The first industrial policy, 1948 itself covers the way for the mixed economy in the nation. It accepted the existence of the public and private sectors in the economy. It assigned a progressive role to the State, to investment in industrialization and to the regulation of the private sector. It also accepted the importance of small and cottage industries in the development of local resources such as capital, labor, raw materials, etc. The industrial policy, 1948 recognized the role of foreign capital in industrial development but stated that there should be strict regulation of foreign capital.
To guarantee the supply of capital goods and modern technology, Industrial policy, 1948 encouraged the free flow of foreign capital. The Government ensured that there was no discrimination between Indian and foreign companies, facilities for sending benefits would be granted and due compensation would be paid if a foreign company was nationalized. Industrial policy, 1948 also emphasized the importance of artisanal and small-scale industries in the Indian economy.
The Industries Law (Development and Regulation) was passed in 1951 to implement the Industrial Policy Resolution of 1948.
The industrial policy of 1948 divided the industry into four categories:
1. Industries in which the State had a monopoly: Basic and strategic industries such as weapons and ammunition, atomic energy, railways, etc., will be the exclusive monopoly of the State.
2. New investment by state: Six industries were specified under this: Coal, iron and steel, aircraft manufacturing, shipbuilding, manufacturing of telephone, telegraph and wireless devices (excluding radio devices) and mineral oil. However, existing private sectors were allowed to continue for ten years, after which the government was able to review the situation and acquire any commitment.
3. The field of government control: These industries should be regulated and directed by the government. Some of these industries were automobiles, heavy chemicals, heavy machinery, machine tools, fertilizers, electrical engineering, sugar, paper, cement, cotton, and wool textiles.
4. Industries open to the private sector: All other industries were left open to the private sector. However, the State may participate and/or intervene if circumstances so require.