In the post-World War II period India was probably the first non-communist developing country to have instituted a full-fledged industrial policy. The purpose of the policy was to co-ordinate investment decisions both in the public and the private sectors and to seize the ‘commanding heights’ of the economy by bringing certain strategic industries and firms under public ownership. This classical state-directed industrialisation model held sway for three decades, from 1950-1980. The model began to erode in the 1980s. Following a serious external liquidity crisis in 1991 the model was fundamentally changed.
it was the change away from India’s traditional industrial policy in 1991 towards liberalisation, de-regulation, and market orientation that ushered in a new era of faster economic growth and one which promises greater prosperity for the Indian people. To fulfil its promise, further liberalization is required both in India’s domestic economy and in its external economic relations (for example, further privatization, capital account liberalization, increasing foreign direct investment (FDI)).
2. Industrial Policy in India’s present and Future:
Post- 1980 industrial policy changed form and became much more pragmatic. Basically instead of planning inputs and outputs for each firm and each industry, the government adopted indicative planning. However, it did not abandon instruments of industrial policy instruments such as very high tariffs by international standards and restrictions on portfolio and foreign direct investment. In the new circumstances, with the opportunity to exploit India’s lead in the IT industry, as well as other structural challenges facing the economy , a further change in the industrial policy is called for.To meet the new challenges and opportunities, It should be a much more vigorous approach than the present one. Policy has not just been confined to upgrading the industrial structure and promoting its industrial...