Page 80 - DMGT401Business Environment

Unit 2: Industrial Policy and Regulatory Structure

Notes
excise duty with older machinery. The new economic policy reforms of the nineties have
changed the situation drastically by reducing the importance of fiscal concessions on the
one hand and by raising the market competition on the other. Industry is now facing
direct competition from the international players. In order to deal with the situation,
Indian component manufacturers including the dominant players have to improve their
technology as also quality and have to get into the global supply chains of the vehicle
manufacturers or into the dealer network for the replacement market. In particular, small-
scale units have to phase out their older and manual machinery and to go in for new and
automatic machinery as also to improve their organizational methods so as to supply
quality products in time.
Questions
1. How has the SME progressed in India?
2. Critically analyse the progress of garments and automotive industry.

3. Do you think Globalisation has any role in development of SMEs?

2.6 Summary

Industrial policy is one of the important government documents, which has a lasting
impact on a country's industry. It is a policy document prepared by the government which
states how the industrial environment of the country will take shape in the future.
Before independence, the industrial policy of British India was formulated with the sole
purpose of exploiting the resources of the country for Britain's advantage. Soon after
independence, in 1948, India's first industrial policy was unveiled, and in 1956 a second
and more comprehensive industrial policy was announced.
Industrial policy strives for a balanced regional development, i.e., it tries to ensure that
industries are not clustered in specific areas but develop in all parts of the country and to
ensure that the scarce resources of the nation are utilised in the interest of the nation and
not in the interest of profit.
The first industrial policy in 1948, itself paved the path for mixed economy in the nation.
It accepted the existence of both “public and private sectors in the economy. It assigned a
progressive role for the State, for investment in industrialisation, and in regulating the
private sector.
The draft of the 1956 industrial policy was very comprehensive. This laid emphasis on the
establishment of a socialist pattern of society. This policy also emphasized that industrial
development of the country should be guided by the Directive Principles of the
Constitution.
In March 1977 the first non-Congress government was at the centre. The Janata Party
assumed power and Morarji Desai, a die-hard Gandhian, became the Prime Minister. The
new government declared a new industrial policy.
The industrial policy of 1977 stated that funds of the public sector financial institutions and
banks should be devoted to the growth of the small scale and medium scale units.
The New Industrial Policy (NIP) was a big departure from the erstwhile industrial policy.
When all the earlier industrial policies talked about how to regulate the private sector in
a so-called national interest, NIP talked about deregulation and delicensing.

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