Industrial Policy Resolution of 1956
Indian parliamentary resolution
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Through Government of India, Industrialisation and Indian Independence Act 1947
Background
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.
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Objectives
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
Classification of industries
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.
- 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.
Key features
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
- Encouragement of cooperative enterprises and workers' participation in management
Impact
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.
However, the industrial licensing regime also gave rise to bureaucratic inefficiencies, delays, and lack of competition, later termed the License Raj.
Criticism and reforms
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.
Legacy
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.