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Pre-1991 Industrial policy (Protection to Indian industries (Partial…
Pre-1991 Industrial policy
Protection to Indian industries
Partial physical ban on imports of products + High import tariffs + Encourage local indus
Import substitution policy
Govt encouraged production of imported goods indigenously
Financial infrastructure
Development banks set up + ICICI, 1955. IDBI, LIC
Control over Indian industries
Highly regulated through legislations like Industrial licensing, MRTP Act, 1969. These restricted production, expansion and pricing of output of all kinds of industries in the country.
Regulations on foreign capital under FERA
Foreign Exchange and Regulation Act. It restricted foreign investment in a company to 40 %. This ensured companies with foreign collaboration remained in the hands of Indians.
Encouragement to small industries
Support measures for Credit, Marketing, Technology, Fiscal, Financial, Infrastructural.
Emphasis on public sector
PSU's established in key sectors. Huge investment in providing infra & basic facilities to industries.
Created climate for rapid industrial growth, broad based infra and basic industries i.e diverse industrial structure with self reliance on large no of items
Consumer goods industry replaced by Capital goods industry
Industrial investment in new industries + modern mgmt techniques + New class of entrepreneurs + New industrial centres + Constrcn of facilities like roads, power, commun.
Shortcomings like Industrial licensing system promoted Inefficiency + high cost economy. Licensing authorities promoting corruption and rent seeking resulting in pre-emption of entry of new enterprises and affecting competition.
Favoured large enterprises and discriminated against backward regions.