The policy of the Congress Government led by Nehru was based upon the fact that there must be industrial development at all costs. Nehru wanted a country with Modern Large Scale Industries, a Large Army, a Strong Navy and Air Force and a socialist development in the country with "touch' of capitalism.

Gandhi, who was in favor of autonomous villages where Panchayats should perform the legislative, executive and Judicial functions, did not find any place in the government. The objection of Gandhi of developing large cities was rejected but Panchayati Raj with 'modifications' was accepted later.

A basic difference between Gandhi & Nehru's economic philosophies was that Gandhi wanted village as an independent unit, while Nehru wanted it a subordinate unit to a higher organization. Gandhi wanted a cottage based economy, Nehru dreamt of major Industries in India.

At the time of India's independence, Industries were grouped into three categories as follows:

1. Government Monopoly: This category included armaments, railways, transport and some other industries.
2. Basic and Strategic Industries: This category included industries such as Coal, Iron & Steel, Ship Building, Mineral Ores etc. They were also vested with the state.
3. Private Industry: The rest of the industries which included small, medium and cottage industries were open to the private sector.

The first five year plan with major focus was on agriculture was launched in 1951-52 and it gave very good results in India's agricultural growth.

In 1948, immediately after Independence, Government of India introduced the Industrial Policy Resolution 1948. This reiterated the above classification and emphasized the approach to industrial growth and development.

The Industrial Policy Resolution 1948 was passed at a time when, our constitution was not adopted and there was no legal framework. But the idea was to keep the industries under the exclusive ownership of Government (Public Sector), Private sector and Joint sector. The beginning was made. The constitution was adopted in 1950 and in March 1950, India's planning commission was constituted. This was followed by an Industrial (Department and Regulation) Act of IDR Act of 1951.

• IDR act 1951 was the first act post independence which empowered the government of India to take necessary steps to regulate the pattern of Industrial development through licensing.

The IDR act paved the way for India's first comprehensive statement on the strategy for industrial development in India.

• In the Avadi session of Indian National Congress in 1955 the Congress stated that object of the planning has to be "Socialist Pattern" and not absolute "Socialism".
• The Socialist pattern meant that India has to be a mixed economy where private & public sector would coexist.

The ideas were getting crystallized and in 1955, pursuant with the "Socialist Pattern", Imperial Bank of India, which came into being in 1921, came under the public sector and became "State Bank of India" in 1955.

• This was followed by; in 1956, the merger of more than 200 insurance companies and provident societies and this was the birth of Life Insurance Corporation of India.
  • Please note that the State Trading Corporation was mainly established to deal with the communist countries, which preferred to deal with the government sector.
  • Apart from that, State Trading Corporation was initially given monopoly in the trade of "Cement". India was importing the Cement and imported cement was costlier in India. The import of cement was discontinued after a few years.

The Constitution of India vested the mineral rights and authority of mining laws with the state governments. The objective & interest of the government to boost the agricultural and industrial development led it to determine to earn the much needed foreign currency through the export of canalized mineral ores, as the country had huge deposits of minerals.

• In pursuant with this, the State Trading Corporation of India Ltd. was founded in 1956, as a wholly owned government subsidiary, to handle the export and import of selected commodities.

In 1956, first comprehensive statement on the strategy for Industrial Development in India was introduced by the government as Industrial Policy Resolution 1956.