Step 1: Understanding the Concept:
The Industrial Policy Resolution (IPR) of 1956 is widely regarded as the "Economic Constitution" of India during the planning era.
It was adopted to provide a roadmap for the state-led industrialization strategy. It emphasized the "Socialistic Pattern of Society" where the government would control the "commanding heights" of the economy.
Step 2: Detailed Explanation:
The Second Five Year Plan (1956-1961) was based on the Mahalanobis Model, named after the statistician P.C. Mahalanobis.
This model argued that for long-term growth, India must focus on "Heavy and Basic Industries" (like steel, chemicals, and machine building) rather than just consumer goods.
The IPR 1956 was the legal instrument to implement this vision. Its key features were:
1. Classification of Industries: Industries were divided into three categories: Schedule A (exclusively owned by the State), Schedule B (State-led with private sector supplement), and Schedule C (remaining industries for the private sector).
2. Industrial Licensing: No new industry was allowed unless a license was obtained from the government. This was used to control the capacity and promote regional equality (by giving licenses easily for backward areas).
3. Expansion of the Public Sector: It gave the public sector a dominant role in the economy, as it was believed that the private sector lacked the capital to invest in heavy industries.
The First Plan (1951-56) focused on agriculture, but the Second Plan (1956-61) was the first true "Industrial Plan," and it relied entirely on the principles laid down in IPR 1956.
Step 3: Final Answer:
The Industrial Policy Resolution of 1956 served as the foundation for the Second Five Year Plan, marking the shift towards heavy industrialization.