Industrial and Labour Policy in India

This study material is designed for aspirants preparing for competitive exams like UPSC, State PCS, SSC, Banking, and others on platforms like cracktarget.com. It covers key topics in Industrial and Labour Policy, including evolution, disinvestment, MSMEs, SEZs, NIMZs, Manufacturing Policy, Industrial Corridors, and relevant Indices/Surveys. The content is structured for easy revision: definitions, historical evolution, key features, advantages/disadvantages, recent developments, and exam-oriented notes. Use mind maps, timelines, and tables for quick recall. Sources are drawn from government websites (e.g., DPIIT, Ministry of Labour), reports, and reliable analyses for accuracy as of November 2025.

1. Evolution of Industrial and Labour Policy in India

Definition

Industrial Policy refers to government strategies to promote industrial growth, regulate sectors, and foster economic development. Labour Policy focuses on worker rights, employment conditions, and industrial relations.

Historical Evolution

• Pre-Independence (Colonial Era): British policies favored raw material exports; industries like textiles were de-industrialized. Factories Act, 1881, was the first labour law.
• Post-Independence (1947-1991): Socialist model with state control.
• Industrial Policy Resolution (IPR) 1948: Emphasized public sector role in key industries.
• IPR 1956: Classified industries into Schedule A (public monopoly), B (public-private), and C (private). Aligned with Five-Year Plans.
• Labour Laws: Trade Unions Act (1926, amended), Industrial Disputes Act (1947), Minimum Wages Act (1948) – focused on worker protection but led to rigidities.
• Monopolies and Restrictive Trade Practices (MRTP) Act 1969: Curbed big business monopolies.
• Licence Raj: Heavy regulation stifled growth; peak in 1970s-80s.
• Liberalization Era (1991 Onwards): Economic crisis led to New Economic Policy (1991) by Dr. Manmohan Singh.
• Industrial Policy 1991: Abolished licensing for most industries, reduced public sector monopoly, encouraged FDI.
• Labour Reforms: Slow initially; major push in 2019-2020 with Labour Codes.
• Post-2014 Reforms: Make in India (2014), Atmanirbhar Bharat (2020) – focus on self-reliance, ease of doing business.

Key Features

• Shift from import substitution to export promotion.
• Integration of labour policies with global standards (e.g., ILO conventions).
• Recent: Four Labour Codes (2020) consolidating 29 laws into Wage Code, Occupational Safety Code, Industrial Relations Code, and Social Security Code.

Advantages/Disadvantages

• Advantages: Promoted balanced regional growth, protected workers, boosted manufacturing.
• Disadvantages: Rigid labour laws caused “jobless growth”; over-regulation hindered competitiveness.

Recent Developments (as of 2025)

• Labour Codes implemented in most states; focus on gig economy workers.
• PLI Scheme (Production Linked Incentive) expanded to 14 sectors.

Exam Notes

• Timeline:
• 1948: IPR (Mixed Economy)
• 1956: Public Sector Dominance
• 1991: Liberalization
• 2020: Labour Codes
• MCQ Tip: IPR 1956 is linked to Second Five-Year Plan (Mahalanobis Model).
• Essay: Discuss how liberalization transformed India’s industrial landscape.

2. Disinvestment

Definition

Disinvestment is the sale of government equity in Public Sector Undertakings (PSUs) to private entities, reducing state ownership.

Historical Evolution

• Pre-1991: Minimal; PSUs like SAIL, ONGC built under nationalization.
• 1991 Onwards: Started with minority stake sales (e.g., 1991-92 budget).
• 1999: Department of Disinvestment created (now DIPAM – Department of Investment and Public Asset Management, 2016).
• Key Phases:
• 2000s: Strategic sales (e.g., VSNL to Tata).
• 2010s: ETF route (CPSE ETF).
• 2020s: Atmanirbhar Bharat – limit PSUs to strategic sectors.

Key Features

• Methods: IPO, FPO, Strategic Sale, Buyback, ETF.
• Targets: Raise funds for infrastructure, reduce fiscal deficit.
• CPSEs: Central Public Sector Enterprises (e.g., BPCL disinvestment attempts).

