework — licensing, location, and foreign investment — governing industrial growth. India's industrial policy since independence has evolved through a series of official Resolutions, of which 1948, 1956, and 1991 are the three landmark statements tested most frequently in BIEAP Economics.

Industrial Policy Resolution, 1948. Announced soon after independence, the 1948 Resolution laid the foundation of a mixed economy by dividing industries into four broad categories: (i) industries that would be the exclusive monopoly of the Central Government — arms and ammunition, atomic energy, and railways; (ii) new undertakings in industries of basic and strategic importance (coal, iron and steel, aircraft manufacture, shipbuilding, telephone and telegraph equipment, mineral oils) that would be set up only by the State, though existing private units were allowed to continue for a period; (iii) industries of importance where the State reserved the right to progressively nationalise the existing private undertakings after a review period, though for the time being they remained with private enterprise under State regulation; and (iv) all remaining industries, left open to private and cooperative enterprise, subject to general government regulation. The 1948 Resolution thus committed India to a mixed economy rather than either pure capitalism or pure state ownership.

Industrial Policy Resolution, 1956. Often called the Economic Constitution of India because it guided industrial policy for the next thirty-five years, the 1956 Resolution reclassified industries into three schedules.