Master10
Indian Economy Module

Industrial Policy, Disinvestment & Service Sectors

Industrial development in India shifted from the state-led import-substitution regime under the Industrial Policy Resolution of 1956 to market-driven liberalization following the landmark New Economic Policy of 1991. The reforms dismantled industrial licensing ('License Raj'), opened key sectors to Foreign Direct Investment (FDI), and promoted privatization and strategic disinvestment of Central Public Sector Enterprises (CPSEs). High-performing public enterprises are granted operational autonomy under Maharatna, Navratna, and Miniratna classifications. Industrial output is tracked through the Index of Industrial Production (IIP) and Eight Core Industries. Concurrently, the services sector, led by IT, telecommunications, and financial services, has grown to contribute over 50 percent of India's Gross Value Added (GVA).

Key Concepts & Examination Highlights

  • The Industrial Policy Resolution of 1956 classified industries into Schedule A (state monopoly), Schedule B, and Schedule C.
  • The New Economic Policy of July 1991 introduced Liberalization, Privatization, and Globalization (LPG reforms) under Prime Minister P.V. Narasimha Rao.
  • The Eight Core Industries (Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement, Electricity) account for 40.27% of IIP weight.
  • Maharatna status grants CPSE boards investment autonomy up to ₹5,000 crore without prior government approval.
  • Within the Eight Core Industries, Refinery Products has the highest weightage (28.04%), while Fertilizers holds the lowest weightage (2.63%) in the index.
  • The Index of Industrial Production (IIP) is compiled and released monthly by the National Statistical Office (NSO) with the base year 2011–12.
  • The Department of Investment and Public Asset Management (DIPAM), functioning under the Ministry of Finance, manages equity disinvestments and CPSE asset monetization.
  • To achieve Maharatna status, a CPSE must already hold Navratna status, be listed on an Indian stock exchange, and have an average annual net profit exceeding ₹5,000 crore over 3 years.
  • The Make in India initiative was launched on September 25, 2014, across 25 sectors to transform India into a global design and manufacturing hub.
  • Production Linked Incentive (PLI) schemes provide financial incentives on incremental sales of manufactured goods across 14 key strategic sectors like electronics, pharmaceuticals, and automobiles.
  • The MSME Development Act, 2006 (revised in July 2020) defines Micro enterprises (investment <= ₹1 cr, turnover <= ₹5 cr), Small (<= ₹10 cr, <= ₹50 cr), and Medium (<= ₹50 cr, <= ₹250 cr).
  • The services sector contributes over 53 percent to India's Gross Value Added (GVA), led by financial services, real estate, and information technology.
  • The first Industrial Policy Resolution of Independent India was announced on April 6, 1948, by Dr. Shyama Prasad Mukherjee, introducing the concept of a mixed economy.
  • The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, was repealed and replaced by the Competition Act, 2002, to shift the focus from curbing monopolies to promoting fair competition.
  • Industrial licensing was abolished in 1991 for all but a few industries related to security, strategic concerns, and hazardous chemicals (such as aerospace, defence, and industrial explosives).
  • Strategic Disinvestment refers to the sale of a substantial portion of government shareholding in a CPSE (50% or more) along with the transfer of management control to a private entity.
  • National Investment Fund (NIF) was created in 2005 to channel proceeds from the disinvestment of CPSEs towards social sector infrastructure and capital expenditure of profitable CPSEs.
  • National Manufacturing Policy (NMP) 2011 proposed establishing National Investment and Manufacturing Zones (NIMZs) to raise the manufacturing sector's share in GDP to 25%.
  • The Purchasing Managers' Index (PMI), compiled by S&P Global, is a monthly economic indicator where a reading above 50 indicates expansion and below 50 indicates contraction.
  • National Industrial Corridor Development Programme oversees the development of 11 multi-modal industrial corridors, including the Delhi-Mumbai Industrial Corridor (DMIC).
  • Udyam Registration portal was launched on July 1, 2020, by the Ministry of MSME to provide paperless, self-declaration-based digital registration for micro, small, and medium enterprises.
  • The Business Process Outsourcing (BPO) and Information Technology Enabled Services (IT-BPM) sector in India is championed by the industry body NASSCOM, founded in 1988.
  • The National Steel Policy 2017 targets achieving 300 million tonnes of crude steel manufacturing capacity in India by the year 2030–31.
  • National Logistics Policy (NLP), launched in September 2022, aims to reduce logistics costs in India from 14–16% of GDP to single digits and place India in the top 25 of the Logistics Performance Index.
  • PM Gati Shakti National Master Plan, launched in October 2021, integrates 16 ministries on a digital GIS platform for synchronized multi-modal infrastructure planning.
  • The Industrial Policy Resolution of 1948 established India's mixed economy framework, categorizing industries into state monopoly, state-controlled, and private enterprise spheres.
  • The Industrial Policy Resolution of 1956, often termed the 'Economic Constitution of India', divided industries into Schedule A (state monopoly), Schedule B (state-led expansion), and Schedule C (private sector).
