Industrial Development in India - After Independence

What was the status of industry and Trade at the time of Independence?

There were very few industries at the time of Independence

They were mainly:

Cotton and Jute Textiles

Iron and Steel Firms - In Jamshedpur and Kolkata

There were not much contribution of other industries

There was a need for widening industrial base

What was Industrial Policy followed by Govt after Independence?

As per Industrial Policy Resolution of 1956,

Industries were classified into 3 Categories:

Schedule A Industries Exclusively Owned by Govt

Schedule B Industries Started by Govt Sector but Supplemented by Private Sector

Schedule C Industries Exclusively Owned by Private Sector

(These were controlled by state under Industries (Development and Regulation Act 1951)

What was License Raj System

Note-License Raj was applicable in Private Sector Industries (Category 3 industries)

In Category 3 Industries, which were allowed to operate in Private Sector

Strict control was maintained by system of license

As per this System,

License was required to be obtained from Govt to open new industries

License was required even to increase production or diversify into new products

It was easier to obtain license in backward area

Also govt provided tax concessions and cheaper electricity in these areas

This was done to remove regional inequality

What was the role of Public Sector in Industrial Development?

Public Sector was given a leading role in Industrial Development

because of the following reasons:

1 Shortage of Capital with Private Sector

Private enterpreneurs do not have the required capital to make the investments

So, government had to make these investments through Public Sector Undertakings (PSU)

2 Lack of Incentive for Private Sector

Indian Market was not big enough to encourage private industrialists to take up major projects

3 Objective of Social Welfare

The objective of social welfare could be achieved only through the direct participation of the government

What is Small Scale Industry?

Small Scale Industry is defined as a unit which has investment upto 5 lakhs in assets of industrial unit

This limit is currently 1 Crore

Why are Small Scale Industries beneficial for economy?

They are labour intensive industries (They employ more labour than machines)

Hence,they provide more employment opportunities

Also they help in promoting rural development by supplementing the income of farmers

What measures were taken by Govt to promote Small Scale Industries

Reservation of products

A number of Products were reserved for Small Scale Industries

It means only Small scale industries can manufacture these products and not big industrial firms

Lower Excise Duty (Less taxes)

There were special scheme in Excise for Small Scale industries and less rate of excise duty tax was charged

Bank Loan at Lower Rate of INTEREST

This was done to ensure Small Scale Industries had enough funds to operate and increase production

What were drawbacks of India's Industrial Policy?

India developed Industrial Policy focused on Developing Large Public Sector Enterprises (Example SBI, ONGC,

GAIL, Modern Bread)

Monopoly of PSU

Many sector had monopoly of PSU

Example- Telecommunication Service were under BSNL (There was no Airtel, Reliance etc)

Customers had to suffer a lot because these PSU were inefficient because of lack of competition from private sector

Public Sector Producing Goods which private Sector could make

Example-Govt was manufacturing bread (Modern Bread) which private sector could easily make

No Distinction between what goods Public Sector can make and what Private Sector can make

PSU Suffered losses

PSU were inefficient in their working and suffered losses

They were burden to govt in budget, still they continued to exist

Problem of License Raj

Private Sector had to take licenses to start business

Those businessman who had good connections and lobbied with different ministries got license

They focused more on making connections rather than improving quality of their products

No Incentive to Improve Goods

Since, there was no foreign competition, Indian industry did not improve the quality of products

It is because they had a captive market

Indian Customer suffered as they had to purchase whatever Indian customer produced

NCERT Questions

Question 12

Why was public sector given a leading role in industrial development during the planning period?

Question 16

Though public sector is very essential for industries, many public sector undertakings incur huge losses and are drain on the economy’s resources.

Discuss the usefulness of public sector undertakings in the light of this fact.

Question 18

Why and how was private sector regulated under the IPR 1956?

MCQ Other Books

Question 1

In the following questions, select the correct answers:

Schedule ______ Comprise of industries which would be exclusively owned by the state :

1. A
2. B
3. C

D. None of these

Question 2

The first industrial Policy Resolution in Independent India was introduced in the year….................

1. 1948
2. 1950
3. 1954
4. 1956

Question 3

In how many categories industries were divided in Industrial Policy, 1956?

1. 3
2. 2
3. 5
4. 4

Question 4

Identify the correctly matched pair from Column A to that of Column B:

1. 1 – (a)
2. 2 – (b)
3. 3 – (C)
4. 4 – (d)

Question 5

Industries (Development and Regulation) Act was implemented in:

1. 1951
2. 1952
3. 1953
4. None of the above

Question 6

Identify the correctly matched pair from Column A to that of Column B:

1. 1 – (a)
2. 2 – (b)
3. 3 – (c)
4. 4 – (d)

Question 7

Process of industrialization was started in India in:

1. First Plan
2. Second Plan
3. Third Plan
4. Fourth Plan

Question 8

Problem of Small-Scale Industries is:

1. Shortage of raw material
2. Inadequate use of capacity
3. Shortage of capital and credit
4. All of the above

Question 9

In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R).

Mark the correct choice:

Assertion (A): Small Scale Industries face a shortage of capital.

Reason (R): The government is reluctant in providing them any assistance and loans.

A. Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).

C. Assertion (A) is true, but Reason (R) is false.

D. Assertion (A) is false, but Reason (R) is true.