The correct option is 2 only
Explanation
The industrial licensing policy in India, particularly under the Industrial Policy Resolution (IPR) 1956, was utilized as a primary instrument to regulate the private sector and promote regional equality. The state controlled industrial development through a system of licenses to ensure balanced regional growth and prevent the concentration of economic power.
Statement-wise Analysis:
- Statement 1 is Incorrect: To address regional disparities, the government made it easier to obtain an industrial license if the proposed unit was to be established in an economically backward area. This was a deliberate strategy to encourage industrialization in neglected regions.
- Statement 2 is Correct: The government provided incentives rather than disincentives to promote industries in backward regions. These units were granted tax concessions (such as tax holidays) and access to electricity at lower tariffs, rather than being subjected to higher tax rates.
- Statement 3 is Incorrect: Under the strict licensing regime (often referred to as the "License Raj"), existing industries were not free to expand output at will. They required a license not only to establish a new firm but also to expand production capacity or diversify into new product lines. This regulation was intended to ensure that the quantity of goods produced aligned with the planned economic requirements.
Key Takeaway:
The pre-1991 industrial licensing policy aimed to promote regional equality by incentivizing setup in backward areas through easier licensing and tax benefits, while strictly regulating capacity expansion to align with state planning.