Unit
II
Industrial Policy
•
It
covers rules, regulations, principles, policies, & procedures laid down by
government for regulating & controlling industrial undertakings in the
country.
•
It
prescribes the respective roles of the public, private, joint, cooperative,
large, medium & small scale sectors for the development of industries.
•
It
incorporates fiscal & monetary policies, tariff policy, labor policy
•
It shows
the government attitude especially toward public & private sectors.
Main Objectives of Industrial
Policies
•
To
maintain a sustained growth and productivity
•
To
enhance gainful employment
•
To
prevent undue concentration of economic power
•
To
achieve optimal utilization of human resources
•
To
attain international competitiveness and
•
To
transform India into a major partner and player in the global arena
Industrial Policies-History
•
Industrial
Policy Resolution of 1948
•
Industrial Policy Resolution of 1956
•
Industrial
Policy Resolution of 1973
•
Industrial
Policy Resolution of 1977
•
Industrial
Policy Resolution of 1980
•
The New Industrial Policy of 1991
Industrial
Policy Resolution 1948
• After
Independence in 1947, the national consensus was in favor of rapid
industrialization of the economy
• Building
on the so-called "Bombay Plan" in the pre-Independence era,
the first Industrial Policy Resolution announced in 1948.
Features/
Objectives of Policy
• Acceptance
of Mixed Economy with exclusive monopoly of government in selected areas
• Bring
Economic stability to create investment friendly environment
• Establishment
of new industrial undertakings
• Importance
of foreign capital was identified but new organizations must be under Indian
ownership.
Industrial
Policy Resolution 1956
• The
Industrial Policy Resolution 1956 was shaped by the Mahalanobis Model of growth, which suggested that emphasis on heavy industries would lead the
economy towards a long term higher growth path
• The
Resolution widened the scope of the public
sector.
Features/ Objectives of
Policy
• The
objective was to accelerate economic growth and boost the process of industrialization
as a means to achieving a socialistic pattern of society
• Removal
of regional disparities through development of regions with low industrial
base
• The
Industrial Policy Resolution - 1956 classified industries into three
categories:
• The
first category comprised 17 industries (included in Schedule A of the
Resolution) exclusively under the domain of the Government. These included inter
alia, railways, air transport, arms and ammunition, iron and steel and
atomic energy.
• The
second category comprised 12 industries (included in Schedule B of the
Resolution), which were envisaged to be progressively State owned but private
sector was expected to supplement the efforts of the State.
• The
third category contained all the remaining industries and it was expected that
private sector would initiate development of these industries but they would
remain open for the State as well
Industrial Policy Resolution of 1973
• To
prevent excessive concentration of industrial activity in the large
industrial houses, this Statement gave preference to small and medium
entrepreneurs over the large houses and foreign companies in setting up of
new capacity particularly in the production of mass consumption goods
• New
undertakings of up to Rs 10 million by way of fixed assets were exempted from
licensing requirements for substantial expansion of assets
Industrial Policy Resolution of 1977
• Emphasized
decentralization of industrial sector with increased role for small scale and
tiny units
• For
the first time, within the small scale sector, a tiny unit was defined
as a unit with investment in machinery and equipment up to Rs.0.1 million and
situated in towns or villages with a population of less than 50,000
• Highest
priority was accorded to power generation and transmission.
• It
expanded the list of items reserved for exclusive production in the small scale
sector from 180 to more than 500
Industrial Policy Resolution of 1980
• Promotion
of competition in the domestic market, technological upgradation and
modernization of industries
• Some
of the socio-economic objectives spelt out in the Statement were
– i)
optimum utilization of installed capacity,
– ii)
higher productivity,
– iii)
higher employment levels,
– iv)
removal of regional disparities,
– v)
strengthening of agricultural base,
– vi)
promotion of export oriented industries and
– vi)
consumer protection against high prices and poor quality.
Industrial
Policy 1991
• The
Industrial Policy Statement of 1991 stated that “the Government will continue
to pursue a sound policy framework encompassing encouragement of entrepreneurship,
development of indigenous technology through investment in research and
development, bringing in new technology, dismantling of the regulatory
system, development of the capital markets and increased competitiveness
for the benefit of common man".
• It
further added that "the spread of industrialization to backward
areas of the country will be actively promoted through appropriate
incentives, institutions and infrastructure investments".
• Policy
focus is on:
Deregulating Indian industry &
increased competition;
• Allowing
the industry freedom and flexibility in responding to market forces and
encouraging entrepreneurship
• Providing
a policy regime that facilitates and fosters growth of Indian industry
especially backward areas
In pursuit of the industrial objectives, Government decided
to take a series of initiatives in respect of the policies relating to the
following areas:
• Public
Sector Policy
• MRTP
Act
• Industrial
Licensing
• Foreign
Investment
• Foreign
Technology Agreements
Public Sector
Policy
• List
of industries reserved for the public (Schedule A) reduced from 17 to 8
• List
of sector reserved for dominance by public sector (Schedule B)
effectively abolished to get rid of low productivity, over staffing, lack of
technological up gradation and low rate of return
• Disinvestment
in selected public sector enterprise to raise finance for development, bring in
greater accountability & help create a new culture in their working for
improved efficiency
• To
revive and rehabilitate chronically sick PSUs, it was decided to refer them to
the Board for Industrial and Financial Reconstruction (BIFR)
MRTP Act
• Removed
the threshold limits of assets in respect of MRTP companies and dominant
undertakings
• The
thrust of policy was more on controlling unfair and restrictive trade practices
• Eliminated
the requirement of prior approval of Central Government for
– Establishment
of new undertakings
– Expansion
of undertakings
– Merger,
Amalgamation and Takeover
– Appointment
of Directors under certain circumstances.
