Indian Economy · Topic 19 of 20
India's industrial policy evolution since 1991 and its effect on industrial growth
The Basics
Industry means converting raw material into finished goods. It covers any manufacturing activity that makes needed goods. It is one of the three sectors of the economy. The other two are agriculture and services.
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The New Industrial Policy, 1991 ended licensing for most industries. Licensing meant firms needed government permission to produce goods. The government announced this policy on 23 July 1991.
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Industrial delicensing means removing a rule. The rule said: get government permission before starting a factory.
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Delicensing removed the old licence system. This note looks at what happened next.
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Disinvestment means government sells shares in public sector companies.
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A Micro, Small and Medium Enterprise (MSME) is a business. It is classified by its investment in plant and machinery or equipment, and by its annual turnover. An MSME can make goods or provide services. One law covers both types. So a small factory and a small service firm both count as MSMEs.
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The National Manufacturing Policy, 2011 is a government plan. It aims to raise manufacturing's share in the economy. It also creates large zones for industry.
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Make in India is a government programme to make India a global hub for manufacturing. It also promotes research and innovation. It encourages Indian and foreign companies to manufacture goods inside India. This helps India join global supply chains, the networks that make and move goods across many countries.
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The Small Industries Development Bank of India invests this fund only in venture capital funds. It does not give money directly to start-ups. Those venture capital funds then choose which start-ups to fund.
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Ease of Doing Business reforms simplify rules for businesses. They cut down approvals and inspections. This makes starting and running a business faster and cheaper. These reforms aimed to improve India's rank in the Doing Business report. This was an annual publication of the World Bank Group. It ranked countries on rules that help or hurt business activity. The report measured areas such as starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency, and labour market regulation.
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Exit policy means easy rules for closing a sick company.
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Industry has many parts. A few big sectors give most of the output, exports and jobs. Steel, aluminium and textiles are three such sectors. Each one has its own strengths and problems.
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Intellectual property is an idea, invention, design, brand name or creative work. A person or company owns it, like owning land. A legal right over it is called an Intellectual Property Right (IPR). For example, a company owns its logo as a trademark. Without such rights, anyone could copy an invention or brand. Then the real creator gets no reward. So people have less reason to invent new things. Liberalisation means opening the economy to more competition. India began liberalisation reforms in 1991. Firms then faced rivals from India and abroad. So firms needed to protect their brands and new ideas. Strong intellectual property protection stopped rivals copying them.
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CSR means a company spends part of its profit on social welfare. For example, a company may build schools or clean water systems near its factory. In India, this is not voluntary. It is a legal duty for large companies.
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The services sector is also called the tertiary sector. It covers work that does not make a physical good. Trade, transport, banking, tourism, information technology, education, health, and real estate are examples. Gross Value Added (GVA) is the value of goods and services made, minus the cost of inputs used. Services now form the largest part of India's GVA.
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Digital India is a government plan. It makes government services available online. It builds internet networks across the country. This means forms, payments and services move from offices to phones and computers.
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E-commerce means buying and selling goods and services online. For example, buying a shirt on a website is e-commerce. There is no shop or seller in person. This is called direct marketing. E-business is a wider idea. It means using computers and the internet to run a firm's work. This includes dealings with suppliers and customers too.
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Champion Sectors are industries picked for extra government support. The government believes these industries can become global leaders.
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