Industrial Policy Revolution, 1956

A comprehensive package of different policy measures covering various issues that are connected with different industrial enterprises of the country is known as Industrial Policy. The country needs to devise various principles, procedures, rules, and regulations to control its industrial enterprise. 

After the Industrial Policy of 1948, the economy of India faced various economic and political changes because of which it became essential for the country to start a fresh industrial policy. Hence, the Industrial Policy Revolution of 1956 was taken into action by the Indian Parliament on 30^th April 1956. It is also known as ‘The Economic Constitution’ of India. The Industrial Policy 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. It provided a comprehensive framework for the industrial development of the country. It aimed at improving the coordination between the public and the private sector to achieve the goal of rapid industrial development by working together. This revolution provided more powers to the governmental machinery and laid down the foundation for India’s second five-year plan. The Industrial Policy also helped in laying down the three categories of the industrial sector that helped in defining industries more sharply.

 Objectives of the Industrial Policy Revolution, 1956

The objective of the policies, according to the revolution was the establishment of the society’s socialistic pattern. Other than this, some of the major objectives of this policy were:

1. Rapid Development of Industries

The main aim of the industrial policy was to increase the speed of the development of industries in India. The government promoted industrial development in the country by creating a favourable investment atmosphere for the private sector enterprises and mobilising the resources for investment in the public sector enterprises.

2. Preventing the Concentration of Economic Powers

The industrial policy provided a framework of reservations, rules, and regulations for the public and the private sectors that aimed at lowering monopolistic tendencies. It also aimed at preventing economic powers from getting concentrated in the hands of a few big industrial houses. 

3. Balance of the Industrial Sector

The industrial policy was taken into action to correct the industrial structure imbalances so that the currently prevailing conditions of the industrial sector get balanced out. This was done by laying the emphasis on heavy industries and developing the sector of capital goods.

4. Balance of the Regional Sector

The aim behind the introduction of industrial policies was also to correct the regional imbalances in industrial development between states. The states like Maharashtra, Gujarat, etc., were considered to be advanced in terms of industrial development, while other states like Bihar, Orissa, etc., were considered to be industrially backward. Thus, the industrial policy took the initiative of launching programs and policies, which led to the development of industries in such states.

5. Incentives to Labours

The industrial policy recognised the role of labour in the development of the industrial sector. This emphasized improving the working conditions of the workers and providing adequate incentives to them. It was also stated that the workers should be associated with the management so that they can be enthusiastically involved in the development process.

Categories of the Industrial Policy Revolution, 1956

According to the Industrial Policy Revolution, 1956, the industrial sector was divided into three categories, namely:

i) Schedule A Industries or Government Enterprises;

ii) Schedule B Industries or Mixed Enterprises;

iii) Schedule C Industries or Private Enterprises.

It can further be elaborated as-

1. Schedule ‘A’ Industries or Government Enterprises

In the scheduled category ‘A’, there are 17 industries. These industries are reserved for the public sector and are of basic and strategic importance. These are: a) Defence equipment, arms, and ammunition; b) Atomic energy; c) Heavy plants and machinery; d) Heavy casting and forging of iron and steel; e) Iron and Steel; f) required for basic industries; g) Heavy electrical plants; h) Coal and Lignite; i) Mineral Oils; j) Mining of iron ore, manganese ore, gypsum, sulphur, gold, and diamond; k) Minerals for atomic energy; l) Mining and processing of copper; m) Aircraft; n) Air transport; o) Railway transport; p) Ship-building; q) Telephones and telephone cables.

2. Schedule ‘B’ Industries or Mixed Enterprises

The Schedule ‘B’ category includes 12 industries. These industries are owned by the states, which will generally take the initiative in establishing new undertakings. These industries also give private enterprises a chance to flourish. Industries included under this schedule are: a) All minerals (except minor minerals); b) Aluminum and other non-ferrous metals (not included in Schedule ‘A’); c) Machine tools; d) Ferro alloys and tool steels; e) Basic and intermediate products required by chemical industries (like drugs, dye, and plastics); f) Antibiotics and other essential drugs; g) Fertilizers; h) Synthetic rubber; i) Carbonization of coal; j) Chemical pulp; k) Road transport; l) Sea transport.

