The Industrial Policy of 1980 was brought in so as to promote the concept of economic

federation, increase the efficiency of the public sector and reverse the trend of industrial
production of the past years.

Need For Industrial Policy

A well defined industrial policy is essential for the economic development of a nation as:

 It helps to maintain a sustained growth in productivity;

 Helps increase gainful employment;
 It aids to achieve optimal utilization of human resources;
 Helps in achieving international competitiveness; and
 It helps to transform the nation into a major partner and player in the international
platform.

Objectives of Industrial Policy Resolution 1980

 Industrial Policy Resolution of 1980 intended to promote the concept of
economic federation.
 It focused on raising the efficiency of the public sector and reversing the trend
of industrial production of the past years and
 It believed in faith in the Monopolies and Restrictive Trade Practices
(MRTP) Act and the Foreign Exchange Regulation Act (FERA).

Features of Industrial Policy Resolution 1980

 The government focused on increasing the efficiency of public sector
undertakings. It was proposed to strengthen the management and develop
management cadres in the field of finance, marketing, etc for PSUs.
 Promotion of economic federalism by setting up of a few nucleus plants in
each district, identified as industrially backward, to generate as many ancillary
small and cottage industries for their development.
 In order to facilitate the development of small units, the government revised the
definition of small units, for example in tiny units limit of investment was raised
from Rs 1 lakh to Rs 2 lakhs.
 Promotion of rural industries, for example, handlooms, handicrafts, and Khadi,
received greater attention so that faster growth of the rural areas is made
possible.
 Management of sick units would be taken over only in exceptional cases on
grounds of public interest where other means for their revival are not feasible.

Conclusion
The Industrial Policy Resolution 1980 focused on a pragmatic approach and measures
for increasing industrial production. However, this policy ignored to reduce the
concentration of economic power in the private sector, etc. It focused on a more capital-
intensive pattern of development and therefore attempted different measures of
liberalization for helping the large sector. It downplayed the employment objective.

What is New Industrial Policy 1991?

 The industrial policy is a series of standards and measures implemented by the
government to track the development of industries and related sectors to
promote India’s economic growth and development.
 The New Industrial Policy, of 1991 had the main objective of providing facilities
to market forces and increasing efficiency.
 The government undertook it to take measures to improve the competitiveness
and capabilities of various industries.
 The government undertook various measures to boost the growth of
industries such as it allowed domestic firms to import better technology to
improve efficiency and to have access to better technology.
 The Foreign Direct Investment ceiling was increased from 40% to 51% in
specific sectors.

Need for New Industrial Policy in 1991

India was forced to implement a New Industrial Policy in 1991, including privatization,
liberalization, and globalization for the following reasons:

 Mounting Fiscal Deficit: As our planned economy developed, expected

spending constantly exceeded expected revenue, leading to a growing fiscal
deficit. Compared to 5% in 1981–1982, it climbed to 8.5% of GDP in 1991.
 Government has to undertake interest-bearing public borrowings to cover this
shortfall.
 Adverse Balance of Payment: A deficit in the balance of payments occurs
when foreign payments exceed foreign receipts. It increased from Rs. 2214
crores in India in 1980–81 to Rs. 17367 crores in 1990–91.
 Thus, the government was forced to borrow money from outside to cover this
deficit.
 Gulf Crisis: The Gulf Crisis refers to the 1990–1991 Iran–Iraq war. The result
was a dramatic increase in petrol prices in the global market. Despite a dramatic
decline in exports to Gulf countries, import costs increased significantly.
 The status of the balance of payments became much more severe. The
government was obligated to announce the new industrial plan at this time.
 Fall in Foreign Reserves: Foreign exchange reserves briefly dipped to a level of
2400 crores in 1990–1991; at that time, there was just enough money to cover
three weeks' worth of imports.
  Due to the severity of the situation, Chandra Shekhar's government was forced to
mortgage its gold reserves to pay off the interest and international debts.
 India was compelled to implement a fresh set of policies to build up its foreign
exchange reserves.
 Rise in Prices: When the inflation rate increased from 6.7% to 16.7%, the
situation deteriorated significantly. Poor performance of public sector enterprises:
From 1951 to 1991, the Government of India greatly enlarged the public sector,
yet the results were insignificant. So, moving it to the private sector from the
public sector was necessary.

