THE SECOND INDUSTRIAL POLICY RESOLUTION OF 1956.
Since the adoption of IPR 1948 significant developments took place in India.
26 th November 1949 – The constitution of India adopted with its “directive principles” of state policy by the Constituent Assembly.
26th January 1950 – Indian constitution came into effect.
1951 – Planning adopted on an organized basis.
1951 to 1956 First five year plan.
1954 December – Parliament accepted the socialist pattern of society as a basic aim of social and economic policy.
This necessitated the re-statement and reformulation of industrial policy in clearer terms and therefore the Government announced the second industrial policy resolution in April 1956 replacing the resolution of 1948.
The industrial policy resolution of 1956 was described as the economic constitution of India based on its political counterpart The constitution of India. The objective of a socialist pattern and mixed economy was given expression terms of industrial development through this resolution.
Important objectives of the 1956 resolution.
1] Acceleration of the rate of industrialization, in particular, the development of heavy industries.
2] Expansion of the public sector, especially I the field of infrastructure and basic and capital goods.
3] Wide diffusion of ownership and management in private industry, including the prevention of monopolies and concentration of economic powers.
4] Expansion of cottage, village and small scale industries.
5] Balanced industrial development and
6] Dispersal of industries in the backward areas.
Important provisions of the 1956 resolution.
I] New classification of industries into three categories
Schedule A – consisted of 17 industries which were to be the exclusive responsibility of the state.
They were arms and ammunition, atomic energy, iron and steel, heavy casting and forgings of iron and steel, heavy machinery required for iron and steel production, for mining for manufacturers, heavy electrical industries, coal, mineral oils, mining, iron ore and other important minerals like copper, lead and zinc, air craft, air transport, railway transport, ship building, telephone, telegraph and wireless equipment, generation and distribution of electricity.
Schedule B – consisted of 12 industries which were to be progressively state owned by the state and in which state would generally set up new enterprises, but in which private enterprises would be expected only to supplement the effort of the state.
They were other mining industries, aluminium and other non ferrous metals not included in schedule A, machine tools, ferro alloys and tool steels, the chemical industry, antibiotic and other essential drugs, fertilizers, synthetic rubber, carbonization of coal, pulp, road transport and sea transport.
Schedule C – consisted of all the remaining industries and their future development would, in general be left to the initiative and enterprise of the private sector.
These industries had to fit into the framework of the social and economic policy of the state and be subject to control in terms of the Industries (Development and Regulation) Act and other relevant legislation’s.
In spite of this clear cut classification of industries they were not water tight compartments. Exceptions cold be made. Though the state was now to act as a senior partner unlike under 1948 policy, the public and the private sector were still expected to work closely together. The basic objective was to create a mixed economy in India.
II] Fair and non discriminatory treatment for the private sector – In order that the private sector may feel confident and function efficiently the state was to facilitate and encourage the development of industries in the private sector eg transport power and other services. The state would adopt suitable fiscal and monetary measures, provide financial and other special assistance and give a non discriminatory treatment to both public and private sector enterprises.
III] Encouragement to village and small scale enterprises – The state would facilitate and encourage village and small scale enterprises by restricting the volume of production in the large scale sector, differential taxation, direct subsidies, reservation of items of production etc. The state would concentrate on measures designed to improve the competitive strength of these enterprises and constantly improve and modernize the technique of production.
IV] Removal of disparities – The state emphasized the need for reducing the regional disparities in development which would ensure that the benefits of industrialization are experienced by the whole nation, A balanced and co ordinate development rural and urban areas, agricultural sector and industrial sectors would improve the overall standard of living.
V] The need for provision of amenities to labour – The resolution recognized a socialist democracy where labour is a partner in the common endeavor of development and should participate in it. The policy laid stress on improving their living and working conditions, joint consultations, participation in management whenever possible and improvement in the efficiency of labour.
VI] Attitude to foreign capital – The Government attitude to foreign capital was the same as was enunciated in the resolution of 1948.