Briefly discuss why the Industrial Policy of 1956 is referred to as the ‘Economic Constitution’ of the country?
Solution:
The Industrial Policy of 1956 is referred to as the `Economic Constitution’ of the country. Private sector is a junior partner. Public sector to play a leading role as a senior partner to develop heavy and basic industries to play a leading role as a senior partner to develop heavy and basic industries as well as infrastructure. Private sector worked under the misconception that the Damocles’ swear was hung on its head. This was an incorrect perception of IPR 1956. Rather a permanent place was provided for the private sector. By developing heavy industry and infrastructure, the State created a congenial environment for the development of the private sector. Later development by the Industrial Licensing Policy Inquiry Committee (1969) indicated that under one pretext or another, several areas reserves for the public sector were opened to the private sector. Private sector investment zoomed forward, along with public sector expansion. Industrial Policy Statement, 1977 - Policy drafted by the Ghanaians in the Janata Party. The main aim of the policy was to correct the distortions in the implementation of the Industrial Policy (1956). Major distortions:
(a) Unemployment has incre4ased
(b) rural-urban disparities have widened
(c) rate of real investment has stagnated.
Chief features:
Major thrust on the development of small industries.
• Reservation list increased from 180 to 807 items.
• District Industries Centres to be set up so that the services and support required
• Khadi and village Industries Commission to be strengthened.
• Appropriate technology to be developed for small and village industries.
Areas for Large Scale Sector:
Large sector should be related to minimum basic needs programme via dispersal of small and village industries. Large industries should strengthen the agricultural sector. Approach towards Large Business Houses – Large houses to rely on internally generated resources fro financing new projects or expanding existing projects. They should not depend on public financial institutions and banks. Larger role for the Public Sector – Besides producing important and strategic goods, public sector be expanded to act as a stabilizing force for maintaining supplies of essential consumer goods.
Foreign Collaborations:
In areas where technological know-how is not needed, existing foreign collaborations will not be renewed. As a rule, majority interest in ownership and control to remain in Indian hands, though the governmental make exceptions in highly export-oriented and/or sophisticated technology areas. Sick Units – Sick units to be helped in the interest of protecting employment, but no blanket assurance was given to take-over every sick unit. Units which are non-viable and continue to make losses year after year, may not be helped.
Showing posts with label Industrial Policy. Show all posts
Showing posts with label Industrial Policy. Show all posts
Wednesday, May 18, 2011
Industrial Policy of 1956
Industrial Policy of 1956
The Industrial Policy Resolution - 1956 was shaped by the Mahalanobis Model of growth, which suggested that emphasis on heavy industries would lead the economy towards a long term higher growth path. The Resolution widened the scope of the public sector. The objective was to accelerate economic growth and boost the process of industrialization as a means to achieving a socialistic pattern of society. Given the scarce capital and inadequate entrepreneurial base, the Resolution accorded a predominant role to the State to assume direct responsibility for industrial development. All industries of basic and strategic importance and those in the nature of public utility services besides those requiring large scale investment were reserved for the public sector.
The Industrial Policy Resolution - 1956 classified industries into three categories. The first category comprised 17 industries exclusively under the domain of the Government. These included inter alia, railways, air transport, arms and ammunition, iron and steel and atomic energy. The second category comprised 12 industries, which were envisaged to be progressively State owned but private sector was expected to supplement the efforts of the State. The third category contained all the remaining industries and it was expected that
private sector would initiate development of these industries but they would remain open for the State as well. It was envisaged that the State would facilitate and encourage development of these industries in the private sector, in accordance with the programmes formulated under the Five Year Plans, by appropriate fiscal measures and ensuring adequate infrastructure. Despite the demarcation of industries into separate categories, the Resolution was flexible enough to allow the required adjustments and modifications in the national interest.
Another objective spelt out in the Industrial Policy Resolution - 1956 was the removal of regional disparities through development of regions with low industrial base. Accordingly, adequate infrastructure for industrial development of such regions was duly emphasized. Given the potential to provide large- scale employment, the Resolution reiterated the Government’s determination to provide all sorts of assistance to small and cottage industries for wider dispersal of the industrial base and more equitable distribution of income. The Resolution, in fact, reflected the prevalent value system of India in the early
1950s, which was centered around self sufficiency in industrial production. The Industrial Policy Resolution – 1956 was a landmark policy statement and it formed the basis of subsequent policy announcements.
