industrialpolicy1991-120416011111-phpapp01

8/13/2019 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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