Advantages/Disadvantages

• Advantages: Improves efficiency, reduces government burden, attracts investment.
• Disadvantages: Job losses, asset undervaluation, loss of control in strategic sectors.

Recent Developments

• 2024-25 Budget: ₹50,000 crore target; Air India fully privatized (2022).
• Strategic Disinvestment: BPCL, SCI ongoing.

Exam Notes

• Table: Major Disinvestments

Year	PSU	Buyer/Method	Amount (₹ Cr)
2002	IPCL	Reliance	1,491
2018	HPCL	ONGC (Merger)	36,915
2021	Air India	Tata Group	18,000
2023	IDBI Bank (Partial)	LIC + Private	TBD

• MCQ: First strategic disinvestment – BALCO (2001).
• Current Affairs: Link to NEP 2021 (limit PSUs to 4 strategic sectors).

3. Micro, Small and Medium Enterprises (MSMEs)

Definition

MSMEs are enterprises classified by investment and turnover (Revised 2020: Micro <₹1 Cr investment/₹5 Cr turnover; Small <₹10 Cr/₹50 Cr; Medium <₹50 Cr/₹250 Cr).

Historical Evolution

• 1951: SSI (Small Scale Industries) focus in First Plan.
• 2006: MSMED Act – unified definition, promotion.
• 2014: Make in India boosted.
• 2020: Atmanirbhar – revised classification, ₹3 lakh Cr collateral-free loans.

Key Features

• Contribution: 30% GDP, 45% exports, 11 Cr jobs.
• Schemes: Credit Guarantee Fund, PMEGP (Employment Generation), ZED (Zero Defect Zero Effect).
• Udyam Registration (2020): Online, Aadhaar-based.

Advantages/Disadvantages

• Advantages: Employment generator, rural development, innovation.
• Disadvantages: Credit access issues, tech lag, GST compliance burden.

Recent Developments

• 2025: MSME Budget allocation ₹20,000 Cr; integration with e-commerce (ONDC).
• Emergency Credit Line Guarantee Scheme (ECLGS) extended post-COVID.

Exam Notes

• Classification Table

Category	Investment Limit (₹ Cr)	Turnover Limit (₹ Cr)
Micro	≤1	≤5
Small	≤10	≤50
Medium	≤50	≤250

• MCQ: MSMED Act year – 2006.
• Stats: 6.3 Cr MSMEs (2023 data).

4. Special Economic Zones (SEZs)

Definition

SEZs are designated areas with relaxed regulations to promote exports, FDI, and employment.

Historical Evolution

• 2000: SEZ Policy announced.
• 2005: SEZ Act – inspired by China’s model.
• 2006: First SEZs operational (e.g., Noida).

Key Features

• Tax Benefits: 100% IT exemption for 5 years, 50% for next 5.
• Single Window Clearance.
• Types: Multi-sector, Sector-specific (e.g., IT, Pharma).

Advantages/Disadvantages

• Advantages: Export boost (₹7.5 lakh Cr in 2023), jobs (2.5 Mn).
• Disadvantages: Land acquisition issues, revenue loss, uneven distribution.

Recent Developments

• 2023: SEZ Amendment Bill – flexibility in denotification.
• 272 operational SEZs (2025).

Exam Notes

• Comparison: SEZs vs. EOUs (Export Oriented Units) – SEZs have better incentives.
• MCQ: SEZ Act – 2005.

5. National Investment and Manufacturing Zones (NIMZs)

Definition

NIMZs are large industrial townships under National Manufacturing Policy (2011) for high-tech manufacturing.

Historical Evolution

• 2011: Announced in NMP.
• 2012: Guidelines issued.
• Slow implementation; 14 approved by 2025.

Key Features

• Minimum 5,000 hectares.
• PPP model, skill development, green tech.
• Incentives: Tax holidays, easier land acquisition.

Advantages/Disadvantages

• Advantages: Cluster-based growth, global competitiveness.
• Disadvantages: Delays in approvals, environmental concerns.

Recent Developments

• Integrated with Industrial Corridors; e.g., Tumkur NIMZ (Karnataka).