  • The Statement on Industrial Policy of July 1991 abolished industrial licensing for all except 18 specified industries, dismantled the MRTP asset threshold, and permitted automatic FDI up to 51% in 34 high-priority sectors.
  • The Industries (Development and Regulation) Act, 1951 (IDRA) provides the statutory basis for industrial regulation, central control, and licensing of scheduled industrial undertakings in India.
  • The Eight Core Industries—Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement, and Fertilizers—carry a combined weight of 40.27% in the Index of Industrial Production (IIP).
  • Refinery Products holds the highest individual weight (28.04%) in the Index of Eight Core Industries, followed by Electricity Generation (19.85%) and Steel Production (17.92%).
  • The Index of Industrial Production (IIP) is compiled and released monthly by the National Statistical Office (NSO) with 2011-12 as the base year across Mining (14.37%), Manufacturing (77.63%), and Electricity (7.99%).
  • The Department of Investment and Public Asset Management (DIPAM), functioning under the Ministry of Finance, manages the central government's equity investments and disinvestment programmes in CPSEs.
  • Under the New Public Sector Enterprise (PSE) Policy of 2021, public sector enterprises are classified into Strategic Sectors (atomic energy, space, defence, transport, power, petroleum, banking) and Non-Strategic Sectors.
  • The National Monetisation Pipeline (NMP) was unveiled in August 2021 by NITI Aayog, targeting an aggregate asset monetisation potential of Rs 6.0 lakh crore over a four-year period (FY 2022-25).
  • The Production Linked Incentive (PLI) Scheme was launched across 14 key manufacturing sectors with an outlay of Rs 1.97 lakh crore to incentivize domestic value addition and global scale.
  • Under the revised MSME classification effective 1 July 2020, a Micro enterprise is defined by investment in plant and machinery not exceeding Rs 1 crore and annual turnover not exceeding Rs 5 crore.
  • A Small enterprise under the 2020 MSME definition has an investment limit up to Rs 10 crore and an annual turnover limit up to Rs 50 crore.
  • A Medium enterprise under the 2020 MSME definition has an investment limit up to Rs 50 crore and an annual turnover limit up to Rs 250 crore.
  • The Udyam Registration Portal is the official paperless, self-declaration platform launched by the Ministry of MSME on 1 July 2020 for formal registration of MSME enterprises.
  • The Special Economic Zones (SEZ) Act, 2005, provided statutory incentives and single-window clearances for designated export-oriented duty-free enclaves, requiring units to maintain positive Net Foreign Exchange (NFE) earnings.
  • The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, facilitates industrial development, intellectual property rights, and FDI policy.
  • The Foreign Investment Facilitation Portal (FIFP) replaced the Foreign Investment Promotion Board (FIPB) in May 2017 as the single-window electronic clearance system for FDI applications requiring government approval.
  • The National Single Window System (NSWS) was launched in September 2021 as a digital platform guiding investors through pre-establishment clearances across central and state ministries.
  • PM Gati Shakti National Master Plan was launched in October 2021 to provide multi-modal connectivity infrastructure across 7 structural engines: Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics.
  • The National Logistics Policy (NLP) was launched in September 2022 to reduce India's logistics cost from ~13-14% of GDP to single digits and elevate India into the top 25 countries on the Logistics Performance Index.
  • Industrial corridors in India, developed under the National Industrial Corridor Development Corporation (NICDC), include the flagship Delhi-Mumbai Industrial Corridor (DMIC) and Chennai-Bengaluru Industrial Corridor (CBIC).
  • The Corporate Social Responsibility (CSR) mandate under Section 135 of the Companies Act, 2013, requires qualifying companies to spend at least 2% of their average net profits on social initiatives.
  • The Competition Commission of India (CCI) was established under the Competition Act, 2002, to prevent anti-competitive agreements, prohibit abuse of dominant position, and regulate mergers and acquisitions.
  • The Annual Survey of Industries (ASI) is the principal source of industrial statistics in India, conducted annually by NSO to evaluate registered manufacturing factories under the Factories Act, 1948.
Curriculum & Reference Sources: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Heavy Industries, Economic Survey of India.

Sample Solved Questions & Concept Explanations

8 Verified Concept Questions
Q1.EASY

Which sector of the economy includes agriculture, forestry, and fishing?

Q2.EASY

Which sector contributes the highest share to India's Gross Value Added (GVA)?

Q3.MEDIUM

The term 'Disinvestment' in the Indian public sector refers to what?

Q4.MEDIUM

Which institution publishes the Index of Industrial Production (IIP) in India?

Q5.HARD

Under the Insolvency and Bankruptcy Code (IBC) 2016, what is the statutory timeline for completing the Corporate Insolvency Resolution Process (CIRP)?

Q6.EASY

The legendary "Bombay Plan" of 1944 was formulated by which group to outline post-war industrial development for India?

Q7.EASY

Which state-owned enterprise was the first public sector steel plant constructed in independent India with German collaboration?

Q8.EASY

The "Make in India" initiative was launched by the Government of India in September 2014 to foster which primary objective?