1. INDUSTRIAL
DEVELOPMENT IN INDIA
DR. LAXMI NARAYAN
Assistant Professor (Economics)
Govt. College
Mahendergarh

2. LECTURE OUTLINE
 Role of Industrial Development in Economic
Development
 Evolution of Industrial Policy in India:
Transition from Socialist to Market Oriented
Economy
 Historical Review of Industrial Development
during Various Five Year Plans

3. IMPORTANCE OF INDUSTRIALISATION
 Provide Employment
 Trickle Down Effect
 Development of Social Overhead
 Increase in Income and Saving
 Increasing Economies of Scale
 Increase in Farm Productivity
 Better Utilisation of Raw Materials

4. INDUSTRIAL SECTOR ON
THE EVE ON INDEPENDENCE
 Weak Industrial Base
 Low Capital Intensity
 De-industrialisation of the Country
 Limited Role of Public Sector
 Decline of Handicraft Industry
 Iron & Steel and Jute Industries

5. STRATEGIES FOR INDUSTRIALISATION
 State Intervention In Industrial Development.
 Role of Public Sector
 Regulations for Control and Direction of
Industrial Sector.
 Industrial Licensing to Regulate Private Sector
(IDR act 1951)
 Industrial Policy

6. INDUSTRIAL POLICY
 Industrial policy is combination of all
government regulation aimed at regulation
and control of industrial activities in a
country.
 Need of Industrial Policy:
 Limited Capacity of Private Sector
 Regulation of Private Sector
 Regulation of Foreign Sector

7. EVOLUTION OF INDUSTRIAL
POLICY IN INDIA
 Industrial Policy Resolution 1948
 Industrial (Dev. & Reg.) Policy 1956
 Industrial Policy 1977
 Industrial Policy 1980
 New Industrial Policy 1991

8. MAIN FEATURES OF IPR 1948
 Industries Classification
– Public Sector – 03
– Public cum Private Sector – 06
– Controlled Private Sector – 18
– Private and Co-operative Sector
 Importance of Foreign Capital
 Domestic Protection
 Industrial Relations

9. MAIN FEATURES OF
INDUSTRIAL POLICY 1956
Industries Classification:
- Public Sector: 17
- Public-cum-Private sector: 12
- Private Sector
 Fair Treatment to Private Sector
 Balanced Regional Growth
 Proper Amenities to Labourers
 Efficient Management of PSUs

10. MAIN FEATURES OF
INDUSTRIAL POLICY 1977
 More Emphasis on SSIs
 Labour Intensive Technologies
 Balanced Regional Development
 Limited Role of Large Industries
 No Expansion of Big Industries
 Efficient Management of PSUs

11. MAIN FEATURES OF
INDUSTRIAL POLICY 1980
 Balanced Regional Development with
Large and Small Industries
 Regularization of Excess Capacity
Installed
 Development of Backward Areas
 Encouragement to EOUs

12. REVIEW OF PRE-1991 POLICIES
 Under Utilisation of Capacity
 Concentration of Economic Power
 Licensing Promoted Corruption, Rent-
seeking and Discrimination
 Delay in Processing of Applications
 Increased Regional Imbalances

13. GENESIS OF
NEW INDUSTRIAL POLICY 1991
 Balance of Payment Crisis
 License-Permit- Quota Raj
 To Unshackle the Industrial Sector from
Administrative and Legal Controls.
 To Make Industry Competitive by Increasing
Efficiency

14. PUBLIC SECTOR POLICY
Dilution of Public Sector Role: only 08 industries
As on Date Only 03 industries (i) Atomic Energy (ii)
Rail Transport and (iii) Radio Active Minerals
 Divestment of PSUs
 Greater Autonomy to PSUs
 Chronically Sick Enterprises to be Referred to
BIFR.
 Facilities to Labourers

15. INDUSTRIAL LICENSING POLICY
Abolition of Industrial Licensing:
Only 18 Industries Related to Security and Strategic
Concerns, Social Reasons, Hazardous Chemicals
and Items of Elitist Consumption.
 As of Now Only 05 Industries (i) Alcohol (ii)
Cigarettes (iii) Hazardous Chemicals (iv) Electronics,
Aerospace and Defense Equipments, and (iv)
Industrial Explosive
 Requires Industrial License.