The Industrial Policy Resolution - 1956 was shaped by the Mahalanobis Model of growth, which suggested that emphasis on heavy industries would lead the economy towards a long term higher growth path. The Resolution widened the scope of the public sector. The objective was to accelerate economic growth and boost the process of industrialization as a means to achieving a socialistic pattern of society. Given the scarce capital and inadequate entrepreneurial base, the Resolution accorded a predominant role to the State to assume direct responsibility for industrial development. All industries of basic and strategic importance and those in the nature of public utility services besides those requiring large scale investment were reserved for the public sector.
The Industrial Policy Resolution - 1956 classified industries into three categories. The first category comprised 17 industries exclusively under the domain of the Government. These included inter alia, railways, air transport, arms and ammunition, iron and steel and atomic energy. The second category comprised 12 industries, which were envisaged to be progressively State owned but private sector was expected to supplement the efforts of the State. The third category contained all the remaining industries and it was expected that
private sector would initiate development of these industries but they would remain open for the State as well. It was envisaged that the State would facilitate and encourage development of these industries in the private sector, in accordance with the programmes formulated under the Five Year Plans, by appropriate fiscal measures and ensuring adequate infrastructure. Despite the demarcation of industries into separate categories, the Resolution was flexible enough to allow the required adjustments and modifications in the national interest.
Another objective spelt out in the Industrial Policy Resolution - 1956 was the removal of regional disparities through development of regions with low industrial base. Accordingly, adequate infrastructure for industrial development of such regions was duly emphasized. Given the potential to provide large- scale employment, the Resolution reiterated the Government’s determination to provide all sorts of assistance to small and cottage industries for wider dispersal of the industrial base and more equitable distribution of income. The Resolution, in fact, reflected the prevalent value system of India in the early
1950s, which was centered around self sufficiency in industrial production. The Industrial Policy Resolution – 1956 was a landmark policy statement and it formed the basis of subsequent policy announcements.
Wednesday, June 10, 2009
Describe the overall impact of the Industrial Policy, 1991 on Indian industry. Give illustrations.
Describe the overall impact of the Industrial Policy, 1991 on Indian
industry. Give illustrations.
Answer. New Industrial Policy, 1991:
The New Industrial Policy of 1991 incorporated the concepts of liberalization,
globalization, internationalization, and privatization. They also incorporated the
following significant features: emphasis on consumer concerns, such as quality, cost,
and variety; encouragement of competition; quality assurance and the need to
continuously upgrade quality, and at reduced costs; a border-less, boundary-less
world, incorporating free exchange of money, ideas, and expertise; fostering of
strategic partnerships and alliances in the best service of the consumer; and human
resource development.
The recent economic and industrial policy reforms call for integration of the Indian
economy and industry with their global counterparts. This calls for quantum leaps in our
levels of productivity and efficiency to survive in the face of international competition. In
addition to resource constraints, we will have to conform to international levels in terms
of energy use and environmental appropriateness, in addition to quality, reliability, and
costs. Simultaneously, we have to maximize employment opportunities. The basic
philosophy of the new policy has been summed up as continuity with change.
Objectives:
To consolidate the strengths built up during the last four decades of economic
planning and to build on the gains already made.
To correct the distortions or weaknesses that may have crept in the industrial
structure as it has developed over the last four decades.
To maintain a sustained growth in the productivity and gainful employment; and
To attain international competitiveness. The pursuit of these objectives will be
tempered by (a) the need to preserve the environment, and (b) the need to ensure
the efficient use of available resources.
Policy Changes Important changes in the NIP 1991, including the subsequent
changes, can be recounted as follows:
Industrial Licensing Policy
Industrial licensing has been abolished for all projects except for a short list of
industries related to security and strategic concerns, social reasons, hazardous
chemicals and overriding environmental reasons, and items of elitist consumption.
Only three industries groups where security and strategic concerns predominate
will be reserved exclusively for the public sector.
In projects where imported capital goods are required, automatic clearance will be
given in the following cases:
Where foreign exchange availability is ensured through foreign equity.
If the CIF value of imported capital goods required is less than 25 per cent of the
total value of plant and equipment, up to a maximum value of Rs.2 crore.
There is no requirement of obtaining industrial approvals from the Central
Government (except for industries under compulsory licensing) for location not
falling within 25 kms. Of cities having population of more than one million.
Industries of non-polluting nature such as electronics, computer software and
printing can hi located within 25 kms. Of the periphery of cities with more than one
million population. Other industries are permitted only if they are located in
designated industrial areas.
The mandatory convertibility clause will no longer be applicable. for term loans
from the financial institutions for new projects.
