The following booklet, titled “Pitfalls in Our Industrial Policy,” was published in 1959 and was authored by M A Master. The author highlighted the momentum of private enterprise that made it possible to develop several privatised industries against all the substantial odds. He highlighted the radical shift that transgressed to economic thinking, leading to the state’s industrial policy breach against the private sector. M A Master concentrated on the approach the then government adopted and highlighted the creation of economic revolution and the monopoly of the State. Furthermore, the author focused on the democratic stand, corroborating the balance between the public and the private sectors, and laid down the contention of anything contrary to the former approach as the model for the prevalence of dictatorship.
The author concluded by accentuating the prevention of the concentration of wealth and power in the hands of a few individuals through the governance of the fundamental principles in the directive policy of the State.
While India was under British Rule, there was no national policy for the industrialisation of the country. It was in the interest of Great Britain that India should continue to be the exporter of raw materials and the importer of finished products. It was only a few years before the fight for Independence gathered strong momentum that the Policy of discriminating protection was announced. It was halting and half-hearted.
That Policy was hemmed in with so many limitations and restrictions that neither could it provide opportunities nor supply a driving force for India’s rapid and all-sided industrial development. Private enterprise has, therefore, earned the country’s gratitude for the faith and courage with which it developed such industries as Textiles, Jute, Steel, Sugar, Shipping, etc., against heavy odds and at considerable sacrifices.
With the advent of independence, the position has radically changed. The days of laissez-faire have been over. The age of development under a planned economy has already gathered strength. It should not, however, be forgotten that Private enterprise had recognised the need for a planned economy even before India obtained her freedom. The publication of the Bombay Plan in 1944 was one of the most remarkable documents which recognised and advocated the vital need and great importance of developing the country in all directions under a well-thought-out and well-balanced plan.
On the 6th of April, 1948, the Government of free and independent India announced for the first time the National Industrial Policy of the country. It made it clear that the manufacture of arms and ammunition, the production and control of atomic energy, and the ownership and management of railway transport shall be the exclusive monopoly of the Central Government. It also laid down that in six other industries, viz., coal, iron and steel, aircraft manufacture, shipbuilding, manufacture of telephones, telegraph and wireless apparatus and mineral oils, the State alone will be exclusively responsible for the establishment of new undertakings.
The rest of the industrial field will normally be open to private enterprises, individuals, and co-operatives. The economic thought in New Delhi had not visualised at that time the public sector becoming the dominant feature of the industrial landscape purely on ideological considerations.
It is also significant to note that the First Five-Year Plan made the following categorical national policy statement. It laid down that “the scope and need for development are so great that it is best for the public sector to develop those industries in which private enterprise is unable or unwilling to put up the resources required and running the risks involved, leaving the rest of the field for private enterprise.”
The first radical shift in this economic thinking of the Government came with the nationalisation of air services on the 1st of August 1953. This was the first breach in the Industrial Policy of the State. With the return of the Prime Minister from China in the latter part of 1954, the government’s economic thinking witnessed a further fundamental departure from the announced industrial Policy of India. Although the First Plan had stated that “the ownership and the control of the material resources of the community are so distributed as best to subserve the common good”, the Prime Minister announced on the 9th November 1954, before the National Development Council, that “the means of production should be socially owned, and controlled for the benefit of society as a whole.”
Here lay the vitalising germ of the revolution in the economic policy to follow. On the 21st December 1954, the Prime Minister remarked in the Lok Sabha- “We cannot progress except by State initiative and by enlarging the public sector and except also by controlling the private sector.”
This was followed by another statement made by the Prime Minister in his address to the A.I.C.C. on the 19th of January, 1955, when he clinched the issue and observed- “In any planned approach to a socialised economy, the public sector must grow and become the dominant feature of the landscape.”
With the Lok Sabha of the Avadi Resolution’s endorsement for establishing a Socialistic Pattern of Society, the revolution in economic thought in New Delhi was complete. The private sector’s ability and willingness to play its part were no longer the criteria for the country’s industrial development. The ideological considerations underlying the new gospel of building up a socialistic pattern of society would alone be the determining force of the future industrial Policy of India.
The invasion of the rights of private property guaranteed by the Constitution, the provision of a clause in the Act making the compensation issue unjustifiable, and the investing of the Government with full powers to acquire any industry and run it at the risk of the shareholders without the payment of any compensation, was the first revolutionary steps taken for the building up of a socialistic pattern of society by making vital changes in the Constitution of India.
There was no halt in this onward revolutionary march of the Government. The Imperial Bank of India was nationalised in July 1955; the Life Insurance Companies in the country were swallowed in one stroke by the State in January 1956. There was thus a three-fold attack on private enterprise. The people were deprived of their sacred rights of property. The services they had built up with the struggles and sacrifices of several decades were taken away by the State. The streams which provided finance for the private enterprise were brought entirely under the control and ownership of the State.
The real objects of nationalising Life Assurance seem to be two-fold: the first was to take over crores of rupees which accumulated from the premia collected by the Life Assurance Companies, and the second was to obtain control, when necessary, over several important industries in which the Life Assurance Companies held a substantial number of shares.
Nationalisation was coming in by the backdoor. This was the new technique of the Government to provide opportunities for the people to cooperate with them, and all this in the name of democracy! The visit of the Prime Minister to China and Russia had brought new wisdom and a new philosophy which, no doubt, were playing their effective part in shaping the future destiny of our country.
The new industrial policy resolution was announced on the 30th of April, 1956. The revolution in the government’s economic thought, manifesting during the First Plan period in several directions, as mentioned above, found its fuller and more vigorous expression in the new national industrial Policy placed before the county. Not only was the field of activities of the private sector drastically limited, but it was also assigned a subordinate place even in the industries in which it had been allowed to play its part.
The ability and the willingness of the people, as mentioned above, will not continue now to be the true tests of economic growth and the speeding up of industrialisation. Still, the ideological considerations and the zeal for establishing an egalitarian society will inspire the State to “progressively assume a predominant and direct responsibility for setting up new industrial undertakings and for developing transport facilities.”
The resolution added that “the adoption of the socialist pattern of society as the national objective as well as the need for planned and rapid development, require that all industries of basic and strategic importance or in the nature of public utility services, should be in the public sector.”
The new philosophy was thus creating a new economic revolution. Even the field of trade and commerce was to become the monopoly of the State. The resolution stated that the State “will also undertake state trading on an increasing scale.” The country has already witnessed the unjustifiable inroads of the State Trading Corporation in diverting several trades from their normal channels to the monopolistic field of the State and under State control. People engaged in some of these trades have lost their means of livelihood. This is how the socialist pattern of society is being built up, and this is how democracy functions in actual life. It is difficult to imagine how it will affect the country when the procurement and distribution of foodgrains are brought completely under the control of the State.
Eleven more industries have now been included in the field of industrial development, which will be the exclusive monopoly and responsibility of the State. Even in the field of industries where the private sector is allowed to function, the resolution has made it crystal clear that it will be the Policy of the State to “take the initiative in establishing new undertakings.” Private enterprise is expected now even in that field, namely, the 12 industries included under schedule ‘B’, merely “to supplement the effort of the State.” Private enterprise will not be allowed in future to be the driving and inspiring force of creating a new industrial India. Still, it will only be allowed to play a minor role as an agent for planned national development.
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