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The government introduced the new industrial licensing policy in 1970 on recommendation of the Dutt Committee. As per this new policy, Industries were divided into 4 parts – Core sector, Middle Sector, Non-Core Heavy Investment Sector or Joint sector, Delicensed Sector. The major outcome of this policy was that the role of the large business houses was confined to the core, heavy and export oriented sectors.

Objectives of Industrial Policy in India

  • Liberalizing the industry from the regulatory devices such as licenses and controls.
  • Enhancing support to the small scale sector.
  • To maintain a sustained growth in productivity
  • To enhance gainful employment
  • To achieve optimal utilization of human resources
  • To attain international competitiveness
  • To transform India into a major partner and player in the global arena.
  • Increasing competitiveness of industries for the benefit of the common man.
  •  Ensuring running of public enterprises on business lines and thus cutting their losses.
  • Providing more incentives for industrialization of the backward areas, and
  • Ensuring rapid industrial development in a competitive environment
  • Promoting workers participation in management, enhancing their welfare and equipping them to deal with inevitability of technological change.

1970 policy:

  • This act was hallmark of infamous ‘license quota permit’ system.
  • Companies having more than specified value of assets needed to take permission/license before any expansion and commencement of operations.
  • Its objectives were:
    • To prohibit monopolistic and restrictive trade practices (except by government)
    • To prevent concentration of economic power in few hands
    • To control the Monopolies
    • To protect consumer Interest
  • MRTP Act became effective in June 1970. Emphasis was placed on increasing productivity of industry. There were major amendments in 1980’s and a MRTP commission was also setup.
  • This act was incompatible with new economic policy after 1991 and consequently, it was repealed in 2009. Now Competition Act and Competition Commission of India are in place instead.

Need of New Manufacturing Policy:

  • The contribution of manufacturingto GDP in 2017 was only about 16%, a stagnation since the economic reforms began in 1991.
  • The contrast with the major Asian economies is significant. For example, Malaysiaroughly tripled its share of manufacturing in GDP to 24%, while Thailand’s share increased from 13% to 33% (1960-2014).
  • In India manufacturing has never been the leading sectorin the economy other than during the Second and Third Plan periods.