In February, 1973 the government modified the Industrial Policy of 1956 to simplify and rationalize it. This new Statement sought to make the investment climate certain and to encourage growth of priority industries.

The Policy Statement of 1973 drew up a list of industries to be started by large business houses so that the competitive effort of small industries was not affected. The entry of competent small and medium entrepreneurs was encouraged in all industries. Large industries were permitted to start operations in rural and backward areas with a view to developing those areas and enabling the growth of small industries around.

The major highlights of this policy were as follows:-

1)Classification of Industries

The classification of industries remained the same as under the 1956 Policy. The 17 strategic and basic industries mentioned in Schedule A of 1956 Policy continued to be reserved for the public sector.

2)Redefinition of Large Business Houses

The Policy redefined the big business houses. The business houses having a fixed investment of Rs. 20 crores or more were considered large so that the definition of large houses could be same for both licensing purpose and under the MRTP Act. The earlier limit was Rs. 35 crores for the purpose of licensing.

3)Area of Large Business Houses

• Large business houses were eligible to participate in those industries which were not reserved for the public sector and small scale sector.
• Foreign companies were allowed to invest in industries which produced primarily for exports.

4) Small Sector Sector

• The existing reservation for the small scale sector was continued.
• The list of industries reserved for the small scale sector could be expanded.
• The government also decided to give encouragement to the Cooperative sector in the production of mass consumption goods.

5) Joint Sector

Joint sector was promoted with the view of reducing concentration of economic power in the hands of few top parties.

6) To stimulate Growth

This Policy Statement was aimed at stimulating growth in all priority industries as per Fifth Five Year Plan.

CRITICISM OF IPS, 1973:-

➢ The limit of Rs. 20 crores for large houses was unrealistic.
➢ Scope for public sector was enlarged ignoring its poor importance.
➢ The role of joint sector was not clearly defined.
➢ Proper emphasis was not placed on balanced regional development.
➢ Role of large houses in backward areas was ignored.