3. Schedule ‘C’ Industries or Private Enterprises

All the industries that have not been included in Schedule ‘A’ and Schedule ‘B’ are included in the Schedule ‘C’ category. The development and establishment of the industries in this category had been left to the initiatives taken by the private sector.

Industrial Licensing System

An Industrial License is a written permission given to the industrial units to manufacture goods. This written permission is issued to industries by the government. The introduction of the Industrial Licensing System in India was done in 1948 as a part of the Industrial Policy Revolution. In India, Industrial Licensing is regulated by the Industrial Development and Regulation Act (IDRA), 1951, and is approved by the Secretarial of Industrial Assistance (SIA).

Industrial licensing for manufacturing in India is required by:

a) Industries under compulsory licensing, and
b) Industrial undertakings attracting location restrictions. 

Advantages of Industrial Licensing

1. The costs of producing, promoting, packaging, or selling your product will not be incurred by the licensee. 
2. There will be little or no risk, as the licensee will already have the knowledge and know-how on how to break into an already established market.
3. The royalty payments can last a very long time depending on the terms of your agreement. 
4. Licensing creates self-employment opportunities, as it allows people to start their own businesses. They get to experience the advantages of self-employment, like setting their working hours, getting the benefits of having someone invested in your business, etc.
5. It helps a domestic company to enter foreign markets, as it helps in avoiding tariff barriers, which makes it easier for a local business to operate globally.

Small-Scale Industry

The industries in which the process of production, manufacturing, and servicing are done on a lower scale or small-scale basis are referred to as Small-Scale Industries. These industries make a one-time investment, which is mostly done on plants and machinery, and the investments made, however, do not exceed a total of ₹1 Crore. Small-scale industries are often referred to as the lifeline of an economy, and India being a labour-intensive industry, is very benefited from the establishment of these small-scale industries, as it has helped in creating employment opportunities for the population of the country. These industries are also considered to be a crucial part of the economy in the terms of finance, as they help in stabilising the per capita income of a country. 

Importance of Small-Scale Industry

1. Employment Generation: The small-scale industries are considered to be the finest source of employment generation in India, and since employment is the defining feature of a country’s growth, the promotion of such industries should be done. These industries increase the rate of employment, as a definite population of people would be required for the working of the industry.

2. Maintains Regional Balance: Since the large-scale industries are mostly concentrated in the big cities, people start migrating from their hometowns to these cities in search of employment. This results in overcrowding of the city and severe damage to the environment. With the establishment of small-scale industries, a large population of people would not have to shift from one city to another, as there will be employment opportunities in their areas too.

3. Short Production Time: Since the production is not done on a larger scale, the production time taken by small-scale industries is less compared to large-scale industries. This further results in the flow of money in the economy.

4. New Opportunities: The establishment of small-scale industries opens the population with new opportunities for investments and start-ups. Since these industries require less capital investment, they can easily receive financial support and funding. Besides, procuring manpower and raw materials is also relatively easier for small-scale industries, as the government’s export policies favour them heavily.

5. Reduced Dependence on Agriculture: More than half of the rural population is dependent on agriculture, which results in a burden on the agricultural sector. Establishment of the small-scale industries helps in overcoming this problem by providing employment opportunities to the rural population. This results in more paths for growth and more organised distribution of occupation in the country.

Reservations and other Concessions

The government had to take various steps to protect small-scale industries from big firms or large-scale industries. To achieve this and ensure the growth of these industries, the government of India took some steps. These were:

1. Reservation of Products: To ensure that small-scale industries are not being exploited, the government reserved the production of certain goods only for small-scale industries. This helped these industries from shutting down and staying on track. The reservation made was on the criteria of the ability of these units to manufacture the goods.

2. Various Concessions: To ensure and enhance the growth of the small-scale industries, the government also gave various concessions to these industries. The concessions given to these industries were lower excise duty, bank loans at interest rates, electricity tariffs, numerous fiscal incentives, like excise duty exemption, etc.