Industrial Policy Statement 1977

The Industrial Policy Statement 1977 was announced by Janata Government led by Morarji Desai on 23 December, 1977. This policy was later replaced by incumbent Congress Government in 1980.

This was the first time when a non-congress government was ruling dispensation at centre. The Janata Government had a different approach and planning philosophy from Congress, and it reflected in its Industrial policy also.

Salient Features of Industrial Policy Statement 1977

Special Focus on Small−scale Industries

So far, the Industrial polices gave maximum emphasis to the large scale industries. The 1977 policy gave highest priority to the small scale and tiny industries.

For the first time, 1977 Industrial policy defined a “tiny unit” as a unit with investment in machinery and equipment up to Rs. 1 Lakh and situated in towns or villages with a population of less than 50,000 (as per 1971 census).

The policy declared to establish one District Industries Centre in each district to meet the requirement of industries within that district. It also announced to establish a separate cell in the Industrial Development Bank of India (now IDBI) to cater to the need of the small industries. It emphasized on more attention to marketing, standardisation, quality control etc. in small industries.

Focus on Labour−intensive Technology

In contrast with capital intensive industries, this policy emphasized on special efforts to develop small and ordinary machines and their optimal use to enhance productivity and income of the workers engaged in small and cottage industries. The role of large scale industries was kept limited to key and strategic sectors such as capital goods, iron and steel, petroleum, fertilizers, etc. It emphasized that the Big units would NOT be allowed to expand their production and instead; small and cottage industries will be encouraged to expand. Thus, role of the large industries was redefined to compliment the role of small industries. It expanded the list of items reserved for exclusive production in the small scale sector from 180 to more than 500.

Viability of Public Sector

The policy emphasized on the viability, efficiency and profitability of the public sector units. It declared that government will selectively take over sick industries to bear minimum possible loss; and will take immediate measures to rehabilitate and manage the units taken over.

Focus on Indigenous Technology

The policy called for use of indigenous technology as far as possible for future development of Industry. However, for sophisticated sectors, the government would buy best available technology from abroad. This policy called for a restrictive use of foreign technology.

Focus on self-sufficiency

This policy called for minimum export and maximum possible self−sufficiency. It called for removing restrictions on those imports which are needed for development of priority industries.

Balanced Regional Development

Via this policy, the government decided that in the interest of balanced regional development; no more licences will be issued for the establishment of industries within certain limits of metropolitan cities having a population exceeding 10 lakh and in other cities having a population exceeding 5 lakh according to 1971 census.

Workers’ Participation

Policy laid emphasis on increased participation of workers in management.

Restrictions on Foreign Investments

The policy declared that the foreign investment in the “unnecessary areas” (means those which had not role to play in development of the country), was prohibited. This was virtually a complete NO to the foreign investment. This policy is also remembered for a very important provision.  The statement stated that foreign companies that diluted their foreign equity up to 40 per cent under Foreign Exchange Regulation Act (FERA) 1973 were to be treated at par with the Indian companies. Companies like Coca Cola and IBM did not comply with the provisions and Industry Minister George Fernandez threw the Coke and IBM out of India.