licence raj

License Raj | Indian History | PDF Download


  • License Raj refers to regulations and accompanying bureaucracy that were required to set up and run Indian businesses in India between 1951 and 1991. The Government resorted to licensing system so that it can maintain control over industries as per the Industries Development and Regulation Act, 1951.
  • license refers to a written permission granted by government to a firm which mentions what product can be manufactured by the firm.


  • The existing industrial units (prior enactment of IDR act 1951) needed to obtain registration under the act.
  • For new industrial units to be set up in category of licensed industries. If the industry is not covered under compulsory licensing but the investment.
  • If any article is reserved for small scale industries and a firm wanted to manufacture these items, it needed a license.
  • If a firm wants to increase its production capacity beyond 25%, it needed to obtain prior approval.


  • To regulate the industrial sector, particularly private sector in desired direction as per objectives of the five year plans.To check the concentration of ownership of Industries in few hands
  • To encourage the new entrepreneurs to set up industries and small scale industries.
  • They needed to deal with various government departments and officers; and spent more time in Delhi than their factories.
  • Needed to deal with the officials and and spent more time in Delhi than their factories.
  • Objective was to check the concentration of power in few hands instead they start issuing license to big houses.
  • There was an excessive control as one needed to obtain licences for setting up new unit, starting production of new product, substantial expansion.
  • Monopolies commission. on the basis of recommendation of this committee, a Monopolies Inquiry Commission was established headed by Justice KC Dasgupta.
  • Hazari committee. The process for review of the licensing system began with Hazari committee in 1967 headed by Dr. R K Hazari. This committee threw light on the failure.
  • Dutt committee. 1967 “Industrial Licensing Policy Inquiry Committee” was set up under the chairmanship of Mr. Subimal Dutt. due to the license raj, a very strong nexus had developed between the Industrial houses, politicians and bureaucrats


  • MONOPOLISTIC AND RESTRICTIVE TRADE PRACTICES on the basis of recommendation of Dutt Committee, MRTP Act was enacted in 1969 to ensure that concentration of economic power is not in hands of few rich
  • This act is not in force now as it was repealed in 2009 and was replaced by Competition Act 2002 with effect from September 1, 2009. It established MRTP commission; which is now replaced by Competition Commission of India.


  • the backdrop of Dutt committee and MRTP Act; the government launched its new Industrial License Policy in 1970 whereby the industries were re-classificlassified into four groups viz. Core Sector, Middle Sector, Noncore Heavy Investment Sector and Delicensed sector. Core sector comprised basic, crit
  • Thus, the role of the large business houses was confined to the core, heavy and export oriented sectors. The small industries were deregulated and in 1991 LPG was also introduced which ultimetely brought end to this.



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