Which of the following correctly describes the purpose and consequence of the Industrial Policy Resolution of 1956?
Show answer & explanation
Correct answer: B
Explanation
Solution: The correct answer is It introduced a mixed economy model by clearly demarcating sectors between public and private domains, reinforcing state control over key industries.
Explanation:
☛ The Industrial Policy Resolution (IPR) of 1956 was adopted to achieve a socialist pattern of society, serving as the cornerstone of India's industrial strategy.
☛ It classified industries into three distinct categories:
• Schedule A: 17 industries reserved exclusively for the public sector (e.g., arms, atomic energy, railways, iron and steel).
• Schedule B: 12 industries progressively owned by the state, where the private sector could supplement state efforts (e.g., fertilizers, mining, aluminium).
• Schedule C: Remaining industries open to the private sector, but strictly regulated under the Industries (Development and Regulation) Act, 1951 through industrial licensing.
☛ The policy reinforced state dominance over the "commanding heights of the economy" while operating within a mixed economy framework.
☛ It aimed to reduce regional disparities by giving tax incentives and licenses to establish industries in economically backward areas.
Extra Exam-Relevant Facts:
☛ Economic Constitution of India: Due to its comprehensive nature and enduring impact, IPR 1956 is often referred to as the Economic Constitution of India.
☛ Second Five-Year Plan (1956–1961): It formed the core operational foundation of the Second Five-Year Plan, which was based on the P.C. Mahalanobis Model prioritizing rapid industrialization through heavy and basic industries.
☛ First Industrial Policy Resolution: Independent India's first industrial policy was declared earlier on 6 April 1948 by Industry Minister Dr. Syama Prasad Mookerjee.
☛ New Industrial Policy (1991): The restrictive licensing system established under the 1956 regime was largely dismantled with the economic reforms of July 1991 (LPG reforms).
Important One-Liners for Upcoming Exams:
☛ In which year was independent India's first Industrial Policy declared? → 1948
☛ Which resolution is famously known as the "Economic Constitution of India"? → Industrial Policy Resolution, 1956
☛ Into how many schedules were industries classified under the IPR 1956? → Three schedules (Schedule A, B, and C)
☛ Which Five-Year Plan was heavily based on the Industrial Policy Resolution of 1956? → Second Five-Year Plan (1956–1961)
☛ In which year was the New Industrial Policy that dismantled the 'License Raj' launched? → 1991