Genesis and Operation of the Bengal State Aid to Industries Act, 19311

Abstract

The Bengal State Aid to Industries Act was passed in 1931 to enable state aid to be given mainly for the purpose of encouraging cottage industries on a small scale. The Act was the outcome of a recommendation made by the Indian Industrial Commission in 1918 which stated that "assistance... be given to small and cottage industries by the local Departments of Industries in the shape of small Government loans or by financing the purchase of plant on the hire-purchase system". This recommendation the Indian Industrial Commission made in view of the lack of financial facilities which stood in the way of extension of small and cottage industries and of those industries which were new to the economy of India. Moreover, it was felt that government financial assistance would also create a favourable environment for investors who till now were unwilling to invest money in undeveloped industries with uncertain prospects until government associated itself with those. In this paper an attempt has been made to examine certain aspects of the Bengal State Aid to Industries Act, 1931. This has been done in three parts. Part I deals with the course of events leading to the passing of the Act. Part II is a critical study of its working while Part III evaluates its performance in Bengal till 1947. The various moves made to amend the Act and the Rules enacted thereunder are also discussed in Part III.