Since July 1991, Indian industry has undergone a sea-change in terms of the basic
parameters governing its structure and functioning. The major reforms include widescale
reduction in the scope of industrial licensing, simplification of procedural rules
and regulations, reduction of areas reserved exclusively for the public sector,
disinvestment of equity of selected public sector undertakings, enhancing the limits of
foreign equity participation in domestic industrial undertakings, liberalization of trade
and exchange rate policies, rationalization and reduction of customs and excise duties
and personal and corporate income-tax, extension of the scope of MODVAT etc.
Separate policy measures have been announced in the form of specific packages
aimed at upliftment of the small scale, tiny and cottage industries as well as 100 per
cent EOU's (Export Oriented Units) and units located in the EPZs (Export Processing
Zone) and Technology Parks.
It is observed
from the table that since 1992-93, all the major sectors had responded to economic
reforms with dynamism and witnessed significant acceleration of their respective
growth rates. However, during the current year until October 1996 there has been a
deceleration of industrial growth rates due to poor performance by mining and
electricity generation.
The adoption of a New Industrial Policy in 1991 was accompanied by a series of
complementary reforms in fiscal, trade and foreign investment policies, which gradually
opened up the industrial sector to international competition. There was a shift in focus
from import substitution to competitiveness in international markets, with trade
liberalization contributing to reducing effective protection for industry.
The Foreign Direct Investment (FDI) policy was further liberalized and limits for foreign
equity participation in domestic industrial undertakings were enhanced. In 1996, a list
of nine industries, which included infrastructure, electronics and software, for which
joint ventures upto 74% foreign equity would be automatically cleared, was approved.
The number of industries eligible for automatic approval upto 51% foreign equity was
also expanded from 35 to 48.
Domestic industry is increasingly open to competition from international markets, with
quantitative restrictions on imports removed with effect from April 1, 2001 (Planning
Commission, 2001a). Tariff levels have also been decreased drastically since the
initiation of reforms. It is estimated that India's weighted import tariff has declined from
around 90% at the start of reforms to around 34% in 2001/02.
Environmental Impact
The energy and resource intensity of industrial production has been associated with
adverse environmental impacts. These can be categorized under four heads:
emissions, effluent discharges, generation of wastes including hazardous wastes and
the production of ozone-depleting substances (ODS). The quantum of industrial solid
wastes (non-hazardous) generated has nearly doubled in the last decade, from 77
MTPA (million tonnes per annum) in 1990 to 147.05 MTPA in 1999. In addition, about
7.2 million tonnes of industrial hazardous wastes are generated in the country (MoEF,
2000). A discussion of the extent of industrial emissions and effluent discharge is
presented in the chapters on Atmosphere and Water.
Employment generation and labour welfare
The industrial sector is an important source of employment in the country. The estimate
of employment in organized public and private sector stood at 27.9 million (MoF, 2002).
In addition, large numbers are employed in the unorganized sector. In the context of
economic reforms and restructuring of the industrial sector, changes in the labour
market involving redeployment and retrenchment of labour would be associated with
social costs. These costs would have to be minimized by providing for social security
mechanisms. Most importantly, productive employment generation and labour welfare
in the unorganized sector, where it will have the greatest poverty-reducing impact, will
have to be ensured.
industry. Give illustrations.
Answer. New Industrial Policy, 1991:
The New Industrial Policy of 1991 incorporated the concepts of liberalization,
globalization, internationalization, and privatization. They also incorporated the
following significant features: emphasis on consumer concerns, such as quality, cost,
and variety; encouragement of competition; quality assurance and the need to
continuously upgrade quality, and at reduced costs; a border-less, boundary-less
world, incorporating free exchange of money, ideas, and expertise; fostering of
strategic partnerships and alliances in the best service of the consumer; and human
resource development.
The recent economic and industrial policy reforms call for integration of the Indian
economy and industry with their global counterparts. This calls for quantum leaps in our
levels of productivity and efficiency to survive in the face of international competition. In
addition to resource constraints, we will have to conform to international levels in terms
of energy use and environmental appropriateness, in addition to quality, reliability, and
costs. Simultaneously, we have to maximize employment opportunities. The basic
philosophy of the new policy has been summed up as continuity with change.
Objectives:
To consolidate the strengths built up during the last four decades of economic
planning and to build on the gains already made.
To correct the distortions or weaknesses that may have crept in the industrial
structure as it has developed over the last four decades.
