Industrial Policy: Meaning, Need and Importance

Industrial Policy is a formal declaration by the Government whereby it outlines its general policies for industries. Any industrial policy has broadly two parts. First part generally deals with the ideology of the current political dispensation, while other one provides a framework of certain rules / principles.

The main objective of any industrial policy is to augment the industrial production and thereby enhance the industrial growth which leads to economic growth by optimum utilization of resources; modernization; balanced industrial development; balanced regional development (by providing concessions for industrial development in backward areas); balanced development of basic and consumer industry; coordinated development of large as well as  small, medium and cottage enterprises; determination of area of operation under private and public sector; enhance cordial relations between workers and management and proper utilization of the domestic / foreign capital.

Importance of Industrialization

Industrialisation is the first and foremost requirement of rapid economic development of a country. The industrialisation is not only helpful in the development of industries but it also promotes agriculture, trade, transport, foreign trade, services and social sectors of the economy.  It increases employment opportunities, national income, per capita income and living standard of the populace. Therefore, an industrial policy is required to establish healthy traditions of industrialisation and to guide, regulate and control (if required) industrial development. The industrial policy of a country is influenced by the ideology ‘ and principles of the concerned government. The industrial policy helps the country making it self-sufficient and prosperous by preparing a structure and basis of industrial development. Hence, the industrial policy of the govt. must be well defined, clear and progressive. Moreover, it should be adhered to and implemented earnestly.

Meaning of Industrial Policy

The industrial policy refers to such formal declaration  by the government through which general policies for industries adopted by the govt. are made public. Any industrial policy may have mainly two parts first, the ideology of the govt. which determines the nature of industrialisation, and second, the governing rules and principles which provide a certain framework behind existing ideology. Thus, industrial policy is a comprehensive concept which provides guidance and out-lines of the policy for establishment and working of industries.

Need, Objectives and Importance of Industrial Policy

The need, objectives and importance of an industrial policy can be explained through following points :

Deployment of Natural Resources

The industrial policy helps in full deployment of natural resources of the country. It helps in identifying, collecting and using resources properly. It facilitates increase in national income of the country.

To Augment Industrial Production

The main objective of the industrial policy is to augment industrial production of the country. It provides an impetus to rapid development of industries and industrial growth.


The industrial policy encourages modernisation for increasing industrial output and productivity. It envisages the use of modem and latest production techniques m industrial sector. It facilitates maximum output at minimum cost of production.

Balanced Industrial Development

The industrial policy envisages balanced industrial development of the country. It also facilitates balanced development of various sectors of the economy.

Balanced Regional Development

The industrial policy helps in balanced regional development of the country. The industrial policy may contain provisions regarding providing facilities or concessions for rapid development of industrially backward areas/regions of the country.

Coordination between Basic and Consumer Industries

The balanced development of basic and consumer industries is essential for economic growth. The industrial policy encourages development of basic and key industries on the one hand, while attention is paid to the development of consumer industries also on the other. Thus, by balanced and coordinated development of both type of industries it provides a pace to economic growth.

Coordination between Small Scale and Large Scale Industries

The industrial policy plays a vital role in coordinated development of small scale or cottage industries and large scale industries. These industries can be made mutually helpful to each other through the provisions of industrial policy.

Area Determination

The industrial policy determines the area of operation under public and private sector. Proper direction can be shown to private sector through the country’s industrial policy.

Cordial Industrial Relations

A comprehensive industrial policy is needed to establish cordial relations between workers and management. Cordial industrial relations are essential for rapid and sustainable industrialisation.

Proper Utilisation of Foreign Assistance/investment

An appropriate industrial policy envisages to attract foreign capital and entrepreneurs. It helps rapid industrial development of the country; A well thought of industrial policy checks the demerits of “foreign assistance. The foreign aid can be used in the national interest if an appropriate industrial policy is pursued by the country.

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