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investment in industrial ventures Although there was a category of required for the development of Indian industries left to the private sector, economy; nor was the market big the sector was kept under state enough to encourage industrialists to control through a system of licenses. undertake major projects even if they No new industry was allowed unless had the capital to do so. It is principaa license was obtained from the for these reasons that the erstwhile government. This policy was used for governments had to play an extensive role in promoting the industrial sector.promoting industry in backward In addition, the decision to develop theregions; it was easier to obtain a license if the industrial unit was Indian economy on socialist lines led established in an economically to the policy of the government backward area. In addition, such controlling the commanding heights of the economy, as the Second Five Year units were given certain concessions plan put it. This meant that the such as tax benefits and electricity government would have complete at a lower tariff. The purpose of this control of those industries that were policy was to promote regional vitalfortheeconomy.Thepoliciesofthe equality. private sector would have to be Even an existing industry had to complimentary to those of the public obtain a license for expanding sector, with the public sector leading output or for diversifying production the way. (producing a new variety of goods). This was meant to ensure that the Industrial Policy Resolution 1956 (IPR 1956): In accordance with the quantity of goods produced was not goal of the state controlling the more than what the economy commanding heights of the economy, required. License to expand the Industrial Policy Resolution of production was given only if the 1956 was adopted. This resolution government was convinced that the formed the basis of the Second Five economy required a larger quantity Year Plan, the plan which tried to of goods. build the basis for a socialist pattern of society. This resolution classified Small-Scale Industry: In 1955, the industries into three categories. The Village and Small-Scale Industries first category comprised industries which would be exclusively owned by Committee, also called the Karve the government; the second category Committee, noted the possibility of using small-scale industries for consisted of industries in which the promoting rural development. A private sector could supplement the efforts of the public sector, with the ‘small-scale industry’ is defined with government taking the sole reference to the maximum invest- responsibility for starting new units; ment allowed on the assets of a unit. the third category consisted of the This limit has changed over a period remaining industries which were to of time. In 1950 a small-scale be in the private sector. industrial unit was one which invested INDIAN ECONOMY 1950-1990 29 Reprint 2026-27