To maintain a sustained growth in the productivity and gainful employment; and
To attain international competitiveness. The pursuit of these objectives will be
tempered by (a) the need to preserve the environment, and (b) the need to ensure
the efficient use of available resources.
Policy Changes Important changes in the NIP 1991, including the subsequent
changes, can be recounted as follows:
Industrial Licensing Policy
Industrial licensing has been abolished for all projects except for a short list of
industries related to security and strategic concerns, social reasons, hazardous
chemicals and overriding environmental reasons, and items of elitist consumption.
Only three industries groups where security and strategic concerns predominate
will be reserved exclusively for the public sector.
In projects where imported capital goods are required, automatic clearance will be
given in the following cases:
Where foreign exchange availability is ensured through foreign equity.
If the CIF value of imported capital goods required is less than 25 per cent of the
total value of plant and equipment, up to a maximum value of Rs.2 crore.
There is no requirement of obtaining industrial approvals from the Central
Government (except for industries under compulsory licensing) for location not
falling within 25 kms. Of cities having population of more than one million.
Industries of non-polluting nature such as electronics, computer software and
printing can hi located within 25 kms. Of the periphery of cities with more than one
million population. Other industries are permitted only if they are located in
designated industrial areas.
The mandatory convertibility clause will no longer be applicable. for term loans
from the financial institutions for new projects.
Since July 1991, Indian industry has undergone a sea-change in terms of the basic
parameters governing its structure and functioning. The major reforms include widescale
reduction in the scope of industrial licensing, simplification of procedural rules
and regulations, reduction of areas reserved exclusively for the public sector,
disinvestment of equity of selected public sector undertakings, enhancing the limits of
foreign equity participation in domestic industrial undertakings, liberalization of trade
and exchange rate policies, rationalization and reduction of customs and excise duties
and personal and corporate income-tax, extension of the scope of MODVAT etc.
Separate policy measures have been announced in the form of specific packages
aimed at upliftment of the small scale, tiny and cottage industries as well as 100 per
cent EOU's (Export Oriented Units) and units located in the EPZs (Export Processing
Zone) and Technology Parks.
It is observed
from the table that since 1992-93, all the major sectors had responded to economic
reforms with dynamism and witnessed significant acceleration of their respective
growth rates. However, during the current year until October 1996 there has been a
deceleration of industrial growth rates due to poor performance by mining and
electricity generation.
The adoption of a New Industrial Policy in 1991 was accompanied by a series of
complementary reforms in fiscal, trade and foreign investment policies, which gradually
opened up the industrial sector to international competition. There was a shift in focus
from import substitution to competitiveness in international markets, with trade
liberalization contributing to reducing effective protection for industry.
The Foreign Direct Investment (FDI) policy was further liberalized and limits for foreign
equity participation in domestic industrial undertakings were enhanced. In 1996, a list
of nine industries, which included infrastructure, electronics and software, for which
joint ventures upto 74% foreign equity would be automatically cleared, was approved.
The number of industries eligible for automatic approval upto 51% foreign equity was
also expanded from 35 to 48.
Domestic industry is increasingly open to competition from international markets, with
quantitative restrictions on imports removed with effect from April 1, 2001 (Planning
Commission, 2001a). Tariff levels have also been decreased drastically since the
initiation of reforms. It is estimated that India's weighted import tariff has declined from
around 90% at the start of reforms to around 34% in 2001/02.
Environmental Impact
The energy and resource intensity of industrial production has been associated with
adverse environmental impacts. These can be categorized under four heads:
emissions, effluent discharges, generation of wastes including hazardous wastes and
the production of ozone-depleting substances (ODS). The quantum of industrial solid
wastes (non-hazardous) generated has nearly doubled in the last decade, from 77
MTPA (million tonnes per annum) in 1990 to 147.05 MTPA in 1999. In addition, about
7.2 million tonnes of industrial hazardous wastes are generated in the country (MoEF,
2000). A discussion of the extent of industrial emissions and effluent discharge is
presented in the chapters on Atmosphere and Water.
Employment generation and labour welfare
The industrial sector is an important source of employment in the country. The estimate
of employment in organized public and private sector stood at 27.9 million (MoF, 2002).
In addition, large numbers are employed in the unorganized sector. In the context of
economic reforms and restructuring of the industrial sector, changes in the labour
market involving redeployment and retrenchment of labour would be associated with
social costs. These costs would have to be minimized by providing for social security
mechanisms. Most importantly, productive employment generation and labour welfare
in the unorganized sector, where it will have the greatest poverty-reducing impact, will
have to be ensured.
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