In March, 1977, the Janata Party came to power at the centre. Criticising the 20 years of the functioning of the Industrial Policy of 1956, the Janata Party Industrial Policy statement (December, 1977) mentioned: Despite some desirable elements, the Industrial Policy of congress resulted in certain distortions: “unemployment has increased, rural urban disparities have widened and the rate of real investment has stagnated.
Since the new policy was drafted by the hardcore Gandhians in the Janata Party, its major emphasis was on the growth and development of the small sector. The chief features of the policy were
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1. Principal thrust was on the Development of small Industries:
The Janata Party accused the Congress of over emphasising on large industries, neglecting the development of cottage and small industries. The main thrust of the new policy was the effective promotion of cottage and small industries. It was declared that whatever can be produced by small and cottage industries must only be so produced.”
The small sector was classified in three categories
(a) cottage and household industries to provide self-employment;
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(b) tiny sector having investment in plant and machinery upto Rs 1 lakh ; and
(c) small industries with an investment upto Rs 10 lakhs and ancillaries with an investment upto Rs 15 lakhs.
Main purpose of the classification was to design measures to specifically help the three sectors. The measures undertaken were
(i) Reservation list (for Small Industries) increased from 180 to 807 items
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(ii) District Industries Centres (DICs) to be set up so that services and support required by small and village industries be availed under one roof. A separate wing of IDBI was to be set up to provide financial assistance to small scale industries.
(iii) Khadi and Village Industries Commission to be strengthened. Nai Khadi or Polyester Khadi to be introduced.
(iv) Appropriate technology to be developed by small and village industries.
2. Areas of Large scale sector:
The role of large sector was related to minimum basic needs programme via dispersal of small and village industries and to the strengthening of the agricultural sector.
The large scale industries were to be the basic industries essential for providing infrastructure as well as for the development of small scale industries such as steel, non-ferrous metals, cement etc.
The large scale industries also included capital goods industries for meeting the machinery requirements, needed for the development of large and small scale industries. It further included high technology industries, necessary for the development of agriculture.
3. Approach ‘towards Large Business Houses:
Large houses were to rely on internally generated resources for financing new projects or expanding existing projects. They were not to depend on public financial institutions and banks which were to be devoted to the growth of the small and medium scale units.
4. Larger role of the Public sector:
Besides producing important and strategic goods, public sector be expanded to act as a stabilising force for maintaining supplies of essential consumer goods.
5. Approach towards Foreign Collaboration:
In areas where technological know-how is not needed, existing collaboration will not be renewed and foreign companies operating in such fields will have to modify their character and activities in conformity with national priorities, within the framework of the Foreign Exchange Regulation Act.
It was also stated that in areas in which foreign collaboration was permitted, the majority interest in ownership and control would be in Indian hands, though the government may make exceptions in highly export oriented and sophisticated technology areas. In hundred percent export oriented cases the Government may consider even a fully-owned foreign company.
6. Attitude towards sick Units:
The IPR of 1977 did, express its desire to help sick units in the interest of protecting employment but did not give blanket assurance to protect all sick units. It was stated that those units which were non-viable and continue to make losses year after years, may not be helped.
The IPR of 1977, failed to give a practical shape to its policies. The short period for which the Janata Party (2/4 years) ruled the country was not enough to bring about a radical shift in favour of the small and cottage industries. The policy failed either to restrict big business or multinationals.