16. FOREIGN INVESTMENT POLICY
 Automatic Approval for FDI up to 51 % Foreign
Equity in High Priority Industries.
 This is Subsequently Increased to 74% in Some
Industries and With the Replacement of FERA (1973) with
FEMA (1999), 100% FDI is Permitted in Many Areas.
 Automatic Approval for Import of Capital Goods
(Maximum Limit 2 Crore)

17. FOREIGN TECHNOLOGY
AGREEMENTS (FTAs)
 Automatic Permission will be Given for FTAs in
High Priority Industries up to a Lump-sum
Payment of Rs. 1 Crore.
 5% Royalty for Domestic Sales and 8% for Exports,
Subject to Total Payment of 8% of Sales for 10 Year
Period
 No Permission will be Necessary for Hiring of
Foreign Technicians and Foreign Testing of
Indigenously Developed Technologies.

18. INDUSTRIAL LOCATION POLICY
 In Cities with Less Than 1 Million population,
No Requirement of Obtaining Location
Clearance (Except for Industries Subject to
Compulsory Licensing)
 In Cities with more than 1 Million Population,
Industries will be Located Outside 25 kms (other
than Non Polluting Industries such as Electronics,
Computer Software and Printing)

19. OTHER IMPORTANT FEATURES
 Threshold Limit of Assets in MRTP
Companies Removed
 Abolition of Phased Manufacturing
Programme
 Reservation for SSIs
 Removal of Mandatory Convertibility Clause
 Encouragement to Industries in Backward
Areas

20. IMPLEMENTATION OF NIP 1991
 Contraction of Public Sector
 Liberalisation of Industrial Licensing Policy: Only
Five Industries are under Compulsory Licensing
 Introduction of Industrial Entrepreneurs'
Memorandum (IEM) for industries not requiring
compulsory licensing
 Liberalisation of the Location Policy
 Five Year Tax Holidays to Power Generation
Industries
….cont’d

21.  Increase in Lending Limit of Banks
 Amendments in SICA in 1993 and 2003
 Increase in Investment Limit of Small
Enterprises
 Micro Enterprises – 25 Lakh (10 Lakh)
 Small Enterprises – upto 5 Crore (5 Crore)
 Medium Enterprises – upto 10 Crore (5
Crore)
 MRTP act Replaced with Competition Act
 Tax Holidays for Industries in Backward
Areas

22.  Encouragement to Private Sector Participation in
Infrastructure
 Reimbursement Scheme for Technology
Upgradation.
 Setting up of Foreign Investment Promotion
Board (FIPB)
 Permission to Raise Capital from Foreign Markets
 Encouragement to Foreign Investment
 Disinvestment of PSUs

23. POSITIVE IMPACT OF NIP 1991
 Increase in Production
 Removal of Bureaucratic Hurdles
 Increase in Competition
 Increase in Efficiency of Public Sector
 Increase in Foreign Investment
 Increase in Exports
 Balanced Regional Development
 Less Economic Burden on Government

24. CRITICISM OF NIP 1991
 Concentration of Economic power
 Increase in Unemployment
 No Evidence of Positive Effect on
Productivity
 Ignore Social Objectives
 Distortion in Production Structure: Growth of
Capital Goods Industries Declined

25.  Adverse Effect of Small Scale Industries
 Misplaced Faith in Foreign Investment
 Danger of Business Colonization.
 Personalized Relationship and Corrupt Practices
still Continue
 Increase in Regional Imbalances

26. Outlay
(Rs. Crore)
% of
total
Outlay
Tgt
Gwth
Rate
Act.
Gwth
RateLarge Small
1ST
55 42 4.95 - 7.5
2ND
938 187 24.0 - 6.6
3RD
1726 241 23.0 14.0 9.0
4TH
2864 243 19.7 8.0 4.5
5TH
8989 592 24.3 7.1 5.9
6TH
20407 1780 22.8 6.9 5.5
7TH
25971 3249 13.4 8.7 8.5
8TH
40588 6334 10.8 7.3 7.4
9TH
33587 8384 8.2 8.2 5.0
10TH
52856 6083 3.9 10.0 8.6
TH
INDUSTRIAL DEVELOPMENT DURING PLAN PERIOD

27. IMPORTANT HIGHLIGHTS
OF DIFFERENT PLANS
 First Five Year Plan (1951-56): Many Basic
and Heavy Industries, Set Up, Namely: Sindri
Fertiliser, Chitranjan Locomotive, HMT, U.P. Cement
Industry, Indian Telephones, Indian Cables, DDT and
Penicillin Factories.
 Second Five Year Plan (1956-61): Based on
IPR 1956 and Mahalanobis Model; Major Industries:
Steel Plants at Bhilai, Durgapur and Rourkela.

