The basic rationale of IPR, 1956 was that the state had to be given primary role for industrial development as capital was scarce and entrepreneurship was not strong. The public sector was enlarged dramatically so as to allow it to hold commanding heights of the economy.

Major provisions of IPR, 1956 are as follows:-

1) Classification of Industries

IPR, 1956 divided the industries into the following three categories.

(a) Schedule A industries

This comprised 17 industrial areas which were strictly under the Central Government. The companies of this area were known as CPSE (Central Public Sector Undertakings). These included key industries such as –

(b) Schedule B industries

This category comprised 12 industries that were put to the State Governments to take measures. However, states were not given monopoly over these industries. States were expected to facilitate
and encourage development of these industries. In this category of industries state was allowed to establish new units but the private sector was not denied to set-up or expand existing units. The schedule B industries included –

(c) Schedule C industries

The Industrial areas which were left out of the Schedule A & B were left with the private sectors subject to licensing and regulation under the IDR Act.

2) No water-tight Compartments

• There were no water-tight compartments for both private and public companies.
• The government was given the freedom to undertake any type of industrial activity.
• The private enterprises may also be allowed to produce some of the items coming in the domain of the State.
• Private enterprises may also depend upon the public sector for some of its requirements.

3)Encouragement to Small-scale and Cottage Industries

• The significance of small scale and cottage industries was reiterated in clear terms.
• In order to strengthen the small-scale sector supportive measures were suggested in terms of cheap credit, subsidies, reservation etc.
• To concentrate on measures designed to improve the competitive strength of small-scale producers.

4) To Reduce Regional Disparities/Balanced Regional Development

• To give encouragement for setting up of new industrial units in backward areas.
• Public sector enterprises were given greater role to develop these areas.

5) Management of Public Enterprises

• The policy resolution stressed the need for management of State Enterprises strictly along business lines.
• It suggested measures like decentralization of authority, speedy decision making and provision of ample initiative to increase the efficiency of State industrial units.
• The bureaucratic management and red tapism should be avoided in the administration of public enterprises.

6) Development of Personnel

• This IPR provided for the development of managerial and technological personnel for the rapid industrialization of the country.

• Facilities for their training were provided at various levels.

7) Industrial Peace

• This policy recognized the significance of industrial peace.
• The policy recommended good working conditions to workers, joint consultation and association of labor with management to achieve industrial harmony.