industrialpolicy1991-120416011111-phpapp01
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PRESENTATION ONINDUSTRIAL LICENSINGPOLICY &
ECONOMIC REFORMSBY-SAKSHI GUPTA
(02916001310)
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INDUSTRIAL POLICY
Industrial policy means rules, regulations ,principles , policies , and procedures laid downby government for regulating , developing andcontrolling industrial undertakings in the
country. It prescribes the respective roles ofthe public, private joint and cooperativesectors for the development of industries. Italso indicates the role of the large , medium ,and small sector . It incorporates fiscal andmonetary policies, tariff policy , labour policy
and the government attitude towards foreigncapital, and role to be played by multinationalcorporations in the development of theindustrial sector.
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OBJECTIVES OF INDUSTRIAL POLICY
Accelerating the overall rate ofgrowth through industrialization.
Expanding the industrial base inrelation to industrialization needs of
the country.
Generating employment andreducing poverty.
Preventing monopolies andconcentration of industrial
power.
Creating competitive conditions
and encouraging the growth ofentrepreneurship
Promoting balanced industrialdevelopment.
Promoting linkages with others
sectors of the economy.Assisting small enterprisesEncouraging the growth of
industrial research anddevelopment
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THE INDIAN GOVERNMENT ESTABLISHED A LICENSINGSYSTEM IN ORDER TO MAINTAIN CONTROL OVER
INDUSTRIES ACCORDING TO THIS ACT.
A LICENSE IS A WRITTEN PERMISSION GRANTED TO AN
INTERPRISE BY THE GOVERNMENT ACCORDING TOWHICH THE PRODUCTS MENTIONED THEREIN CAN BE
MANUFACTURED BY THE ENTERPRISE. THE LICENSE
ALSO INCLUDE MANY PARTICULARS SUCH AS:
.Name of the product to be produced The place where the factory to be established.
Expansion of the enterprise.
The limit of the production capacity.
INDUSTRIES DEVELOPMENT AND
REGULATION ACT 1951
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The main objectives of the Act was to empower
the Government:-(i) to take necessary steps for the development
of industries;
(ii) to regulate the pattern and direction of
industrial development;(iii) to control the activities, performance and
results of industrial undertakings in the public
interest.
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OBJECTIVES OF NEW INDUSTRIAL POLICY
Attainment ofinternational
competitiveness.
Development ofbackward areas.
Encouragingcompetition
within Indian
industry.
Efficient use ofproductiveresources.
Full utilizationof plant
capacities to
generateemployment.
Revival ofweak units.
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New Industrial licensing Act(1991)
Under this act, an industrial licence is required
in respect of the following:
Items of manufacture falling under the list of
compulsory licensing (only 5 industries are in
the list)
If a non SSI unit intends to manufacture items
reserved exclusively for the Small Scale Sector.
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FEATURES OF NIP
De-reservation of Public Sector: The number of
industries reserved for public sector was reduced to 8industries. At present, there are only three industries
reserved for public sector which include. (a) Atomic
energy (b) Railways, and (c) specified Minerals.
De-licensing: -The most important features of NIP,
1991 was the abolition of industrial licensing of all
industries except six industries. The six industries are
of social and strategic concern. The six industries are1. Hazardous Chemicals. 2. Alcohol 3. Cigarettes 4.
Industrial Explosives 5. Defense Products, and 6.
Drug and pharmaceuticals.
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Foreign Technology Agreements: Automatic
permission will be given for foreign technology
agreements in high priority industries up to a lump
sum payment of Rs. 1 crore, 5% royalty for domestic
sales and 8% for exports, subject to total payment of
8% of sales over a 10 year period from date ofagreement or 7 years from commencement of
production. No permission will be necessary for
hiring of foreign technicians, foreign testing of
indigenously developed technologies.
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MRTP Act: Emphasis will be placed on controlling and
regulating monopolistic, restrictive and unfair tradepractices.
Simultaneously, the newly empowered MRTP
Commission will be authorized to initiate
investigations on complaints received from individual
consumers or classes of consumers in regard to
monopolistic, restrictive and unfair trade practices.
