Industrial Policy Resolution # 4
Apart from socialising the means of production in strategic areas, public sector provides a countervailing power to the growth of large houses and large enterprises in the private sector. Public sector will have an expanding role in several fields. Not only will it be the producer of important and strategic group of basic nature, but it will also be used effectively as a stabilising force for maintaining essential supplies for the consumer. The public sector will be charged with the responsibility of encouraging the development of a wide range of ancillary industries and contribute to the growth decentralised production by making available expertise in technology and management to small scale and cottage industry sectors. The government will endeavour to operate public sector enterprises on profitable and efficient lines in order to ensure that investment in these industries pays an adequate return to society. The high priority of the government attaches to the building up of a professional cadre of managers in the public sector, who would be given the necessary autonomy and entrusted with the task of providing dynamic and efficient management to such enterprises.
Indigenous and Foreign Technology: India has a well-developed infrastructure of scientific establishments. Future development of Indian industries must be based on indigenous technologies as far as possible. Development of indigenous technology will be given full scope. It is also essential that development of indigenous technology is responsible to the objectives of efficient production in increasing quantities of goods that society urgently needs. Science and technology must contribute to the improvement in the standard of living and the quality of life of the larger mass of our people.
The government recognises the necessity for continued inflow of technology in sophisticated and high priority areas where Indian skill and technology are not adequately improved in order to promote technological self-reliance. In such areas, the government’s preference would be for outright purchase of the best available technology and then adapting such technology to the country’s needs. Indian firms which are permitted to import foreign technology would be required in appropriate cases to set up adequate research and development facilities so that imported technology is properly adapted and assimilated. The government will also set up a national registry of foreign collaborations in the Secretariat of the Foreign Investment Board so that there is continuous monitoring of these efforts.
The government would also like to clarify its policy regarding participation of foreign investment and foreign companies in India’s industrial development. Existing foreign companies so far concerned the provisions of the Foreign Exchange Regulation Act would be strictly enforced. Under the process of dilution under this Act has been completed, companies with direct non-resident investment not exceeding 40 per cent will be treated on par with Indian Companies except in cases specially notified and their expansion will be guided by the same principle as those applicable to Indian Companies.
Foreign investment and acquisition of technology necessary for India’s Industrial development would be allowed only on such terms as are determined by the Government of India to be in the National interest. In areas where foreign technology know-how is not needed existing collaborations will not be renewed and foreign companies operating in such fields will have to modify their character and activities in conformity with national priority within the framework of Foreign Exchange Regulation Act. Government, to guide entrepreneurs will issue a revised illustrative list of industries where no foreign collaborations, financial or technical, is considered necessary since indigenous technology is fully developed in this field.
For all foreign approved investments, there will be complete freedom for remittance of profits, royalties, dividends as well as repatriation of capital subject, of course, to rules and regulations common to all. As a rule, majority interest in ownership and effective control should be in Indian hands through Government may make exceptions in highly export oriented and/or sophisticated technology areas. In hundred per cent export oriented cases, government may consider even a fully owned foreign company.
Indian Joint Ventures Abroad: In many developing countries a number of Joint Ventures have been set up by Indian companies in collaboration with local associates. At the present stage of the country’s industrial development, substantial export of capital from India will neither be feasible nor desirable. The contribution of the Indian Entrepreneurs to the Joint Ventures abroad shall, therefore, have to be mainly in the form of machinery and equipment, structural and also technical know-how and management expertise. In cases where, in addition, some cash investment is found necessary. Government will be willing to consider such investment up to a maximum limit to be prescribed for this purpose.