• The
newly empowered MRTP Commission will be authorized to initiative
investigations on complaints received from individual consumers or classes of
consumers in regard to monopolistic, restrictive and unfair trade practices.
Industrial
Licensing Policy
• Industrial
Licensing is governed by the Industries (Development & Regulation) Act,
1951.
• Industrial
licensing was abolished for all industries, except those specified (18
industries like alcoholic drinks, cigars and cigarettes, drugs and
pharmaceuticals), irrespective of levels of investment.
Foreign Investment
• Limit
on foreign equity holdings raised from 40% to 51% in a wide range of industries
(especially export oriented units)
• Foreign Equity Proposals need not to be
accompanied by Foreign Technology Transfer Agreement
• Procedure
for FDI streamlined by creating a Foreign Investment Promotion Board to
consider individual application case by case.
Foreign Technology
Agreements
• Foreign
technology agreements in high-priority industries upto Rs. 1 crore were given
automatic permission
• No
permission was required for hiring foreign technicians and foreign testing of
indigenously developed technologies.
Liberalization and
Privatization & Globalization
• Liberalization,
privatization and globalization was introduced in year 1991 through New
Economic Policy.
• This
policy has been introduced to get rid off problems related to strict
regulations and pubic sector which resulted into bureaucratization,
overstaffing, corruption related problems.
• Another
significant reason for implementing this policy was insufficient foreign
reserve in kitty of Indian Government and pressure of International
agencies for opening up Indian markets for outside players.
Liberalization
• Liberalization
means to reduce unnecessary restrictions and controls on business units
imposed by government.
• This
resulted procedural simplification and relaxing trade related activities from
unnecessary government restrictions.
Therefore it resulted into easing the barriers created by
government through various means like industrial licensing; import
licensing, price control, control over production of goods, foreign exchange
control, expansion and investment by large business houses and foreign
investors etc.
Features of
Liberalization
• Eliminating
industrial licensing barriers
• Freedom
in price fixation
• Easing
the procedures related to international trade
• Reduction
in tax rates
• Freedom
about the scale of businesses
• Reducing
control over foreign exchange rates
Privatization
• This
refers to providing opportunity and suitable atmosphere to private sector
for setting up industrial units previously reserved for public sector.
• This
enhances the importance of private sector to achieve better economic
growth.
• It
results into transfer of ownership from government (PSUs) to Individual
citizens (Private sectors).
Features of
Privatization
• Increased
competition
• Ownership
transfer
• More
job opportunities
• Effective
utilization of resources
Globalization
• Globalization
means linking the economy of a country with economies of other countries by
means of free trade, easy mobility of labour and capital.
• Globalization
refers to joining the whole world market in one market like the market of a
small village.
Features of Globalization
•
Latest Technology support
•
Transfer of best skill
•
Availability of quality products at reasonable
price
•
International Competition
Socio Economic Implications of LPG
Favorable implications
• Enhanced
competition results in better products and soothing investment
climate which yields overall infrastructural development
• Optimum
use of resources like land, labour and capital
• Availability of quality goods at reasonable prices
• Better quality service to customers
• Significant foreign investment
• Less political interference
• Reduced corruption and other malpractices
• Better rate of returns on investment in businesses than public sector
• Better employment opportunities
• Use of latest technology
• Boost in industrial activities
• Composed Global developmen
- Unfavorable Implications
• Problems
for domestic industries
• Exploitation
of employees
• May
convert conditions more worse in underdeveloped countries
• Non-balanced
regional development
• Concentration
of economic powers in private hands
• Lack
of environmental concerns
• Rare
control on monopoly
• National
sovereignty: under question
• Beneficial
for big business houses only
• Chain
reaction of financial disturbances
Public Sector
Suggestions to improve PSUs
• PSUs
should be preferred in selected areas of strategic importance and Public
service
• Politicians
should not be allowed to interfere in matters and policies of PSU
• Complete
autonomy should be given towards business and social objectives
• Latest
possible technologies should be used by joining hands with foreign companies
• Responsibility
centers should be established for income and expenditure purposes
• Appointments
and promotion of employees should take place on basis of competency
• All
Audit related activities should be in synergy
• Prices
of goods and services should be decided in a way to avoid losses
Features of PSUs
• Government
Ownership
• Accountable
for Public welfare
• Overall
developments purposes
• Bureaucratic
System
Private Sector
• Private
Sector refers to the part of the economy, where there is private ownership and
control over means of production.
• This
sector has prime objective of earning profits and not owned by government.
Features of Private Sector
• Profit
Motive
• Ownership
by individuals or group of individuals
• Full
Autonomy
• Least
political interference
Advantages/ Merits of Private
Sector
• Incentive
to take risk and bear uncertainty
• Higher
rate of capital formation
• Rapid
Economic Growth
• Efficient
utilization of Resources
Problems/ Disadvantages of
Private Sector
• Competition
Related Wastage
• Rare
attention on Social Welfare
• Economic
Fluctuations creates spiral effect
• Struggle
of classes
• Exploitation
of Human Resources
• Concentration
of Income & Wealth
No comments:
Post a Comment