Importance of industry
Industry plays an important role in the prosperity and development of a country.
1] Source of employment
Employment is an important source. It becomes important when agriculture is already overburdened and the labor force grows rapidly.
This labor force can get gainful employment only outside agriculture and at this time industry plays an important role.
2] Source of mechanized means of farming
Industry plays an important role in mechanization of farming. In farming machines like
1] Tractor
2] Thresher
The use of technology has become possible only due to the development and prosperity of industries.
It is because of mechanization in farming that India (for the second most populous country in the world) has been successful in producing enough food grains.
3] Development of infrastructure
Industrialization leads to development of infrastructure in the economy.
Industry expands in different parts of the country. With the expansion of industry, infrastructure facilities in the form of means of transport and communication, banking, insurance services etc. expand.
Industrial Policy of 1956 Manifesto of the major role of the state
It was announced by the Industrial Policy of 1956 that the government would play a major role in the process of industrialization.
1] Main features of industrial policy
1] Industrial Licensing
Made it necessary to obtain a license from the government to set up an industry in the private sector.
The basic idea behind the licensing policy was to encourage industries in backward areas of the country.
This was done to encourage regional equality
It was necessary to obtain a license to set up a new enterprise.
Existing enterprises were also required to obtain a license from the government to expand their production capacity.
2] Industrial concessions
Many types of exemptions were provided to private enterprises for setting up industries in backward areas of the country.
These concessions included
1] Tax holiday – exemption from payment of tax for a period of time
2] Electricity supply at concessional rates
Industrial concessions were intended to encourage regional equality.
Development of small scale industries
1] Development of large scale industry to create infrastructure facilities.
2] Development of small scale industry for social justice as well as employment opportunities.
At the beginning of planning in 1950, this industry was called a small scale industry in which the investment was not more than Rs 5 lakh.
Key features of the strategy of industrial development during the period 1050 – 1990
1] Public enterprises played a greater role in the process of industrialization.
2] Private enterprises had only a secondary role in the process of industrialization and that too under the Permit License Raj.
3] The process of industrialization focused on import substitution
4] It means that high priority was given to the production of such goods which were imported from the rest of the world. Its objective was to become self-reliant.
5] Large scale industry was to be developed to create a strong infrastructure in the country.
6] Small scale industry was to be developed to achieve the objectives of employment and equality.
Positive effects:-
1] Economic growth received a major boost. Industrial production increased significantly at about 6% per annum during the period 1950 – 1990.
2] The development of large-scale industry strengthened the structural structure of the Indian economy.
3] The development of small scale industries had a solid contribution in achieving the objective of development with social justice.
Negative effects:-
1] As a result of protection of domestic industry, the development of domestic industry was encouraged but it failed to achieve international level quality.
2] Saving foreign exchange through import substitution proved to be an efficient policy tool of the government.
Our foreign exchange reserves began to dwindle
By the end of 1990, these reserves reached their lowest level.
We had to pledge our gold reserves to the World Bank to get loans from abroad
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