What is Industrial Policy: Objectives and Significance

Definition of Industrial Policy

Industrial Policy (IP) of a nation or economy is a declared and official plan with the strategic attempt to influence the growth of various sectors. This policy measures involved specific activities which stimulate and promote structural changes.

It is a set of government schemes,procedures,principles, and rules for the regulation,growth and control of industrial entities in a country. For the industrial development, specific roles are allocated to the different types of industrial organizations like public,private,joint and cooperative sectors.

The role of small,medium and large sectors is also defined by industrial policy. It involves formulation of labour policy,tariff policy, fiscal policy and monetary policy. It also identifies the attitude of government towards the foreign capital. Industrial policy is also decides the role of multinational corporations for the growth of industrial sector.

According to World Bank___” Industrial Policy comprises government efforts to alter industrial structure to promote productivity based growth”.

According to UNCTAD (United Nations Conference on Trade And Development)___” Industrial policy as a “concerted, focused,conscious effort on the part of government to encourage and promote a specific industry or sector with an array of policy tools”.

According to Akkemik___” Industrial policy is a set of policies designed for the development of selected industries by use of state apparatus in resource allocation”.

Objectives of Industrial Policy

  1. Correcting Imbalances: Correct the imbalances in the development of industrial and helps in bringing about a desirable balance and diversification in them.
  2. Directing Resource Flow: Direct the flow of scarce resources in the most desirable areas of investment in accordance with national priorities.
  3. Optimum Utilization of Resource: Prevent the wasteful use of scarce resources and ensure their conservation and judicious utilization.
  4. Control over Private Industry: Empower the government to regulate the establishment and expansion of private industry in accordance with the planned objectives.
  5. Demarcating Industry Areas: Demarcate areas among the public, private and joint sectors of the economy, as well as large, medium and small-scale industries.
  6. Proper Distribution of Wealth: Prevent the formation of monopolies and concentration of wealth in a few hands through fiscal and monetary policies. So that the evils associated with monopolies can be effectively curbed.
  7. Control Over Foreign Capital: Give guidelines for importing foreign capital and the conditions on which such capital should be permitted to operate.
  8. Other Objectives: Other objectives or the rational of industrial policy includes:
  1. Achieving a socialistic pattern of society.
  2. Preventing undue concentration of economic power.
  3. Achieving industrial development.
  4. Achieving economical growth.
  5. Reducing disparities in regional development.
  6. Developing heavy and capital goods industry.
  7. Expanding the public sector for achieving socialism.
  8. Achieving faster economic growth.
  9. Achieving a self-sustained economy.

Significance of Industrial Policy

  • Establishes Co-ordination
  • Directs National Resources
  • Helps in Industrial Development
  • Prevents Economic power Concentration
  • Proper Control
  • Promotes Export
  • Prevents Duplication of Economic Resources