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Compulsions for licensing
REGISTRATION OF EXISTING INDUSTRIAL UNITS-
An existing industrial units which were existingbefore enforcement of this act and are coveredunder industrial licensing will have to obtainregistration under this act.
FOR SETTING UP OF NEW INDUSTRIAL UNITS:- If the industrial is to be set up in the category of
licensed industries, it has to obtain license.
While setting up industrial unit, not covered undercompulsory licensing, it has to file a memorandumof information with the department of industries ifthe value of investment in plant and machinery of
such unit is above Rs.10 crore.
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FOR SUBSTANTIAL EXPANSION:-
If any industrial unit which is covered under licensing units
to substantially expand its production capacity, beyond
25% of existing of licensed capacity, then it will have to
obtain prior approval under this Act.
LOCATION OF INDUSTRIAL UNITS:-
If any industrial unit wants to change its location, then it
will have to take the approval of the concerned authority.
Which are located in the large cities with a population of
more than 10 lakhs. Only after obtaining approval location
can be changed.
FOR PRODUCING ARTICLES RESERVED IN SMALL-SCALE
INDUSTRIES:-
An industrial undertaking wants to manufacture goods I reserved
for the small-scale sector it is required to obtain industrial license.
The list of items reserved for small-scale industries is reviewed
from time to time. In oct,2008, 21 items were reserved for the
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Criticism of licensing policy
Discourages the Entrepreneurs:-
Under Industrial licensing Policy, industries have to obtain license
for setting up new unit, change location etc. So excessive control
discourages the entrepreneurs.
Conflicting objectives:-
Like on one hand government wants to increase industrial
production in the economy. On the other hand government is
restricting the activities of industrial units like substantial
expansion,or production of new articles etc.
Lengthy Procedures:-
For obtaining industrial license the entrepreneurs has to take
approval from various government departments. So all this
involves lengthy procedures and many formalities.
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Corruption while granting licenses:-
Licenses are given to such entrepreneurs who have either
political links or who can bribe the corrupt officials. Licenseare not granted on merit basis. Efficient entrepreneurs are
ignored.
Poor follow up :-
After granting license, authorities do not check whether thebusiness unit is following the provisions of licensing or not. So
the basic objectives of licensing policy is defeated
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Positives & Watch- Outs
o POSITIVES:
De-licensing of most industries will help entrepreneursto quickly seize business opportunities.
Removal of controls under the MRTP Act will facilitateexpansion and growth.
There will be greater inflow of foreign capital andtechnology due to easing of restrictions.
Burden on the public sector will be reduced.
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oWATCH-OUTS:
The bureaucracy has a tendency to attempt to defeatmeasures aimed at deregulations.
Foreign investors still regard the policy and proceduralsystem in India confusing. Rather many feel that policyand development environment in China is superior toIndia.
Distortion in Industrial pattern would occur due to slow
pace of investment in few basic and strategic industries.Absence of a mechanism would slow down thedevelopment of backward areas
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Meaning of economic reform
The term economic reform broadly indicates
necessary structural adjustments to external
events. It include the function of countrys
spending to the level parallel to its income
and thereby reducing fiscal deficits.
This requires gradual reduction in import
and increase in export. These adjustments
also requires market change in order to
make economy flexible.
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Economic Reforms during 1960s and
1980s
During the mid 1960's effort was made to make India self
sufficient and also increase the production and export of
the food grains.
To make the plan a success, huge scale agricultural
development was undertaken. The government initiated the
Green Revolution movement and stressed on better
agricultural yield through the use of fertilizers, improved
seed and lots more.
New irrigation projects were undertaken and the ruralbanks were also set up to provide financial support to the
farmers.
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The Crisis Of June 1991
The present process of economic reformswas born out of the crisis in the economy,
which climaxed in 1991. The crisiscompelled the government to adopt a newpath-breaking economic policy underwhich a series of economic reform
measures were initiated with the objectiveto deal with the crisis and to take theeconomy on a high-growth path.
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Need of Economic Reforms
Increase in Fiscal Deficit
Increase in adverse balance of Payment
Fall in foreign Exchange Reserve
Rise in Prices
Poor Performance of Public Sector
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Early Crisis Management
Measures As Trend Setters To The
Reform Process
The top and immediate priority of thegovernment was to stabilize the economy,bring the growth of the economy to itsnormal track and to win back confidence ofmasses in the country and theinternational financial community.
