The Evolution of Indian Industrial Policy since 1948 and its Impacts on the Development of the Manufacturing Sector

ABSTRACT: India’s industrial policy is a key factor affecting the development of its manufacturing sector. Applying theories of path dependence borrowed from New Institutional Economics, this paper analyzes the logic behind India’s changing industrial policy since 1948. Taking into account changes in the manufacturing sector since the 1950s, the paper also discusses in detail the paths through which industrial policy impacts the direction of the sector’s development. The paper finds that in the course of promoting the manufacturing sector, while India repealed and modified a wide range of outdated policies, industrial policies of the past nonetheless shaped the sector’s development. The paper finds Path Dependence theory useful not only for explaining these phenomena, but also in terms of identifying a means to breakout of this particular path.