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Industrial Policy Resolution of 1956

The Industrial Policy Resolution of 1956 (IPR 1956) was a policy adopted by the Government of India to promote industrial development and institutionalize a socialist pattern of society in India. It built upon the Industrial Policy Resolution of 1948 and formalized the state's role in key industries.[1]

Background

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Following Indian independence, the government sought to transition from an agrarian economy to an industrialized one through planned development. The 1948 resolution provided a preliminary framework for public and private sector roles, but by the mid-1950s, a more comprehensive approach was deemed necessary.[2][3]

Objectives

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The resolution aimed to establish a socialist pattern of society through state-led industrialization. Its specific goals included:

  • Development of heavy and basic industries
  • Balanced regional industrial growth
  • Equitable distribution of income and wealth
  • Employment generation[4]

Classification of industries

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The resolution classified industries into three schedules:

  • Schedule A: 17 industries, including atomic energy, arms and ammunition, and Indian Railways, were reserved exclusively for the state.[1]
  • Schedule B: 12 industries where the state would increasingly establish enterprises, with private participation allowed under regulation.
  • Schedule C: All other industries, open to private enterprise but subject to government licensing and regulation.

This structure emphasized public sector control in strategic sectors while allowing regulated private sector participation.[1]

Key features

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The resolution introduced the industrial licensing system, requiring government approval for establishing or expanding industrial units. Other key provisions included:

  • Expansion of the public sector in core and capital-intensive industries
  • Promotion of small-scale industry and cottage industries
  • Regional dispersion of industries to reduce concentration in urban areas[5]
  • Encouragement of cooperative enterprises and workers' participation in management[6][7]

Impact

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The resolution led to the establishment of several major Central Public Sector Undertakings (CPSUs), such as Bharat Heavy Electricals Limited (BHEL), Steel Authority of India Limited (SAIL), and Indian Oil Corporation.[1]

However, the industrial licensing regime also gave rise to bureaucratic inefficiencies, delays, and lack of competition, later termed the License Raj.[8]

Criticism and reforms

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By the late 1980s, the industrial policy was seen as inflexible and a barrier to innovation. In 1991, the government introduced the New Industrial Policy of 1991, which dismantled the licensing regime, liberalized the economy, and opened sectors to private and foreign investment.[1]

Legacy

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Although later replaced by liberalization measures, the Industrial Policy Resolution of 1956 significantly shaped India's economic strategy for over three decades. Several institutions and industries established during this period continue to play important roles in infrastructure, defence, and energy sectors.[9]

See also

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References

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  1. ^ a b c d e "Industrial Policy Resolution, 30 April 1956 (Gazette of India)" (PDF). Government of India. p. 1. Retrieved 23 June 2025.
  2. ^ "Economy of India". Encyclopædia Britannica. Retrieved 23 June 2025.
  3. ^ Jadhav, Narendra. "Indian Industrial Policy" (PDF). Dr Narendra Jadhav. Retrieved 23 June 2025.
  4. ^ "Industrial Policy Resolution, 30 April 1956 (Gazette of India)" (PDF). Government of India. p. 1. Retrieved 23 June 2025.
  5. ^ "A Review of India's Industrial Policy and Performance". ResearchGate. p. 8. Retrieved 23 June 2025.
  6. ^ "Workers Participation in Management in India". Your Article Library. Retrieved 23 June 2025.
  7. ^ Bhagwati, Jagdish N. (1967). "India's Economic Policy and Development". The American Economic Review. 57 (2): 18–24. JSTOR 1817119.
  8. ^ "The case for a new industrial policy". The Hindu Business Line (Reuters). Retrieved 23 June 2025.
  9. ^ "Towards Liberalization: A Study of Indian Experience, 1947–1991". University of Tehran / Iranian Social Policy Studies. Retrieved 23 June 2025.