The crisis management measures focussedlargely on fiscal correction, industrialdecontrol and balance of payments.
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Main Features Of Economic Reforms
ECONOMIC
REFORMS
LIBERALISATION
PRIVATISATION
GLOBALISATION
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LIBERALISATION
It means to free the economy from direct or physicalcontrols imposed by the government. Prior 1991,government had imposed several types of controls onIndian economy e.g. industrial licensing system, price
control or financial control on goods, import license,foreign exchange control, restriction on investment bybig business houses, etc. These controls leads to fall ineconomy growth.
Economic reforms were based on the assumption thatmarket forces could guide the economy in a moreeffective manner than government control.
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MEASURES TAKEN FOR
LIBERALISATION
Abolition of industrial licensing and Registration :According to new industrial policy , with theexception of 6 sectors, industrial licensing has
been removed. Concession from MRTP Act
Freedom from Expansion and Production toIndustries
Increase in the Investment Limit of the SmallIndustries: It has been raised to Rs 1crore &Investment limit has been raised to Rs 25 lakh.
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MEASURES TAKEN FOR
LIBERALISATION
Freedom to import capital goods
Freedom to import technology
Action plan for information Technology andsoftware development.
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PRIVATISATION
Privatisation means allowing the private sector toset up more and more of industries that werepreviously reserved for public sector.
It can take in three in forms:
a. Change in ownership: Degree of privatisationjudged by the extent of ownership transferredfrom public to private sector. This can have fourforms:
i) Nationalisation
ii) Joint Venture
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PRIVATISATION
iii) Liquidation
IV) Workers Co-operative
b. Organizational Measures: It includes varietyof measures to limit state control.
i) A holding Company Structure
ii) Leasingc. Operational Measures: Autonomy to the
operators of the enterprise.
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OBJECTIVES OF PRIVATISATION
To increase efficiency & competitive
power of the enterprises
To strengthen industrial management.
To earn more & more Foreign currency.
To make optimum use of resources
To achieve rapid industrial developmentof the country.
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ADVANTAGES OF PRIVATISATION
Reduction in economic burden
Increase in efficiency
Reduction in sense of irresponsibility
Scientific Management
Reduction in Political Interference
Encouragement of new Inventions
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DISADVANTAGES
Lack of social welfare
Class struggle
Increase in inequality
Increase in unemployment
Exploitation of weaker section
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Measures adopted for privatisation
Contraction of Public sector
Disinvestment
Sale of shares of public enterprises
Increase in private sector
Sick industries
Memorandum of understanding
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Public sector reforms & disinvestment
programme
Public sector in India includes all activities orinstitutions funded out of the governmentsbudget whether at centre or states. Public
sector includes the following: Govt. Dept. & Govt. Companies
Irrigation & power projects
Railways, post & telegraphs Banking, insurance, financial and other
services
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Public sector reforms
PSU Refocussing
Memorandum-of-Understanding (MOU)
System of PSE
Financial & operational autonomy
Restructuring of sick units
Privatisation through disinvestment
Protection of PSU workers Interest
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GLOBALISATION
It is defined as a process associated withincreasing openness, growing economicindependence and Deeping economic integrationin the world economy.
Reduction of trade barriers
Free flow of capital
Free flow of technology
Free movement of technology
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Process of globalisation
Stage I: Domestic company exports to foreign countriesthrough the dealers or distributors of home country
Stage II: The domestic company exports to foreigncountries directly on its own.
Stage III: The domestic company becomes an internationalcompany by establishing production and marketingoperations in various key foreign countries.
Stage IV: The company replicates a foreign company in theforeign country by having all the facilities including R&D,
full fledged human resources, etc. Stage V: The company becomes a true foreign company by
serving the needs of foreign customers just like the hostcountrys company serves.
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Types of Globalisation
Globalisation of markets
Globalisation of Production
Globalisation of Technology
Globalisation of Investment
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Measures taken for globalisation
Reduction of import duties
Encouragement of foreign investment
Reducing custom duty
Devaluation of currency
Partial convertibility
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THANK
YOU
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