Exam Notes

• Link to NMP 2011 (25% manufacturing GDP target by 2022, revised to 2025).
• MCQ: NIMZs under DPIIT.

6. Manufacturing Policy

Definition

National Manufacturing Policy (NMP) aims to increase manufacturing share in GDP to 25%.

Historical Evolution

• 2011: NMP launched.
• 2014: Make in India – defense, electronics focus.
• 2020: Atmanirbhar – PLI for self-reliance.

Key Features

• Focus Sectors: Auto, Textiles, Pharma.
• Targets: 100 Mn jobs by 2025.
• Schemes: Startup India, Skill India.

Advantages/Disadvantages

• Advantages: FDI inflow ($100 Bn+ post-2014).
• Disadvantages: Global competition, supply chain issues.

Recent Developments

• 2025: Manufacturing GDP share ~17%; PLI disbursed ₹50,000 Cr.

Exam Notes

• Targets: 25% GDP (missed 2022, ongoing).
• MCQ: NMP Year – 2011.

7. Industrial Corridors

Definition

Industrial Corridors are integrated infrastructure networks linking manufacturing hubs.

Historical Evolution

• 2007: DMIC (Delhi-Mumbai) conceptualized.
• 2011: National Industrial Corridor Development Programme.
• 2020: 11 corridors planned.

Key Features

• Major Corridors: DMIC, AKIC (Amritsar-Kolkata), CBIC (Chennai-Bengaluru).
• Components: Smart Cities, High-Speed Rail, Ports.
• NICDC (National Industrial Corridor Development Corporation) manages.

Advantages/Disadvantages

• Advantages: Logistics efficiency, regional balance.
• Disadvantages: High cost, land issues.

Recent Developments

• 2025: DMIC Phase 1 complete; ₹1 lakh Cr investment.

Exam Notes

• Table: Key Corridors

Corridor	Length (km)	States Involved
DMIC	1,500	6 (Delhi to Mumbai)
AKIC	2,300	7 (Punjab to WB)
CBIC	1,000	3 (TN, KA, AP)

• MCQ: DMIC inspired by Japan’s model.

8. Indices and Surveys Related to Industry and Labour

Key Indices/Surveys

• Ease of Doing Business (EoDB) Index (World Bank, discontinued 2021; India improved from 142nd (2014) to 63rd (2020)).
• Logistics Performance Index (LPI) (World Bank): India 38th (2023); measures trade logistics.
• Global Innovation Index (GII) (WIPO): India 40th (2024); tracks innovation in manufacturing.
• Global Manufacturing Risk Index (Cushman & Wakefield): India 2nd (2023) for cost-effectiveness.
• Labour Force Participation Rate (LFPR) (PLFS – Periodic Labour Force Survey): 58% (2024); urban female low at 25%.
• ASUSE (Annual Survey of Unincorporated Sector Enterprises): Covers MSMEs; latest 2023 shows 6.5 Cr enterprises.
• Index of Industrial Production (IIP): Monthly; base 2011-12; 2024 growth ~5%.

Evolution and Importance

• Post-2014: India focused on rankings for reforms (e.g., Insolvency Code boosted EoDB).
• Surveys like PLFS (2017 onwards) replaced NSSO for labour data.

Recent Developments

• 2025: India aims top 30 in GII; new Domestic Manufacturing Index proposed.

Exam Notes

• Comparison Table: India’s Rankings

Index	2014 Rank	2024 Rank	Improvement Factors
EoDB	142	63 (2020)	Single Window, GST
GII	81	40	Startups, R&D
LPI	54	38	Sagarmala, Bharatmala

• MCQ: IIP released by NSO.
• Tip: Link indices to policies (e.g., EoDB to Make in India).

Revision Tips for Cracktarget.com Users

• Mind Map: Connect Evolution → Policies (NMP, Make in India) → Tools (SEZs, NIMZs) → Outcomes (Indices).
• PYQs: Focus on UPSC 2020-2024 questions on labour reforms, disinvestment.
• Updates: Check DPIIT website for latest stats.
• Mnemonics: MSME – Micro Saves Many Employees; SEZ – Special Export Zones.

This material is concise yet comprehensive.
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