Assertion: During the initial phase of planning in India, it was easier for a private entity to obtain a license if the industrial unit was to be established in an economically backward area.

Reasoning: The licensing policy was a tool in the hands of the government to promote regional equality.

Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A.

Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A.

Although there was a category of industries left to the private sector as per Industrial Policy Resolution of 1956, the sector was kept under state control through a system of licenses. No new industry was allowed unless a license was obtained from the government. This policy was used for promoting industry in backward regions; it was easier to obtain a license if the industrial unit was established in an economically backward area. In addition, such units were given certain concessions such as tax benefits and electricity at a lower tariff. The purpose of this policy was to promote regional equality.