2.5.

4 Industrial Policy Resolution (IPR) of 1956

Industrial policy is an important instrument through which the government regulates the
industrial activity in an economy. The main aim of industrial policy is to direct the pattern of
industrial development and the speed of industrialisation in accordance to the economic
programme of the government. Therefore, industrial policy spells out the role of government in
the development of industries, role of public enterprises, role of private enterprises, etc.
The 1956 Resolution laid down the following objectives of industrial policy:
(a) To accelerate the rate of growth and to speed up industrialisation;
(b) To develop heavy industries and machine making industries;
(c) To expand public sector;
(d) To reduce disparities in income and wealth;
e)To build up a large and growing cooperative sector; and
income in the hands of small
To prevent monopolies and concentration of wealth and
a

number of individuals.
The features of Industrial Policy Resolution of 1956 were:
1. New Classification of Industries. Industries were classified into three schedules depending

upon the role of the State:

of the State.
a) Industries whose future development would be the includedresponsibility
exclusive
defence industries, heavy
17 such industries were listed in Schedule 'A' which
 industries
dustries like steel, mahinoru
like steel. machinery, haa
heavy electricals, mining industries ore, bauxite
liron ore
d..abrios (iron
and other petroleum,
important minerals), energy and power (atomic energY Coay

electricity generation, etc.), transport and communication, etc.

(b) Industries in which the State would te sector
units
increasingly establish new units ou ndustries
would be allowed to expand existine units and set up new units. Lz
were included in
u
Schedule B'. These were machine tools, ferroalloys, non-ferrous
metals, fertilizers, drugs and pharmaceuticals, dye stuffs and plastic, road aand ocean
ocean
transport, synthetic rubber, etc.
(c)
Other residual industries were left
open to the private sector. In this category, the a e
the power to start
any new undertaking in public interest.
2. Stress on the Role of
Cottage and Small-scale Industries. The 1956 resolutionrecogOr uie
the critical role of cottage and small-scale industries in economic development
Country.
3. Reduction in Regional Disparities. The disparities in the level of
different regions should be progressively reduced. Facilities for development between
development will be made
available to the industrially backward areas.
4. Emphasis on Industrial Peace. The need for maintenance and promotion of industria
peace and cordial relations between employers and employees was stressed. Reasonable
wages, good working conditions and participative management were given emphasis.
5. Technical Education and Training. Need was felt to develop technical and management
education and training facilities to meet the growing needs for technical and managerial
personnel in industrial units.
 2.5.7 Small Scale
Industry (SSI)
ne investment limit for small scale industries and ancillary units is 1 crore. However, t
ntare technology upgradation and enhance competitiveness, the investment limit (in plant and
acinery) has been raised from 1 crore to 5
crores in respect of 69 items reserved for
c T u r e in the small scale
sector and for all tems in the drugs and pharmaceuticals sector.
Role of Small Scale
Industries
ois have found their
economic rationale in the Mahalanobis model which forms the theoretical
Dasis of India's second and
subsequent five year plans. It focussed on the development of highly
capltal-intensive large scale basic and
means to heavy industries. It underlined the development of S5Is as a
promote employment.
Role of SSIs and
cottage industries is clear from the
. Labour Intensive. SSIs are labour intensive in
following:
labour and are best suited character, i.e., they require more units ot
for
solving the problem of unemployment.
2.
3.
Self-employment. SSIs provide opportunities for self-employment.
Less Capital Intensive.
SSIs are less capital intensive,
amount of capital to i.e., they require relatively smaller
SSI is best suited to
produce a
commodity. In a country like India where capital is scarce,
bring about industrial development.
4. Import Light. SSIs are import light, i.e., low import
reduces the need for foreign intensity in the capital structure of SSI
capital.
5. Export Promotion. SSls offer vast opportunities for
great demand in advanced countries. export promotion. These goods are in
6. Equal Distribution of Income. SSIs can serve more even
distribution of
income and wealth
as
compared to large-scale industries.
7. Decentralisation of Industries. SSIs bring about decentralisation of
promote the objective of regional development. industries and, thus.
8. Seed Beds for Large-scale Industries. SsIs
provide all the essential raw materials to 4h
large-scale industries which are needed for their development.
9. Sustaining Agricultural Development. The development of Ssls will divert
labor f om
agriculture to industries which will bring about a more desirable occupational struch
will relieve agriculture from pressure of population. Ssls can bring about nd
development through promotion of agro-based industries like agricultural ural agricultural
machinery,
machin
repairs and service workshops, etc.