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Unit 16: Industrial Sector in Pre-Reform Period
Hitesh Jhanji, Lovely Professional University

Unit 16: Industrial Sector in Pre-Reform Period Notes

CONTENTS
Objective
Introduction
16.1 Industrial Sector in Pre-Reform Period
16.2 The Role of Industrialisation
16.3 Summary
16.4 Key-Words
16.5 Review Questions
16.6 Further Readings

Objective

After reading this Unit students will be able to:
• Discuss the Industrial Sector in Pre-Reform Period
• Explain the role of Industrialisation.
Introduction

The term ‘pre-reform period’ in Indian context means that the process of industrial policy reform
started in 1970s. During the 1970s and 1980s, automatic capacity expansions were permitted and a
few industries were delicensed in 1975. Moreover, systematic deregulation began in earnest in the
mid-1980s. One major change was taxation reforms which primarily related to the conversion of
multi-point excise duties into a Modified Value-Added Tax (MODVAT) in all sectors except petroleum
products, textiles and tobacco. However, this liberalisation was trivial and hence the intensive
industrial policy reforms were launched when the New Industrial Policy (NIP) statement of 1991
introduced. This policy announced reforms in regulations governing foreign investment, licensing,
small-scale sector industries, monopoly, and in public sector enterprises. The economic reforms of
1990s were unprecedented in their scope and magnitude. Therefore, the period before 1991 is known
as ‘pre-reform period’ and after 1991 is termed as ‘post-reform period’. However, the discussion with
regard to the industrial sector will have an emphasis on its performance during 1980s only.
16.1 Industrial Sector in Pre-Reform Period

The direction of industrial development in India made an early start with the introduction of the
Statement of Industrial Policy, 1945, the Industrial Policy Resolution of 1948, the enactment of the
Industries (Development and Regulation) Act, 1951, the First and Second Five Year Plan documents,
and the Industrial Policy Resolution of 1956. These were efforts of organised thinking. It may be
noted that the 1945 Statement of Industrial Policy is remarkable as a precursor of all the thinking that
became enshrined in the key industrial policy resolutions after independence.
The concept of industrial licensing was also included in this statement. At this point of time, special
emphasis was laid on the development of steel, heavy engineering, machine tools and heavy chemicals
industries in the economy. The active participation of the Government in the setting up of certain
important industries was also mooted in this industrial policy. A significant continuity is observed in
thinking between pre-independence and post-independence Government as reflected in the Industrial
Policy Resolutions of 1948 and 1956. The dominant view in development economics during 1950s
and 1960s was that the Government had to play an important role and it should undertake activities
that would compensate for market failure. The low growth of the economy persisted during 1970s. A
succession of Five Year Plans set forth a large number of economic policies controlling and directing

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