Understanding the Effect of India's Industrial Policy, 1956

The Industrial Policy Resolution of 1956 was a landmark policy that shaped India's industrial development for several decades. It was a comprehensive framework that aimed at accelerating the pace of industrialization, reducing income inequalities, promoting regional development, and expanding the public sector. The policy classified industries into different categories based on the role of the state.

Key Features of the Industrial Policy, 1956

The policy divided industries into three main schedules:

• Schedule A: Industries whose future development would be the exclusive responsibility of the state. This included critical sectors like arms and ammunition, atomic energy, heavy machinery, mining (coal, iron ore, etc.), electricity generation, and railway transport.
• Schedule B: Industries which would be progressively state-owned, but in which private enterprise would also be expected to supplement the state's efforts. Examples included aluminum, machine tools, fertilizers, synthetic rubber, road transport, and sea transport.
• Schedule C: All the remaining industries which were left open to private sector initiative, but the state reserved the right to establish industries in this schedule too.

This structure significantly influenced the direction and growth of industries in India.

Effect on Industrial Diversification

One of the major effects of the Industrial Policy, 1956 was that it led to the diversification of industries. By explicitly assigning different industries to the public and private sectors and encouraging growth in various fields (especially through the state's entry into heavy and basic industries), the policy helped broaden India's industrial base. Instead of being concentrated in a few traditional areas, new sectors like heavy machinery, chemicals, fertilizers, and various engineering goods started developing.

The expansion of the public sector into complex and capital-intensive industries, as outlined in Schedule A and B, meant that India began producing a wider variety of goods. Simultaneously, the opportunities left for the private sector in Schedule C encouraged growth and innovation in consumer goods and other industries. This two-pronged approach fostered diversification across different types of industries and manufacturing activities.

Analyzing the Options

Let's evaluate the given options in light of the effects of the Industrial Policy, 1956:

• industries started to get diversified: As explained above, the policy structure and goals directly contributed to the growth of a wider range of industries, making this a significant effect.
• India become self-sufficient in industrial goods: Achieving self-sufficiency was a goal of the policy, particularly through import substitution. While progress was made, becoming fully self-sufficient is a very strong statement and the extent of self-sufficiency is debatable by any specific timeframe directly attributable *solely* to the 1956 policy's immediate effects. Diversification was a more definite outcome of the policy's structural approach.
• imports of those goods which could be produced in India itself was avoided: This describes import substitution, which was indeed a key strategy under the policy. The licensing system was used to restrict imports of goods that could be produced domestically. However, complete avoidance of imports is an exaggeration, and diversification is often considered a more direct and visible outcome of the policy's framework for industrial development.
• industries share fell in the GDP during 1991: The share of industries in GDP fluctuates due to many economic factors, including policy changes over time. A potential fall in 1991 (which coincided with major economic reforms) is not a direct, intended, or immediate effect of the 1956 policy. The policy's aim was to increase the contribution of the industrial sector to the economy.

Based on the historical analysis of the Industrial Policy, 1956, the most direct and widely acknowledged effect among the given options is the diversification of India's industrial base.

Revision Table: Industrial Policy, 1956 Key Aspects

Additional Information on Industrial Development

The Industrial Policy of 1956 laid the foundation for India's mixed economy model, where both the state and the private sector played significant roles. While it successfully promoted industrial growth and diversification, it also led to certain challenges over time, such as bureaucratic hurdles due to the licensing system (often called the 'License Raj') and potential inefficiencies in the public sector. The policy underwent modifications and eventually paved the way for the economic reforms of 1991, which aimed at liberalizing the economy and reducing the state's direct control over many industries.

Understanding the 1956 policy is crucial for studying India's post-independence economic history and the evolution of its industrial sector. It represented a strong state intervention model intended to build a self-reliant and diversified industrial economy.