The new Janata Government which came to power at the centre in March 1977.

It announced the New Industrial Policy 1977 with an emphasis on cottage and small scale sector.

 The main elements of the policy were:

1] Development of the small scale sector – the small scale sector was classified into three categories:

a] Cottage and Household Industries – which provide employment on a large scale.

b] Tiny sector – included industries which invested upto Rs 1 lakh in machinery and equipment and were situated in towns with a population of less than 50,000.

c] Small scale industries – comprising industrial units with an investment upto Rs 10 lakhs and in case of ancillaries with an investment in fixed capital upto Rs 15 lakhs.

The measures suggested for the promotion of small scale and cottage industries included the following:

a] The list of items reserved for this list was increased from 180 to 807 in May 1978.

b] A “District Industries Centre” was set up to provide services like credit facilities for small, villages and cottage industries.

c] To improve the productivity and earning of Khadi spinners and weavers.

d] Special arrangements were made to ensure an effective and coordinated approach for the development of the small scale sector in order to improve productivity and earnings capacity of their workers and bring about development of the rural areas.

2] Areas for large scale sector – The large scale sector was to meet the basic minimum needs of the people through wider dispersal of small scale and village industries and to the strengthening of the agricultural sector. Therefore, the industries which were encouraged were

a] Basic industries, essential for providing infrastructure as well as for development of small scale and village industries such as steel, non-ferrous metals, cement, oil refineries.

b] Capital goods industries for meeting the machinery requirement of basic industries as well as small scale industries.

c] High technology industries which required large scale production and which were related to agriculture and small scale sector and which were considered essential for the development of the economy such as, fertilizers, pesticides and petrochemicals etc.

d] Other industries which were outside the list of reserved items for the small scale sector and which were considered essential for the development of the economy such as machine tool, organic and inorganic chemicals.

Small scale industries were encouraged to increase employment opportunities and reduce concentration of economic power.

3] Approach towards large business houses – To restrict the concentration of economic power funds of the public sector financial institutions would be largely available for the small scale sector (large scale sector would largely have to rely on their own internally generated resources)

4] Expanding role for the public sector – The resolution specified that along with controlling basic industries the public sector would also be a stabilizing force for maintaining essential supplies for the consumer encourage development of ancillary industries and make available expertise in technology and management in small scale and cottage industries and thereby promote decentralized production.

5] Promotion of technological self-reliance – Government recognized and promoted inflow of technology in high priority areas where Indian skills and technology was not adequately developed.

6] Approach towards foreign collaboration – In areas where foreign technological knowhow was not needed existing collaboration would not be renewed. Also where it was necessary Government may consider a major or full control of foreign companies.

7] Approach towards sick units – According to this resolution though Government would continue to protect the sick units, this process could not continue indefinitely.

This policy was short lived as the Congress which came to power in January 1980 announced its new industrial policy resolution in July 1980.

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