REGIONAL PATTERN OF INDUSTRIAL LICENSING 5 Industrial Policy Resolution of 1956, which declared that "in order that industrialization may benefit the economy of the country as a whole, it is important that disparities in the levels of development among the different regions should be progressively reduced.555 It also staged that the aim of national planning in India was to ensure that facilities like power, transport, water supply and so on become readily available in all these regions "which are lagging behind industrially."6 It was declared that the industries would continue to be governed through the provisions of IDRA 1951 which meant that provisions of the Act were to be used in accordance with the guidelines provided in the policy document.7 It would be interesting to examine to what extent these goals were realized by the actual use of the industrial licensing system. Industrial Agglomeration and Licensing Before we take up the study of actual regional pattern of industrial licensing, it would be relevant to digress towards the theory of industrial agglomeration. The accepted theories of industrial location suggest that industrial activity tends to concentrate in a few regions if the market forces are left uncontrolled.p This is mainly due to agglomeration economies which accrue to the firms located in a given region. Such economies include access to the large markets; development of urban labour market and managerial talents; transportation economies; communication economies; presence of commercial, banking and financial facilities, and economies of scale in public services and so forth.9 The availability of such economies at a few centres and their dearth at others create serious gaps between the economic textures of different regions. Not only that, it has also an influence on the entrepreneurs who receive some 'psychological income9 at certain locations. They consider the economic climate of certain regions as 'favourable5 and look down at other regions a^ 'unfavourable5. These psychological factors contribute in developing 'location inertia5 among the entrepreneurs and the logic of the situation leads to an increase of disparities among the regions. Any control on location, intervening into the interplay of market forces should aim at the prevention of concentration of industrial activity. A better regional balance of industrial development is desirable not only for political considerations and regional aspirations but also for a better utilization of untapped resources in the backward regions which have a larger growth potential. The licensing policy should be used in such a way as to discourage the tendencies of agglomeration. It is often pointed out from certain quarters that licensing plays only a negative role in this context.10 That it can prevent the industrial units from going to certain areas, but cannot attract industries to backward regions, is their contention. The Licensing Policy Enquiry Committee, in its report, has rightly called it a ^mistaken view5. If the planners would have prepared a priority list of industry-mix for different regions, taking into account all the locational factors, and had told the entrepreneurs that their applications