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Industry and Trade

  • The first Industrial Policy was declared on April 6, 1948 by the then Union Industry Minister Mr. Shyama Prasad Mukherjee.
  • Industrial Policy (1948) was replaced by a new Industrial Policy Resolution declared on April 30, 1956 with the basic objective of establishing Socialistic Pattern of Society in the country.
  • Industrial Policy Resolution of 1956 categorised industries which would be the exclusive responsibility of the state or would progressively come under state control. 
  • ln June 1991, Narsimha Rao Government took over charge and a wave of reforms and liberalisation was observed in the economy. 
  • In that new atmosphere of economic reforms, the Government declared broad changes in Industrial Policy on July 24, 1991.
  • The Industrial Policy initiatives undertaken by the Government since July 1991 have been designed to build on the past industrial achievements and to accelerate the process of making Indian industry internationally competitive.

Industrial Policy 1991
Main Features

  1. to maintain a sustained growth in productivity.
  2. to enhance gainful employment.
  3. to achieve optimum utilisation of human resources.
  4. to attain international competitiveness.
  5. to transform India into a major partner and players in the global arena.

Main Focus on

  1. deregulating Indian industry.
  2. allowing the industry freedom inflexibility in responding to market forces and
  3. providing a policy regime which facilitates and fosters growth of Indian industry,

Policy Measures

  1. Liberalisation of Industrial Licensing Policy.
  2. Introduction of Industrial Entrepreneur Memorandum.
  3. Liberalisation of Locational Policy.
  4. Liberalised policy for Small Scale Sectors. 
  5. Non-Resident Indians Scheme (NRIs are allowed to invest upto 100% equity on non-repatriation basis in all activities except for a small negative list).
  6. Electronic Hardware Technology Park (EHTP) and Software Technology Park (STP) Scheme for building up a strong electronic industry to enhance exports.
  7. Liberalised policy for Foreign Direct Investment (FDI).
  8. The areas reserved for the public sector are
  • atomic energy; the substances specified in the schedule to the notification of the Government of India in the Department of Atomic Energy dated the March 15,1995 and 
  • Railway transport.

List of Industries Requiring Compulsory Licence
With the introduction of New Industrial Policy in 1991, a substantial programme of deregulation has been undertaken. Industrial licensing has been abolished for all items except for a short list of five industries related to security, strategic or environmental concerns. 

These are:

  1. Distillation and brewing of alcoholic drinks.
  2. Cigar Cigarettes and other substitutes of prepared tobacco.
  3. Electronic, Aerospace and all types of defence equipment.
  4. Industrial Explosive including match boxes.
  5. Hazardous chemicals.

Sixth Economic Census

  • The year 2012 was proposed for the 6th Economic Census. The last 5th Economic Census was done in the year 2005.
  • The first Economic Census was done in 1977, followed by second, third, fourth and fifth in the years 1980, 1990, 1998 and 2005 respectively.
Economic Census

The Sixth Economic Census had been a joint effort of CSO and Directorates of Economics and Satisfies of States/UTs.

Micro, Small and Medium Enterprise Development Act, 2006
Small and Medium Enterprise Development Bill 2005 (which was introduced in the Parliament on May 12, 2005) has been approved by the President and thus became an Act.
This new Act, named as ‘Small and Medium Enterprise Development Act, 2006’ has become effective from October 2, 2006.

Salient Features of the Act

  • The Act provides for a statutory consultative mechanism at the national level with wide representation of all sections of stakeholders, particularly the three classes of enterprises, and with a wide range of advisory functions, and an Advisory Committee to assist the Board and the Centre/State Governments.
  • The other features include 
  1. establishment of specific Funds for the promotion. development and enhancement of competitiveness of these enterprises, 
  2. notification of schemes/programmes for this purpose, 
  3. progressive credit policies and practices, 
  4. preference in Government procurements to products and services of the micro and small enterprises, 
  5. more effective mechanisms for mitigating the problems of delayed payments to micro and small enterprises and 
  6. simplification of the process of closure of business by all three categories of enterprises. 
  • It provides the first-ever legal framework for recognition of the concept of ‘enterprise’ (comprising both manufacturing and services) and integrating the three-tiers of these enterprises, viz., micro, small and medium.
  • Under the Act, enterprises have been categorized broadly into those engaged in (i) manufacturing and (ii) providing/rendering of services. Both categories have been further classified into micro, small and medium enterprises, based on their investment in plant and machinery (for manufacturing enterprises) or in equipment (in case of enterprises providing or rendering services) as under:

Manufacturing Enterprises: Micro Enterprises-investment upto Rs. 25 lakh. Small Enterprises-investment above Rs. 25 lakh and upto Rs. 5 crore. Medium Enterprises-investment above Rs. 5 crore and upto Rs. 10 crore.

