Towards a New Industrial Policy in India

Abstract

Industrialization is essential for bringing about structural changes in an economy. Industrial policy is a process whereby governments intervene in the economy selectively to bring about the industrialization. Most major economic powers pursued industrial policy before and several years after the Second World War. This helped in the economic reconstruction of Europe and the modernization of the economies of East and South East Asian countries. The attitude towards industrial policy changed drastically after the onset of liberalization and globalization from the early 1980s. For several years thereafter, development was very much left to market forces. After frequent instances of market failures culminating in the global economic crisis of 2008–09, there has been a revival of industrial policy. Since the mid-2000s, industrial policy has been revived in most major economies. Ever since its independence, India has followed industrial policy in one form or the other. Such policies were adopted in 1948, 1956, 1991 and 2011. The present government circulated in 2017 a draft industrial policy which is under discussion. In the context of the current socio-economic scenario in the country, a new industrial policy should concentrate on galvanizing agriculture, reviving demand through stress on the production of goods and services for mass consumption, prioritizing employment generating industries, creating industrial infrastructure and through massive state intervention for the restructuring of the health and education sectors. It will also be necessary to delink selectively from the world economy and creatively use the limited space available for pursuing industrial policy, in the framework of the WTO rules.