The Indian economy features diverse industries, ranging from small-scale sectors to large conglomerates. This section elaborates on the different facets of Indian industry, including policies, sector classifications, and growth trends.
Learning Outcomes:
- Understand the significance of industrial development in India.
- Gain insights into industrial policies, particularly post-independence reforms.
- Recognize the role of public and private sectors in the economy.
- Learn about the challenges and opportunities in small-scale industries.
Industry refers to economic activities involving the processing of raw materials and the manufacturing of goods in factories. They are typically classified based on their principal products, such as steel, automobiles, and textiles. The Indian Government has prioritized industrial growth since independence, achieving multifaceted expansion in various sectors.
Role of Industry: Rapid national income growth depends heavily on industrialization due to inherent limitations in agricultural growth. The following points emphasize its importance:
Important Note: Growth in India’s industrial sector during various Five-Year Plans ranged from 4.29% in the 9th Plan to approximately 10% in the 11th Plan, indicating varied developmental phases.
The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, oversees India’s industrial policy. The evolution of this policy includes several significant resolutions and statements since 1948.
The first Industrial Policy in April 1948 introduced a mixed economy system, entrusting industrial development to both private and public sectors.
Salient Features of IPR 1948:
Known as the ‘Economic Constitution’ of India, this policy outlined a framework for the industrial economy until the reforms of 1991.
Salient Features of IPR 1956:
The Industries (Development and Regulation) Act, 1951 introduced licensing for new and existing industries. While intended to control investment and production, its complexities led to monopolistic conditions and regional imbalances. Several committees, including the RK Hazari Committee (1964) and Subimal Dutt Committee (1967), recommended reforms. This culminated in the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, aimed at curbing economic power concentration.
On 24th July 1991, India adopted a new policy to liberalize the industrial economy. The policy’s goal was to enhance efficiency to international standards.
Key Features of NIP 1991:
Important Note: The Competition Act of 2002 replaced the MRTP Act, focusing on promoting competition and preventing market dominance abuses.
Initially, India’s economy was agrarian. Given the private sector’s limitations in funding and risk-taking, public sector expansion became crucial for infrastructure and industrial growth, especially after the Second Five-Year Plan (1956-61).
Objectives of Public Sector:
Concept: Maharatna, Navratna, and Miniratna schemes empower PSEs based on financial performance, providing investment autonomy and global expansion capabilities.
| Enterprises | Manufacturing Investment | Service Sector Investment |
|---|---|---|
| Micro Enterprises | Up to ₹25 lakh | Up to ₹10 lakh |
| Small Enterprises | ₹25 lakh – ₹5 crore | ₹10 lakh – ₹2 crore |
| Medium Enterprises | ₹5 crore – ₹10 crore | ₹2 crore – ₹5 crore |
Note: Government interventions, like the National Equity Fund and Single Window Scheme, aim to support SSI financing and technical development.
Disinvestment refers to the government’s selling of equity in PSUs to private entities, while privatization implies a more significant transfer of ownership and management control.
Objectives of Disinvestment:
Disinvestment Process: Began in 1991 with minority stake sales. In 1996, the Disinvestment Commission provided strategic sale recommendations, emphasizing improving PSU performance.
Important Note: National Investment Fund (NIF) was established in 2005, using disinvestment proceeds for social sector funding and PSU capital requirements.
India ranks 4th globally in crude steel production. The Steel Authority of India Limited (SAIL), established in 1974, oversees the industry’s development.
The largest industry in India, textiles account for about 20% of industrial output and employ 20 million people. The Scheme for Integrated Textile Park (SITP) aims to modernize infrastructure.
Constitutes one of the fastest-growing manufacturing segments, contributing 27% to average industrial growth. The establishment of Mega Food Parks (MFPs) clusters food-producing units to enhance productivity.
Table: Comparison of Textile and Iron Industry
| Criteria | Textiles | Iron and Steel |
|---|---|---|
| Employment | 20 million | Strategic importance |
| Contribution | 20% industrial output | Infrastructure support |
| Governing Bodies | TEXPROCIL, SIT |
P | SAIL, Tata Steel |
Concept: The New Economic Policy (NEP) of 1991 introduced comprehensive reforms, deregulating the industrial sector to encourage private participation and foreign investment.
MCQ:
What is the main goal of India’s New Industrial Policy (1991)?
- To impose more government regulations on industry.
- To improve agricultural growth.
- To deregulate the industrial sector for efficiency.
- To nationalize major private industries.
Answer: 3. To deregulate the industrial sector for efficiency.
The above text covers the vast expanse of India’s industrial policies, reforms, public sector dynamics, and small-scale industry challenges, outlining critical elements driving economic growth.