Service Enterprises: Micro Enterprises-investment upto Rs. 10 lakh Small Enterprises-investment above Rs. 10 lakh and upto Rs. 2 crore. Medium Enterprises-investment above Rs. 2 crore and upto Rs. 5 crore.

Make in India

  • Prime Minister Narendra Modi on September 25, 2014 launched the NDA Government's 'Make in India' campaign for attracting industrialists to make India a global manufacturing hub, to help in creating additional job opportunities and providing a boost to economic growth in the country. 
  • The basic philosophy behind this campaign is to establish India a manufacturing hub for domestic and foreign companies.
  • The Prime Minister promised to create and ensure a ‘business-friendly environment’ for making this campaign.
  • The strategic components behind the 'Make in India' campaign are —
  1. Making India a manufacturing hub for domestic as well as foreign companies.
  2. Stress on skill development.
  3. Develop world level infrastructural facilities.
  4. Reducing import dependence and promoting exports.
  5. Creating more employment opportunities for the youth in the country.
  6. Addition in individual's income and purchasing power in the hands of people.

Scheme of Funds for Regeneration of Traditional Industries (SFURTI)

  • A scheme titled the ‘Scheme of Funds for Regeneration of Traditional Industries’ (SFURTI) was notified in October 2005 for the integrated development of traditional clusters of Khadi, coir and village industries, including leather and pottery. 
  • The main objective of SFURTI is to establish a regenerated holistic sustainable and replicable medal of integrated cluster -based development of traditional industries. 
  • Under SFURTI, it is proposed to develop around 100 clusters (25 clusters for Khadi, 50 clusters for village industries and 25 clusters for coir industries) over a period of five years. 
  • The Scheme Steering Committee of SFURTI has approved 122 clusters (34 Khadi clusters, 26 coir clusters and 62 village industry clusters) so far.

National Manufacturing Policy

  • The Government of India has notified a National Manufacturing Policy vide a press note dated 4th November, 2011 with the objective of enhancing the share of manufacturing in GDP to 25% within a decade and creating 100 million jobs. 
  • It also seeks to empower rural youth by imparting necessary skill sets to make them employable.
  • Sustainable development is integral to the policy and technological value addition in manufacturing has received special focus.
  • The policy is based on the principle of industrial growth in partnership with States. 
  • The policy envisages a number of fiscal incentives:
  1. Income tax concession on venture capital funds with a focus on small and medium enterprises (SME), 
  2. Rollover relief from long term capital gains tax to individuals on sale of a residential property wherever such sale consideration is invested in the equity of a new start-up SME.
  3. Viability gap funding to polytechnics and special purpose vehicles in proposed National Manufacturing and Investment Zones (NMIZs) etc.

Distinction between Cottage, Small and Village Industries

  • In a broad sense cottage, small and village industries are treated similarly but they fundamentally differ from each other.
  • Cottage industry is run by family members on a full or part time basis. 
  • It possesses negligible capital investment. There is hand made production and no wage earning person is employed in the cottage industry.
  • Small industrial units employ wage earning labour and production is done by the use of modern techniques. Capital investment is also there. 
  • A few cottage industries which are export-oriented, have been included in the category of small sector so that facilities provided to small units may also be given to export-oriented cottage industries.
  • The industries established in rural areas having population below 10,000 and having less than Rs. 15,000 as fixed capital investment per worker will be termed as village industries.
  • The KVIC and state village Industries Board provide economic and technical assistance in establishing and operating these industrial units.

Recommendations of Meera Seth Committee

  • The Meera Seth Committee related to the handloom sector submitted its recommendations to the Central Ministry on January 21, 1997.
  • The main recommendations were as follows:
  • National Handloom Loan Fund of Rs. 500 crore should be established.
  • Weavers of the non-government sector should be granted loans from this fund.
  • Calamity Relief Scheme should be implemented to provide subsidy on handloom purchase and hand made yarn.