Objectives of New Industrial Policy 1991

 The primary objectives of the New Industrial Policy of 1991 were to promote
efficiency and provide facilities for market forces.
 The bigger roles were played by
o L – Liberalization (Reduction in Government Control.)
o P – Privatization (Increasing the Private Sector's Role & Scope.)
o G – Globalisation (Economic Integration between India and the rest of the
world)

Features
Features of New Industrial Policy 1991
 Reduction in Government’s Monopoly: Government monopoly was reduced
by decreasing the number of industries reserved for the public sector from 17 (as
per 1956 policy) to 8 industries such as arms and ammunition, atomic energy,
coal, mineral oil, mining of iron ore, manganese ore, gold, silver, mining of
copper, lead, etc.
 Abolition of Industrial Licensing: The Industrial Licensing Policy abolished the
industrial licensing given to all industries except for the 18 industries, which was
further reduced to 6 industries in 1999. These included drugs and
pharmaceuticals, hazardous chemicals, explosives such as gunpowder and
detonating fuses, etc.
 Provision of Foreign Companies as a Major Stake: It allowed foreign
companies to have a majority stake in India. For example, in 47 high-priority
industries, up to 51% of FDI was allowed.
 Provision to Non-Residential Indians (NRIs): Non-Resident Indians (NRIs)
were allowed 100% equity investments on a non-repatriation basis in all activities
except the negative list.
 Internal Agreements on Foreign Technologies: Various international
agreements were made about foreign technologies. For example, permitting
high-priority industries up to a lump sum payment of Rs. 1 crore, with 5% royalty
for domestic sales and 8% for exports.
 Restructuring of Portfolio Public Sector Investments: Restructuring the
portfolio of public sector investments, for example, the PSUs which were unlikely
 to be turned around were to be referred to the Board for Industrial and Financial
Reconstruction (BIFR).
 Removal of Prior Approval from Central Government: To remove the
requirement of prior approval of the Central Government for the establishment of
new undertakings, expansion of undertakings, merger, amalgamation, etc MRTP
act was to be amended.
 Changes in the Standard for Small Units: The criteria for a tiny unit was
changed to a unit having an investment limit of Less than Rs. 5 Lakh.
 Establishment of National Renewal Fund: As per this policy, the government
announced the establishment of a National Renewal Fund (NRF) to ensure a
social safety net for labor.

Impact
Impact of New Industrial Policy 1991
 Removal of Restrictions Regarding License, Permit, And Quota Raj: It
removed the restrictions experienced during the license, permit, and quota raj. It
intended to liberalize the economy by removing bureaucratic restrictions on
industrial growth.
 Public Sector’s Role And Disinvestment: The role of the public sector was
decreased and two sectors were reserved for the public. The process of
disinvestment was started in PSUs.
 Entry of Multi-National Companies: By removing restrictions it enabled the
entry of multinational companies, privatization, removal of asset limits on MRTP
companies, liberal licensing policy, etc.
 Increment in Domestic And Foreign Investment: Domestic, as well as foreign
investment, increased in almost every sector of the economy.
 Increment in Exports And Related Activities: Increased efforts were
undertaken to increase exports such as Export Oriented Units (EOU), Export
Processing Zones (EPZ), Agri-Export Zones (AEZ), etc emerged.
 Establishment of A Separate Ministry: To better resolve the issues of MSMEs
in 2006 a new act and separate ministry were established.

