6. Industrial Policy

8/2/2019 6. Industrial Policy

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` Recommendations :

Proposed improved dept. organization for

encouragement & control of industries.

To improve technical training & education and alsoto improve conditions in factories and industrial

centers.

Reorganization of scientific staff of industrial

departments. Provisions for technical and financial aid to

industries.


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Industry has enjoyed a special position as this is the sector thatwould lead India into the modern world, reduce its economicdependence on other countries and generate the higher incomes needed to eliminate poverty.

Indias trade and industrial regulatory policies have had apervasive role in shaping the development of the sector sinceIndependence. They have produced a diverse industrialstructure and reduced imports.

The process of industrial development can be traced by makinga assessment of various Industrial Policy Resolutions passedby the Government ofIndia from time to time.


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` 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 & smallscale sectors for the development of industries.

` It shows the government attitude not only towardsexternal assistance but also toward public & private

sectors.


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` Correct the imbalances in the development of industries.` Direct the flow of scarce resources in the most desirable areas of

investment in accordance with national priorities.

` Prevent the wasteful use of scarce resources

` Empower the government to regulate the establishment and

expansion of private industry in accordance with the plannedobjectives.

` Demarcate areas among the public, private and joint sectors ofthe economy, as well as large, medium and small-scaleindustries.

` Give guidelines for importing foreign capital and the conditionson which such capital should be permitted to operate.


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` Industrial Policy Resolution of 1948





` The New Industrial Policy of 1991


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Industrial activities were divided into these

categories:-

Central govt. arms and ammunition production,

control of atomic energy, ownership and control ofrailways.

State govt. coal,iron,steel,aircraft

manufacture,shipbuilding,telephones.

All other items left over to private sector.


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` Objectives:-

To accelerate the rate of economic growth and to

speed up industrialization.

To expand the public sector, develop heavy andmachine making industry.

To increase employment opportunities and

improvement of living standards and working

conditions of people..

To achieve participation of workers in management. To build up a large and growing private sector.

Maintenance of Industrial peace.


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To overcome budgetary and fiscal deficits andbalance of payment Crises.

Allowing the industry freedom and flexibility inresponding to market forces and

Providing a policy regime that facilitates andfosters growth ofIndian industry.

` Focus Areas: Industrial Licensing

Foreign Investment Foreign Technology Agreements

Public Sector Policy


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(i) Encouragement to Indian entrepreneurship, promotionof productivity and employment generation.

(ii) Development of technology through greater investmentin R & D and bringing in new technology to help Indian

manufacturing units attain world standards.(iii) Removing the regulatory system and other

weaknesses.

(iv) Increasing the competitiveness of industries for thebenefit of the common man.

(v) Incentives for the industrialization of backward areas.(vi) Enhanced support to the small-scale sector.


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` Industrial Licensing is governed by the

Industries (Development & Regulation) Act,

1951.

` Industrial licensing was abolished for allindustries, except those specified (18

industries), irrespective of levels of investment.


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` Limit on foreign equity holdings raised from 40%

to 51% in a wide range of industries

` Foreign Equity Proposals need not to be

accompanied by Foreign Technology TransferAgreement

` Procedure forFDI streamlined by creating a

Foreign Investment Promotion Board (FIPB) to

consider individual application case by case` 100% NRI equity holding in export oriented

industries


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` Foreign technology agreements in high-priority

industries upto Rs. 1crore were given automatic

permission.

` No permission was required for hiring foreigntechnicians and foreign testing of indigenously

developed technologies.


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` 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` Disinvestment in selected public sector

enterprise to raise finance for development,

bring in greater accountability & help create a

new culture in their working for improvedefficiency


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` Priority areas for public sector Essential infrastructure goods and services

Exploration and exploitation of oils and minerals

Technology development and building of manufacturing

capabilities where private sector investment is

inadequate

Production of items of strategic importance

` Brought under MRTP act

` Reserved areas arms and ammunitions,warcraft, atomic energy, coal and lignite, mineral

oils etc.


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` The Monopolistic and Restrictive Trade Practices Act

` Removed the threshold limits of assets in respect of MRTPcompanies and dominant undertakings

` Eliminated the requirement of prior approval ofCentral

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 beauthorized to initiative investigations on complaintsreceived from individual consumers or classes ofconsumers in regard to monopolistic, restrictive andunfair trade practices.


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` Liberalization ofLocation Policy - decentralization of industrial activities geographically

No industrial approvals from centre required for industriesto be set up in areas with population more than 1 mn;

otherwise 25km out of periphery of city` Abolition of Phased Manufacturing Programs

not required now

` Convertibility Clause debt could be converted into equity if assistance

exceeded Rs. 5 Cr. not now


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` Export Oriented Unit (EOU) 30 % annual productionexported by third year

` Ancillary Unit not a subsidiary atleast 50%production supplied to other units

`

Single Window Loan Scheme cover projects upto 20Lakhs` Industrial undertakings allowed 24% equity

participation in SSI units` SIDBI Small Industries Development Bank ofIndia

factoring services` SIDO Small Industries Development Organization

TDC(Technology Development Cell) to providetechnology inputs


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` Industrial Associations encouraged common

testing and quality counseling

` Design and Development Centers IITs and

other colleges.` Entrepreneurship Development Programs (EDP)

` Janata Cloth Scheme modernization of looms,

training facilities, better designs, better dyes


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` Abid Hussain Committee Recommendations Rationalization of duty draw back system

Exemption of cash compensatory support

Reformulation of import replenishment (REP) system for

export production

Essential capital goods to be included underOpen

General License (OGL)

Liberalize import of technology


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` Export Import (EXIM) Policy, 1985 Easier and quicker access to imported inputs

Stability of export import policy

Strengthening export production base

Upgrading technological base

Import Export Pass Book Scheme reduce delays

in obtaining licenses under duty exemption scheme

` 1988 745 new items placed underOGL, REP

broadened


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` 1990 OGL now included 1343 items Import of instruments required for modernization and

technological upgradation supplementary licensing as

in capital goods/REP / additional licensing.

Automatic Licensing 10% of value of previous years

license could be imported.

Import of items earlier under the purview of public sector,

now could be imported by trading houses.

NFE Net Foreign Exchange condition to obtainlicenses for foreign exporters.


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` Micro and Small Enterprises

` Generate highest employment

` Micro, Small and Medium Enterprises

Development Act, 2006` Policy package for stepping up credit

` Micro, Small and Medium Enterprises

Development Organization facilities and services

to MSMEs


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` Growth in Forex Reserves

` PSU could grow faster in a competitive

environment

` Opening of economy` Small sector policy displays government

concern

` Investment limit in small scale raised from Rs. 65L

to Rs. 3 Cr. benefits grabbed by powerfulindividuals


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` Entry of foreign investment would remove the

distinction between high priority and low priority

sector should be focused on high priority

` Sick units transferred to private hands socialsecurity measures needed

` Unemployment Overlooked

` No Exit Provisions for entrepreneurs

` Little role of R & D

6. Industrial Policy

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