India's Industrial Policies: 1948, 1956 and the New Industrial Policy of 1991

Industrial policy is the government's declared framework for the role of the public and private sectors, the regulation of private industry, and the treatment of small-scale and foreign investment. India's industrial policy evolved through a few clearly datable milestones, and Telangana Intermediate commerce industrial sector answers are expected to state these years accurately.

Industrial Policy Resolution, 1948. This was independent India's first industrial policy statement. It divided industries into four broad categories: (i) industries that would be an exclusive state monopoly (such as arms and ammunition, atomic energy, and railways); (ii) industries in which the state would take the lead in setting up new units, while existing private units could continue for a defined period (basic and strategic industries such as coal, iron and steel, aircraft manufacture and shipbuilding); (iii) industries of basic importance where the state would progressively regulate private enterprise; and (iv) all remaining industries, left open to private enterprise, individual or cooperative. The 1948 Resolution thus laid down, for the first time, a mixed-economy approach in which both public and private sectors would coexist, with the state reserving the most strategically important industries for itself.

Industrial Policy Resolution, 1956. Adopted alongside the Second Five Year Plan's emphasis on heavy industry, the 1956 Resolution refined the mixed-economy approach by dividing industries into three Schedules:

• Schedule A — industries whose future development would be the exclusive responsibility of the state (17 industries originally, including iron and steel, heavy machine-building, mining, and defence production).
• Schedule B — industries in which the state would increasingly set up new units, but private enterprise would also be expected to supplement state effort (12 industries, such as aluminium, machine tools and fertilisers).
• Schedule C — all remaining industries, left to the private sector, though the state retained the right to enter any industry in the national interest. The 1956 Resolution is often described as the 'economic constitution' of India for the following decades, because it established public-sector dominance in basic and heavy industry while still leaving substantial room for private and small-scale enterprise, and it explicitly encouraged cottage and small-scale industries for the sake of employment and equitable regional development.

New Industrial Policy, 1991. Facing a severe balance-of-payments crisis, India in 1991 announced a New Industrial Policy that marked a decisive shift toward liberalisation — commonly summarised, together with the trade and financial-sector reforms of the same period, as the LPG (Liberalisation–Privatisation–Globalisation) shift. Its key features included:

• Delicensing — industrial licensing was abolished for all industries except a short list retained on strategic, security, environmental or safety grounds, ending decades of the restrictive 'licence-permit' regime.
• Reduction in public-sector reservation — the number of industries reserved exclusively for the public sector was drastically cut down (from the earlier Schedule-A style list to a handful of strategic sectors), opening most industries to private and even foreign participation.
• Foreign Direct Investment (FDI) liberalisation — automatic approval was permitted for foreign equity participation up to specified limits in many industries, actively inviting foreign capital and technology instead of restricting it as earlier policy had done.
• MRTP Act relaxation — the Monopolies and Restrictive Trade Practices Act's requirement of prior government approval before large firms could expand or set up new undertakings was removed, so that firm size itself was no longer treated as automatically undesirable.
• Disinvestment of government equity in select public-sector undertakings and greater autonomy for public enterprises were also initiated around this period as part of the broader reform package. …