Conclusion
Conclusion
Various steps undertaken by the New Industrial Policy 1991 led to the abolition of
industrial licensing, dismantling of price controls, dilution of reservations for small-scale
industries and the virtual abolition of the monopolies law, relaxation of restrictions on
foreign investment, etc. All such steps helped in the removal of restrictions and
benefitted in economic growth and development of the country.
 The public sector in India has been playing a very significant role since the country’s independence.
It has always been aimed at achieving certain socio-economic objectives. However, its performance
over the years has not been up to the mark. This article provides an overview of the public sector in
India, its objectives, importance, performance, and problems.

What is the Public Sector

The public sector is that part of the economy which is owned and controlled by the government. The
primary objectives of the public sector are to provide basic goods and services to the citizens,
promote economic development, and protect the interests of weaker sections of society.

The public sector in India comprises both Central Government and State Governments. The Central
Government includes ministries, departments, and public enterprises. The State Governments
include state-level ministries, departments, and public sector undertakings.

Importance of the Public Sector in the

Economy
The public sector is important for the following reasons:

 It plays a key role in the economic development of a country

 It helps in providing essential services to the citizens
 It provides employment opportunities
 It helps in the development of infrastructure
 It encourages private investment
 It promotes exports
 The public sector is the backbone of the Indian economy and it plays a pivotal role in its
development.

Objectives of Indian Public Sector:

The objectives of the public sector in India can be divided into three categories:

Social Objectives: The public sector aims at providing basic goods and services to the citizens. It
also provides employment opportunities and promotes economic development.

Economic Objectives: The public sector plays a key role in the development of infrastructure and
encourages private investment.
Political Objectives: The public sector protects the interests of weaker sections of society and
promotes exports.

The public sector has always been aimed at achieving certain socio-economic objectives. However,
its performance over the years has not been up to the mark.

Public Sector Development since

Independence:
The public sector undertakings (PSUs) have also made significant progress since their inception.
The PSUs have contributed immensely to the development of infrastructure and the promotion of
industrialization in the country. The eight core industries, which include coal, steel, cement,
electricity, crude oil, refinery products, natural gas, and fertilizers, account for about 38% of the total
industrial production

in India. These eight sectors are dominated by the public sector. The PSUs have also made
significant contributions to the exports of the country.

The public sector has always been an important part of the Indian economy. However, its
performance has not been up to the mark.

Major Problems Faced by Indian Public

Sector:
There are several problems faced by Indian public sector enterprises that can be classified into three
categories: managerial problems, financial problems, and operational problems.

Managerial Problems: The public sector is plagued by red-tapism, bureaucracy, and corruption.
These problems have led to inefficiency and poor quality of products and services.

Financial Problems: Public sector enterprises are often dependent on the government for their
financial needs. This dependence has led to a lack of autonomy and accountability.

Operational Problems: Public sector enterprises are often hampered by outdated technology and
processes. This has led to low productivity and high costs.

The public sector in India has been facing several problems over the years. These problems have
adversely affected its performance and efficiency.
 Role of Public Sector in Economic
Growth of India:
The public sector plays a key role in the economic development of India. It accounts for about 14%
of the country’s GDP and employs over 20 million people. The public sector undertakes a variety of
activities that include infrastructure development, employment generation, and the promotion of
exports.

The public sector has always been an important part of the Indian economy. However, its
performance over the years has not been up to the mark.

The steps which need to be taken by the Public Sector to be Effective and Efficient are:

 The public sector needs to be more efficient and effective.

 There is a need for better planning and coordination between the various agencies of the
government.
 The public sector needs to focus on its core competencies and outsource non-core activities.
 There is a need for more transparency and accountability in the functioning of the public sector.
 The public sector needs to adopt new technologies and processes to improve its efficiency.
 The public sector needs to be more customer-oriented in its approach.
 The public sector needs to reduce its dependence on the government for financial assistance.
 The public sector needs to focus on its strengths and improve upon its weaknesses.

Conclusion
The Indian public sector has been facing several challenges in recent years. These challenges have
adversely affected the performance and efficiency of the public sector. To overcome these
challenges, the public sector needs to undertake many reforms. These reforms will help the public
sector regain its lost glory and become an engine of growth for the country once again.