-Standing Committee on Finance Report

Why in News?

• The Standing Committee on Finance (headed by BJP MP Bhartruhari Mahtab) recommended an action plan for the even distribution of industries across all States, ensuring balanced and equitable economic development.
• Concerns raised on bias in industrial investment approvals and slow progress in disinvestment of loss-making PSUs.

Concept Corner – Basics for UPSC

Concept	Explanation in Points
Industry as a State Subject	– As per Seventh Schedule, List II, industries mainly fall under State jurisdiction. – However, certain industries of national importance fall under Union List (e.g., defense, atomic energy). – Hence, both Centre & States play complementary roles.
Industrial Policy	– Set of rules, incentives, and restrictions guiding industrial growth. – India’s first Industrial Policy Resolution (1948), later major ones: 1956, 1991. – Post-1991 reforms shifted towards liberalisation, privatisation, globalisation (LPG model).
Equitable Industrial Development	– Industries are concentrated in states like Maharashtra, Gujarat, Tamil Nadu, Karnataka. – Poorer states (e.g., Bihar, Odisha, North-East) remain under-industrialised. – Leads to regional imbalance, migration, and social unrest.
Public Sector Enterprise (PSE) Policy	– Announced in 2021. – Non-strategic PSUs: To be privatised/closed if loss-making. – Strategic sectors (defence, energy, transport, telecom): Minimum presence of PSUs ensured.
Disinvestment	– Selling government stake in CPSEs (Central Public Sector Enterprises). – Aims at fiscal prudence, efficiency, and resource allocation. – Delay in disinvestment hampers resource mobilisation.

Core Highlights of the Report

1. Even Distribution of Industries – Action plan needed to reduce regional imbalance and promote equitable development.
2. Centre’s Role – Though industry is a State subject, central initiatives (FDI policy, tax incentives, infrastructure projects) are crucial.
3. Disinvestment Lag – No major progress in privatising/closing non-strategic, loss-making CPSEs since 2021 guidelines.
4. Need for Higher Investment Rate – India’s investment rate is below required levels for sustained high growth.
5. Political Debate – Opposition accused Centre of bias in approving investments, moving them away from Opposition-ruled States.

UPSC/Constitutional Stand

• Article 246 & 7th Schedule: Industry falls under State List, but Union List entries (Industries controlled by the Union) and Concurrent List entries allow Centre’s intervention.
• Article 38 (Directive Principles of State Policy): State shall strive to promote welfare of people by reducing inequalities.
• Article 39(b): Ownership and control of material resources should be distributed to best subserve the common good.
• Article 19(1)(g): Freedom to practise any profession or carry out trade/industry, subject to reasonable restrictions.

Recent Developments

• PSE Policy 2021: Yet to see active disinvestment in non-strategic CPSEs.
• FDI liberalisation: Centre allows 100% FDI in many sectors to attract investments.
• Make in India & PLI Schemes: Focused on boosting manufacturing, but concentrated in industrially advanced states.

Prelims Practice Questions

Q1. With reference to Indian industrial policy, consider the following statements:

1. Industries are entirely a Union subject under the Constitution of India.
2. The 1991 Industrial Policy emphasised liberalisation, privatisation, and globalisation.
3. The PSE Policy (2021) provides for privatisation of loss-making non-strategic PSUs.

Which of the above is/are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3

Q2. Consider the following:

1. Article 38 – Reducing regional inequalities
2. Article 39(c) – Preventing concentration of wealth
3. Article 246 – Division of powers between Union and States

Which of the above have a bearing on industrial distribution in India?
a) 1 and 2 only
b) 2 and 3 only
c) 1, 2 and 3
d) 1 only

Q3. Which of the following is/are correctly matched?

1. 1956 Industrial Policy – Greater role for PSUs
2. 1991 Industrial Policy – Abolition of industrial licensing
3. 2021 PSE Policy – Nationalisation of key industries

Select the correct answer:
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3

Mains Practice Question

“Balanced industrial development is not just an economic necessity but a constitutional obligation.” Discuss in the context of recent Standing Committee recommendations and India’s industrial policy evolution.

Answers to Prelims Questions

Q1. → (b) 2 and 3 only

• Industries are not entirely Union subject (they are in State List except strategic ones).
• 1991 = LPG reforms.
• 2021 PSE Policy = Privatisation/closure of non-strategic loss-making PSUs.

Q2. → (c) 1, 2 and 3

• All three Articles have direct relevance: inequality reduction, wealth distribution, and Union-State power division.

Q3. → (a) 1 and 2 only

• 1956 = Expanded PSU role ✅
• 1991 = Abolished licensing (except strategic areas) ✅
• 2021 PSE Policy = Privatisation, not nationalisation ❌