Abstract
This paper describes the relationship between industrial policy and development of machine tool industry in India. Although industrial and import licensing was liberalized to promote competition among machine tool manufacturers during 1980s, they did not react. Competition became tough after automobile policy was changed as a part of economic reforms. Demand of machine tools expanded and buyer demanded more sophisticated machine. Big machine tool manufacturers tried to introduce TPM and TQC to improve quality and labour productivity. Indian manufacturers are still protected by high import duty. While it is being reduced, they can adjust because they have ability to reduce costs. However, they take time to establish them selves in export market. Protection, competition and expansion of demand was necessary for development of machine tool industry.