28.  Sixth Five Year Plan (1980-85):
Main Objective: Optimum Utilisation of
Existing Capacity and to Increase Productivity. Focus:
Capital Goods Industries Specially Electronic Industry,
Adoption of New Technologies.
 Seventh Five Year Plan (1985-90):
Main Objective - Increasing Production of
Consumer Goods and to Increase Productivity. Focus:
Achievement of Self Sufficiency in Defense
Production, Development of Sunrise Industries
like Electronics.

29.  Eighth Five Year Plan (1992-97):
More Importance to Private Sector, Public Sector in Core
and Basic Industries only; Top Priority to Capital Goods
Industries.
 Ninth Five Year Plan (1997-2002):
More Importance to Private Sector, Development of
Backward Areas, Increasing Industrial Efficiency, MRTP
Ceiling Removed.
 Tenth Five Year Plan (2002-07):
Focus on Infrastructure Development, R&D, Technical
Development and Modernization. Special Concessions to
EOUs.

30. ELEVENTH FIVE YEAR PLAN(2007-12)
 Focus On Pharmaceuticals, Auto-Components and
Textiles
 Strengthening Manufacturing Sector, Making Indian
Industries more Competitive, strengthening
infrastructure,
 Special Concessions for MSME and Labour
Intensive Industries
 Emphasis on Technological Improvement
 Wider Role for Private Sector
 Flexible Labour Laws

31. ACHIEVEMENTS
DURING PLANNING PERIOD
 Vast Network of Infrastructure Developed
 Increase in the Share of Industrial Sector
in National Income: 16% to 25.9%.
 National Defense and Self independence
 Development of Public Sector
 Moderanisation
 Increase in Foreign Collaboration
 Increase in Government Income

32. INDUSTRIES UNITS 1950-51 2007-08
Finished Steel Lakh Tonnes 10 552
Electricity Bn. kwh 5.1 704
Crude Oil Lakh Tonnes 03 341
Fertilisers Thousand
Tonnes
18 14738
Cement Lakh Tonnes 27 1683
Passenger Cars Thousands 7.9 1545
Cloth bn. sq. Mtrs 4.5 55
DEVELOPMENT OF
STRONG INDUSTRIAL BASE

33. WEAKNESS OF INDUSTRIAL
DEVELOPMENT DURING PLANS
 Under-utilisation of Capacity
 Irregular Increase in Industrial Production
 Increase in Monopoly Power
 Poor Performance of Public Sector
 Industrial Sickness
 Industrial Disputes
 Poor Quality Production
 Regional Imbalances

34.  FDI – Foreign Direct Investment
 SSIs – Small Scale Industries
 EOUs – Export Oriented Units
 PSUs – Public Sector Units.
 MRTP - Monopolistic & Restrictive Trade Practices
 FERA - Foreign Exchange Regulation Act
 FEMA - Foreign Exchange Management Act
 SICA – Sick Industries Companies Act
 BIFR – Board for Industrial & Financial Reconstruction
ABBREVIATIONS USED

35.  Excess Capacity
 Trickle Down Effect
 Competition Act
 Labour Relation
 Memorandum of Understanding (MOU)
 License-Permit-Quota Raj
 Balanced Regional Growth
 Phased Manufacturing Programme
NEW/KEY TERMS

36.  S.C. Kuchhal, “Industrial Economy of India”
Chaitanya Publishing House.
 R.K. Misra AND V.K.Puri, “Indian Economy”
Himalaya Publications.
 Ruddar Dutt and K.P.M. Sundaram, “Indian
Economy” Sultan Chand.
 Uma Kapila, “Understanding the Problems
Of Indian Economy” Academic Foundation.
REFERENCES