Chapters :

Industry & Infrastructure – 02

Problems of British Rule:

  • The British rule stunted the growth of Indian enterprise.
  • The economic policies of British checked and retarded capital formation in India. The drain of wealth financed capital development in Britain.
  • Indian agricultural sector became stagnant and deteriorated even when a large section of Indian population was dependent on agriculture for subsistence.
  • The British rule in India led the collapse of handicraft industries without making any significant contribution to development of any modern industrial base.
  • Some efforts by the colonial British regime in developing the plantations, mines, jute mills, banking and shipping mainly promoted a system of capitalist firms that were managed by foreigners. These profit motives led to further drain of resources from India.


Important Industrial policies prior to 1991

India is the Asia’s third largest economy. The 70 years of Independence have brought a remarkable change in the socio – economic landscape of India.

Economic development of a country particularly depends on the process of industrialisation. At the time of Independence, India inherited a weak and shallow industrial base. Therefore during the post–Independence period, the Government of India took special emphasis on the development of a solid industrial base. The Industrial Policy Resolutions of 1948 and 1956 clearly stated the need for developing both small scale industries and large scale industries.

Industrial Policy Resolutions 1948

The Government of India recognized the significant contribution of industrialization. Therefore the Government of India declared its first Industrial Policy on 6th April 1948. The main importance of this policy was that
it ushered in India the system of mixed economy.

  1. Industries were classified into four groups such as public sector (strategic industries), public–cum –private Sector (key industries), and controlled private sector, private and co-operative sectors.
  2. This policy endeavoured to protect cottage and small scale industries.
  3. The central and state governments had a virtual monopoly in rail roads
    and exclusive rights to develop minerals, iron ore etc.
  4. The Government encouraged the significance of foreign capital for
    industrialization but the government decided that the control should
    remain with Indian hands.

Industrial Policy Resolution 1956


  1. The Industrial Policy of 1956 sought to give a dominant role to public sector. At the same time, it assured a fair treatment to the private sector.
  2. The Government would support and encourage cottage and small scale
    enterprises by restricting volume of production in the large scale sector by differential taxation or by direct subsidies.
  3. This industrial policy emphasized the necessity of reducing the regional
    disparities in levels of development.
  4. The Government recognized the need for foreign capital for progressive
    Indianisation of foreign concerns.

Industrial Policy Resolution of 1980


Meaning of Liberalization, Privatization and Globalization (LPG)

The triple pillars of New Economic Policy are Liberalization, Privatization and
Globalization (LPG)

Liberalization: Liberalization refers to removal of relaxation of governmental
restrictions in all stages in industry. Delicensing, decontrol, deregulation,
subsidies (incentives) and greater role for financial institutions are the various facets of liberalization.

Privatization: Privatization means transfer of ownership and management of
enterprises from public sector to private sector. Denationalization, disinvestment and opening exclusive public sector enterprises to private sector are the gateways to privatization.


Globalization refers to the integration of the domestic (Indian)
economy with the rest of the world. Import liberalization through reduction of tariff and non-tariff barriers, opening the doors to Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) are some of the measures towards globalization.

The following are the major changes after 1991:

  • Foreign exchange reserves started rising there was a rapid industrialization. The pattern of consumption started improving (or deteriorating).
  • Infrastructure facilities such as express highways, metro rails, flyovers
    and airports started expanding (but the local people were thrown away).
  • The benefits of this growth in some sectors have not reached the marginalized sections of the community. Moreover, the process of development has generated serious social, economic, political, demographic and ecological issues and challenges.
  • Development brings benefits, but which section gets this benefit depends on socioeconomic structure of the society. Despite all these initiatives in the Indian economy, a large section of the people of India continue to face basic economic problems such as poverty, unemployment, discrimination, social exclusion, deprivation, poor healthcare, rising inflation, agricultural stagnation, food insecurity and labour migration.
  • However, for these problems, Government policies alone cannot be blamed. As new institutional economists suggest, the values, believes, norms etc. of the individuals also matter.
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