National Textile Policy 2000
The National Textile Policy was announced on November 2, 2000.
The basic objective of the policy is to take care of the challenges and opportunities presented by the changing global environment to the domestic textile industry.

Important targets of this policy are—

  • Implement in a time bound manner, the Technology Upgradation Fund Scheme (TUFS) covering all manufacturing segments of the textile industry.
  • Achieve an increase in cotton crop productivity by at least 50 per cent and upgrade its quality to international standards, through effective implementation of the Technology Mission on Cotton.
  • Launch the Technology Mission on Jute to increase productivity and diversify the use of this environment-friendly fibre.
  • Assist the private sector to set up specialized financial arrangements to fund the diverse needs of the textile industry.
  • Set up a Venture Capital Fund for tapping knowledge based entre-preneurs of the industry.
  • Dereserve the garment industry from the Small Scale Sector.
  • Encourage the private sector to set up world class, environment-friendly, integrated textile complexes and textile processing units in different parts of the country.

Iron and Steel Industry

  • In 1870 Bengal Iron Works Company established its  first plant at Kulti near Jharia, West Bengal.
  • This plant could produce only cast iron.
  • Large scale iron and steel production was started in 1907 by TISCO established at Jamshedpur.
  • In 1919, Indian Iron and Steel Company (IISCO) was established at Burnpur. 
  • TISCO and IISCO both belonged to the private sector. 
  • The first public sector unit was ‘Vishwa-shwaraiya Iron and Steel Works at Bhadravati’.
  • After independence, a thought was given to develop the Iron and Steel Industry in the First Five Year Plan, but this materia-lised in the Second Five Year Plan. 
  • The Second Plan established three steel plants in the public sector-Bhilai (with assistance of USSR), Durga-pur(with assistance of U.K.) and Rourkela (with assistance of West Germany).
  • Each of these steel plants had a capacity of 10 lakh tonnes of ingots per year. 
  • Simultaneously attempts were made to increase the capacities of two private sector plants i.e., TISCO and IISCO upto 20 and 10 lakh tonnes respectively.
  • All the three public sector plants started production between 1956 and 1962.
  • During the Fourth Five Year Plan these steel plants were exploited to a greater extent.
  • Increased production capacity of iron and steel was planned by establishing new steel plants at Salem (Tamil Nadu), Vijai Nagar (Karnataka) and Visakhapatnam (Andhra Pradesh).
  • The first phase of Bokaro Steel Plant was completed in 1978 which enhanced the iron production capacity of the country.
  • In 1974, the Steel Authority of India Limited (SAIL) was created and was made responsible for the development of the steel industry. 
  • SAIL is also responsible for management of Bhilai, Durgapur, Rourkela, Bokaro and Burnpur Steel Plants.
  • Besides SAIL has been given responsibility of managing Alloy Steel Plant, Durgapur and Salem Steel Plant.
  • On July 14, 1976, the Government took over the ownership of IISCO plant and as a result IISCO also came under the control of SAIL.
  • SAIL took over the control of Maharashtra Elektrosmelt Limited, a mini iron plant producing ferro-manganese in January 1986 and also of Visvesvaraya Iron and Steel Ltd. on Aug. 1, 1989.
  • Steel Authority of India Limited (SAIL), the country's largest steel maker plans to increase its capacity to 40 million tonnes per annum by 2020.
  • India ranked as the fourth largest producer of crude steel in the world during 2013 after C Fina , Japan, and the USA.
  • India was also the largest producer of sponge iron in the world during 2013, accounting for 25 percent of world production. 
  • In the last five years, domestic crude steel production grew at a compound annual growth rate (CAGR) of 7.9 per cent. 
  • Such an increase in production was driven by 9.8 per cent growth in crude steel capacity, high utilization rates, and a 7.0 per cent growth in domestic steel consumption.

    Sugar Production

     (million tonnes) 

     Year Season

     (Oct. – Sept.)






















Fertilizer Industry

  • The consumption of fertilizers in the country has been showing an appreciable growth in the last few years. 
  • The total consumption of chemical fertilizers in nutrient terms has increased from 6.06 million tonnes in 1981-82 to 27.79 million tonnes in 2011-12
  • But during 2012-13, it declined to 25.54 million tonnes. 
  • The average consumption of 141.30 kg per hectare in the country however, is much below as compared to many developing countries including that of our neighbours like Pakistan and Bangladesh.
  • Despite manifold increase in international prices of fertilisers and domestic cost of production, the prices of fertilizers have been kept at 2002 levels for major fertilizers.
  • The increased burden of cost is borne by the government in the form of increased subsidy and concessions paid to manufacturers.

