Industry & Infrastructure: Notes for UPSC & State PSC Exams

Industrial policy before 1991

Early planners wanted the state to build heavy industry. The Industrial Policy Resolution of 1948 declared a mixed economy. The IPR of 1956, adopted with the Second Five Year Plan's Mahalanobis strategy, divided industries into three schedules: Schedule A (17 industries exclusively for the state), Schedule B (state to take the lead, private sector supplements) and the rest open to private enterprise under licensing. The Industries (Development and Regulation) Act, 1951 provided the licensing framework, and the MRTP Act, 1969 checked concentration of economic power.

Over time, licensing, reservation for small industry and controls led to delays and inefficiency, the so-called licence raj. A balance of payments crisis in 1991 triggered wide reform.

The 1991 New Industrial Policy

• Compulsory licensing abolished for all but a short list of strategic, hazardous or environmentally sensitive industries.
• Public sector reservation cut from 17 to 8 industries in 1991, and today only atomic energy and railway operations remain reserved.
• Automatic approval for foreign investment up to set limits; the threshold has since been raised in most sectors.
• Disinvestment of government shares in public sector enterprises began.
• MRTP restrictions on big business were removed; the Competition Act, 2002 later replaced the MRTP Act and set up the Competition Commission of India.

MSMEs

Micro, small and medium enterprises are governed by the MSMED Act, 2006. Since 2020 they are classified by a composite test of investment in plant and machinery and annual turnover, with no separate limits for manufacturing and services. The limits were raised from 1 April 2025:

Measuring industrial output

The Index of Industrial Production (IIP) is released monthly by the National Statistics Office, MoSPI, covering mining, manufacturing and electricity. A new series with base year 2022-23 was first released on 1 June 2026, replacing 2011-12, with a broader scope that now also covers gas supply, water supply, sewerage and waste management. Manufacturing has by far the largest weight.

The Index of Core Industries is compiled separately by the Office of the Economic Adviser, DPIIT. The old series had eight core industries: coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. The revised series (base 2022-23, released July 2026) adds iron ore as the ninth; electricity now has the highest weight, followed by refinery products and steel. ICI weights are derived from the IIP weights of these items.

Public sector enterprises

Central public sector enterprises are graded Maharatna, Navratna and Miniratna (Category I and II). Higher status gives the company's board more freedom to invest and form joint ventures without seeking government approval. Maharatna status was introduced in 2009 for large, profit-making Navratnas listed on the stock exchange.

Infrastructure programmes

Financing institutions include the National Investment and Infrastructure Fund (2015) and the National Bank for Financing Infrastructure and Development (NaBFID, set up under a 2021 Act). Make in India (2014) and the Production Linked Incentive schemes (from 2020) aim to raise manufacturing by rewarding incremental output.

Public-private partnership models