be industrial policy

8/14/2019 BE Industrial Policy

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Business Environment(BE)MGT511

ABBAS ANSARI


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Why to study Industrial

Policy? Industrial policy and regulation determine,

to a large extent, business opportunities

and threats Also it sets certain limits and norms for the

conduct of business

It decides the development path of the

economy to a larger extent


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Industrial Policy It covers rules, regulations, principles,

policies, & procedures laid down by

government for regulating & controllingindustrial undertakings in the country.

It prescribes the respective roles of thepublic, private, joint, cooperative large,

medium & small scale sectors for thedevelopment of industries.


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Industrial Policy It incorporates fiscal & monetary

policies, tariff policy, labor policy.

It shows the government attitudenot only towards externalassistance but also toward public &

private sectors.


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Main ObjectivesTo maintain a sustained growth in

productivity

To enhance gainful employment

To prevent undue concentration ofeconomic power


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Main ObjectivesTo achieve optimal utilization of

human resources

To attain internationalcompetitiveness and

To transform India into a major

partner and player in the globalarena


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Industrial Policies Industrial Policy Resolution of 1948

Industrial Policy Resolution of 1956



Industrial Policy Resolution of 1980 The New Industrial Policy of

1991


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Industrial Policy up to

1991 Reservation of Industries

Future development of most of the import

industries was exclusively reserved for thepublic sector

Mfg of a large no ( over 850 in 1991) ofitems was reserved for the small scale

sector


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1991 Dominance of Public sector

Industry Policy Resolution 1948 establishedpublic sector monopoly in 9 industries

IPR 1956 further expanded substantially the roleof public sector

17 most imp industries development wasreserved for the public sector (Scheduled A)


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1991 Further, public sector was assigned

priority for the establishment of

new units in 12 most imp ofremaining industries (ScheduledB)

Public sector also monopoly in theremaining of the industries


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1991 Entry and Growth Restriction

Entry and growth restriction for the private

firms even in the industries open for them Large firms ( Assets > Rs 100 crore & Market share > 25%) had

to obtain clearance under MRTP Act

Industrial Licence, for new undertaking

establishment, substantial expansion andmfg of new items


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1991 Restrictions on Foreign Capital &

Technology

Scope of foreign capital and tech. wasltd ( Ceiling of 40 % total equity)

Operations of foreign comp. in India

and issue of securities aboard by Indiancompanies were routed(regulated) throForeign Exchange Reg. Act(FERA 1973)


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The New Industrial

Policy Objectives

To maintain a sustained growth inproductivity and gainfullemployment

To attain international

competitiveness


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The New Industrial

Policy Redefinition of Role of Public

sector

No of industries reserved for publicsector was reduced to 8 and lateron reduced to 2 ( atomic energy

and railway transport) Selective privatisation


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The New Industrial

Policy Expansion of Scope of Private Sector

and Dismantling of Entry and growth

restriction Delicensing : All but 18 industries were

freed from licensing

Removal of MRPTA restriction : Most of the

provisions of MRTP Act were scrapped( related to expansion, mfg of new itemsand M&As)


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The New Industrial

Policy Liberalisation of Foreign

Investment

Policy towards foreign capital andtechnology are being modified

FDI allowed in all industries

( except industries falling in small ve list) from 26 to 100 %


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The New Industrial

Policy Related Measures

Liberal Import policy : reduction intariff levels and quant. Restriction

Price controls have been graduallyeased out


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Industrial Policy 1991 Policy focus is on

Deregulating Indian industry;

Allowing the industry freedom andflexibility in responding to market forcesand

Providing a policy regime that facilitatesand fosters growth of Indian industry.


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Industrial Policy 1991

In pursuit of the industrial objectives,Government decided to take a series of

initiatives in respect of the policies relatingto the following areas: Industrial Licensing

Foreign Investment

Foreign Technology Agreements Public Sector Policy

MRTP Act


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Industrial LicensingPolicy

The Industrial Policy Resolution of1956 identified the following three

categories of industries: Those that would be reserved for

development in public sector.

Those that would be permitted for

development through private enterprisewith or without State participation.

Those in which investment initiatives wouldordinarily emanate from private

entrepreneurs


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Industrial LicensingPolicy

Industrial Licensing is governed bythe Industries (Development &

Regulation) Act, 1951. Industrial licensing was abolished

for all industries, except those

specified (18 industries),irrespective of levels of investment


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Foreign Investment

Limit on foreign equity holdings raisedfrom 40% to 51% in a wide range of

industries Foreign Equity Proposals need not to be

accompanied by Foreign TechnologyTransfer Agreement

Procedure for FDI streamlined bycreating a Foreign InvestmentPromotion Board to consider individual

application case by case


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Foreign TechnologyAgreements

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 testingof indigenously developed technologies.


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Public Sector Policy

List of industries reserved for the public(Schedule A) reduced from 17 to 8

List of sector reserved for dominance by publicsector (Schedule B) effectively abolished

Disinvestment in selected public sectorenterprise to raise finance for development,bring in greater accountability & help create anew culture in their working for improvedefficiency


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MRTP Act

Eliminated the requirement ofprior approval of Central

Government for Establishment of new undertakings Expansion of undertakings Merger, Amalgamation and Takeover Appointment of Directors under

certain circumstances.

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