Posted by Anjali Kaur on May 21, 2020

Industrial Policy Resolution:1956

So far, we have seen the situation of the industrial sector during the planning period. Let’s discuss the Government measures to improve the performance of the industrial sector.

Industrial Policy Resolution, 1956 was a declaration on the major role played by the Government sector in the process of the growth of industrialization. The Industrial Policy Resolution of 1956, formed the basis of the second five-year plan (1956-1961) of the planning commission. Under this, industries were classified into three categories, which are popularly known by the principal elements of IPR-1956:

  1. The three-fold classification of industries: This element divided industries into three categories namely;
  • Schedule A: Industries that are exclusively owned by the state.
  • Schedule B: Industries can be under the private sector, but the starting of the new units will be under the public sector control.
  • Schedule C: Some industries will be under the private sector, but these have to take a license from the public sector.

2. Industrial License: This is also known as Permit License Raj, under this element, no new industry was allowed to be set up unless a license was obtained from the Government. This policy was used for promoting industrialization in backward regions because it was easier to obtain a license if the industrial unit was established in an economically backward area to promote regional equality. Even any existing industry had to obtain a license for expanding or diversifying its production.

3. Industrial Concessions: Industrial units were given concessions such as tax benefits and electricity at a lower rate to encourage establishing their units in the country’s backward region. This was done to promote regional equality.

For your reference:

Indian Economy between 1950 to 1990, Class XII from Anjali Kaur Suri

To summarize, IPR-1956, focused on the role of Government in boosting the industrial sector by classifying them into different categories, imposing licensing as a mandatory measure to open or expand any industry and providing concessions like discounts to lure more industries setting up in the backward region.

Note: On April 30, 1948, the Government of India passed the first Industrial policy resolution(IPR, 1948).

It divided the industrial sector into four broad groups:

  1. Group 1 – Basic and strategic industries like arms and ammunition, atomic energy, railways, etc. Further, these were in the exclusive monopoly of the State.
  2. Group 2 – Key industries like coal, iron and steel, shipbuilding, manufacture of telegraph, telephone, mineral oils, etc. The State took over the exclusive responsibility of all future developments in these industries. Also, the existing industries were allowed to function for 10 years. After the end of the tenure, the State would review and take adequate decisions.
  3. Group 3 – A total number of 18 industries including automobiles, tractors, machine tools, etc. The private sector was allowed to open these industries subject to government regulation and supervision.
  4. Group 4 – All the remaining industries. However, the government can participate or intervene if the need arises.

Photo by Avi Waxman on Unsplash

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