Cement Industry

  • As on March 31, 2013 there are 183 large cement plants with an installed capacity of 324.90 million tonnes and more than 350 operating mini cement plants with an estimated capacity 11.10 million tonnes per annum.
  • The production during 2010-11 was 209.7 million tonnes, which increased to 223-5 million tonne in 2011-12.
  • India is producing different varieties of cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil well Cement, White Cement, etc. 

Establishment of Important Industries


Establishment year & place of first modernised industrial unit

Cotton Industry

1818, Kolkata


1855, Rishra (West Bengal)

Iron & Steel

1907, Jamshedpur


1900, Bihar


1904, Madras (Chennai)


1938, Kolkata


1812, Serampore (West Bengal)

Jute Industry

  • About 40 lakh people are engaged in organised jute industries. 
  • There are 83 jute mills in the country, of which 64 are in West Bengal, 3 each in Bihar and Uttar Pradesh, 7 in Andhra Pradesh and 2 each in Assam, and Chhattisgarh and one each in Odisha and Tripura.
  • Annually, the exports of jute products ranges between Rs. 1300-1400 crore.
  • The Government on June 2, 2006, approved the implementation of the Jute Technology Mission (JTM) at an estimated cost of Rs. 355–55 crore, of which the outlay for mini missions III and IV will be Rs. 38.60 and Rs. 260 crore respectively.
  • The government has formulated first ever National Jute Policy 2005 with an objective of increasing production, improving quality, ensuring remunerative prices to the jute farmers and per hectare yield.

    Production of Cement


    Production (In million tonnes)

































Paper Industry

  • The Government has completely delicenced the paper industry from July 17, 1997. 
  • Foreign Direct Investment upto 100% is permitted on automatic routes in the paper Industry.
  • At present there are around 759 pulp & paper mills out of which nearly 651 are in operation.  
  • The total installed capacity is nearly 128 lakh tonnes out of which 13 lakh tonnes are lying idle due to closure of 106 units, mostly due to pollution problems.
  • The domestic production of Paper and Paper Board was 7007 lakh tonnes for the year 2009-10 and it became 73-7 lakh tonnes in 2010-11. 
  • It is estimated that production of paper and paper board for the year 2011-12 will stand at about 75 lakh tonnes.

    Production, Supply, and Import of Coal

     (million tonnes)



    Total Imports





































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FAQs on Industry & Trade- 1 - Indian Economy for UPSC CSE

1. What is the importance of industry and trade?
Ans. Industry and trade play a crucial role in economic development by creating job opportunities, generating income, and promoting innovation. They are essential for the growth and prosperity of a nation, as they contribute to the overall Gross Domestic Product (GDP) and enhance international trade relationships.
2. How does industry contribute to economic growth?
Ans. Industries contribute to economic growth by manufacturing goods, providing services, and creating employment opportunities. They stimulate investment, increase productivity, and generate income, leading to overall economic development. Industries also encourage innovation and technological advancements, which further drive economic growth.
3. What are the key factors influencing international trade?
Ans. Several factors influence international trade, including government policies, exchange rates, import and export regulations, tariffs, and trade agreements. Market demand, supply chains, transportation, and logistics infrastructure also play a significant role. Additionally, political stability, cultural differences, and competitive advantages of countries impact international trade patterns.
4. How does trade benefit the global economy?
Ans. Trade benefits the global economy by promoting specialization and efficiency. It allows countries to focus on producing goods and services in which they have a comparative advantage, leading to increased productivity and lower costs. Trade also expands market opportunities, encourages competition, and fosters innovation. It stimulates economic growth, raises standards of living, and facilitates the exchange of ideas and cultural experiences.
5. What are the challenges faced by the industry and trade sector?
Ans. The industry and trade sector face various challenges, including market volatility, changing consumer preferences, technological disruptions, and global economic uncertainties. Other challenges include trade barriers, protectionism, unfair competition, and intellectual property infringements. Environmental sustainability, labor rights, and ethical considerations are also becoming increasingly important factors to address within the industry and trade sector.
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