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  2. 2. Industries- one the eve of independence India was economically & industrially backward. 1951-52: even when first five year plan was initiated. Primary sector : 58.9% GDP at factor cost Secondary sector: 13.6% of GDP at factor cost 4/11/2013
  3. 3. Industries- one the eve of independence Why Strategy for long term plan for development of industries spelt – under various five year plans? Country was industrially backward Productivity of labour is the highest in mfrg. Industries Pressure of population on land is excessive Inustralisation induces development in other sectors. Industry create demand for agriculture goods Ex: cotton, fertilizers, insecticides & farm implements 4/11/2013
  4. 4. “Industrialization produces steel, it produces power. They are the base, Once you have got the base, it is easy to build. The strategy governing planning in India is to industrialize and that means the basic industries being given the first place” -------------------Jawaharalal Nehru 4/11/2013
  5. 5. INDUSTRIAL STRUCTURE Industries can be structured on the following basis: 1. Structure in terms of Use based classification – (a) Consumer goods- cotton textiles, leather goods, salt sugar & paper (b) Intermediate goods- Coal, cement steel, power alcohol, chemicals etc., (c ) Basic industries - Capital goods- heavy engineering & machine building industries 2. Structure by type of ownership: PS,JS, PS 3. Structure by size of the employment: depending upon the no. of employees factories were divided & their contribution towards national economy was derived. 4. Structure by size of the capital: Large, small, Ancillary & Tiny sector. 5. Structure by type enterprises of organization of industries: 6. (a) Public Ltd & Pvt. Ltd (b) Govt. & non-govt. companies 4/11/2013
  6. 6. STRUCTURE OF INDUSTRIES • Universal agreement – importance of industrialization. • Debate –regarding the proper structure of industrial development. • Historically, industrial development - proceeded with 3 stages. • First stage: Industries concerned with the processing of primary products • Milling Grain, extracting oil, tanning leather, spinning, preparing timber and smelting ores. 4/11/2013
  7. 7. STRUCTURE OF INDUSTRIES • Second stage: comprises the transformation of material making. • Bread & confectionary, foot wear, metal goods, cloth, furniture & paper. • Third stage: consists of manufacture of machines and other capital equipments not for direct consumption – facilitate future process of production. 4/11/2013
  8. 8. INDUSTRIAL STRUCTURE ON THE EVE OF INDEPENDENCE 1. Lop sided structure of industry: unevenly balanced because of colonial nature & lack of medium sized entrepreneurs in our economy. high concentration of employment either in small factories or household enterprises. 2. Low capital intensity: general level of wages was low, small size of the home market in view of low percapita income 4/11/2013
  9. 9. INDUSTRIAL STRUCTURE ON THE EVE OF INDEPENDENCE 3. Composition of manufacturing output: structural imbalance in the industrial structure. Incase of consumer goods, domestic supply was more than the demand. But in case of capital goods (producer goods) fell short of domestic demand. In short, industrial structure in India on the eve of planning was marked by low capital intensity, limited development of medium sized factory & imbalance between consumer goods and capital goods. 4/11/2013
  10. 10. “ Planning is, not a once-for all exercise for a five year period, it requires a continual watch on current or incipient trends, systematic observation of technical, economic and social data and adjustments of Programmes in the light of new requirements” - Planning Commission 4/11/2013
  11. 11. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS GOI launched the process of industrialization as conscious & deliberate policy of economic growth in early fifties. Industries & the First Five year Plan (1951-56) – no big effort to industrialize the economy. Emphasis to build basic services like power & irrigation so that the process of industrialization is facilitated. total investment planned for industry 800 crores. 94 cr investment in the public sector. Actual public sector outlay – 57 cr on new projects, replacement and modernization – actually spent Rs. 340 cr. Thus – shortfalls in investment programmes. 4/11/2013
  12. 12. What changes have taken place in the industrial structure during the period of Planning? First Five Plan: Total Exp. Rs. 1,960 crore – Ind. 55 crore (2.8%). “If industrialization is to be rapid enough country must aim of developing industries which makes machines to make the machines needed for further development. Heavy engineering & machine building industries. 4/11/2013
  13. 13. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS Second Five year Plan: based on industrial policy Resolution 1956, Envisaged big expansion of public sector. Major task – building up of 3 steel plants in public sector ; 1. Rourkela Steel Plant in Orissa 2. Bhilai Steel Plant in Madhya Pradesh 3. Durgapur Steel plant in West Bengal Rapid expansion of Machine Building industries . Modernization and re-equipment of important industries –Jute, cotton textiles and sugar. Second Plan: TE - 4,672 cr. Ind. 938 cr. (20.1%) 4/11/2013
  14. 14. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS • Third Five year Plan (1961-66) : called for maximum rate of investment: • 1. To set India as self reliant & self generating economy. • 2. Top priority is for agriculture than for basic industries. • Due to India’s conflict with China in 1962 & with Pakistan in 1965 the focus was shifted to defense. • It was failure as along with conflict India had severe famines • This held to postponement of plans i.e 4th plan by 3 years- Plan holiday. • Three annual Plans were adopted in 1966-1969 4/11/2013
  15. 15. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS • Fourth Five year Plan (1969-74) : intended to complete industrial projects undertaken in the third plan. • ‘Growth with Justice’ or garibi hatao • Aimed – to enlarge capacities in export promotion & import substitution industries. • First 2 years were promising with record food grains & industrial production. • Next 3 years were failure due monsoon failure- power breakdowns, Influx of refugees from Bangladesh Indo Pak war of 1972 • The growth rate was around 5% - much below targeted 8% envisaged. 4/11/2013
  16. 16. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS Fifth Five year Plan(1974-78) - formulated - objectives of self-reliance and growth with social justice. 1. High priority to steel, non-ferrous metals, fertilizers, mineral oils , coal and machine building 2. Rapid diversification & growth of exports 3. Enlarging – production of industries supplying mass consumption needs. 4. The Janatha party terminated this at the end of the 4th year plan in 1978. 5. The emphasis shifted on the Prime minister 20 point program 6. Public sector outlay was revised from 37500 cr to 39430 cr. 4/11/2013
  17. 17. Sixth Plan (1980-85) : In review of Indl. Development over the 30 yrs. Of planning. 6th plan noted that Indl. Production had increased – 5 times during this period Quantitative increase output was the fact. Indl structure had been widely diversified- consumer, intermediate and capital goods. Emphasized optimum utilization of existing capacities. Improvement of productivity, enhancement of Mfrg., capacity, special attention to the capital goods industry and electronics industry, improvement in energy efficiency, etc., 6th Plan, the share of the indl. Sector was Rs. 15,002 crore which comes 13.7 % INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS 4/11/2013
  18. 18. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS 7th Five year Plan (1985-1990) : The country has a reasonable growth in 6th plan. Total exp: 2,18,730 - 25,971 cr which is 11.9% . Indl. Production targeted to grow at the rate of 5% per annum. Public sector was 19,663 crore. It was successful and it recorded at 6% rate of economic growth as against the targeted 5%. 4/11/2013
  19. 19. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS 8th Five Year Plan (1992- 97) – Narasimhan Rao Govt. initiated the process of fiscal reforms & bought a new Industrial policy 1991 The highest annual growth rate of 6.8 was recorded. No. of industries could not face external competition. Dumping by foreigners also created problems for many industries. The Government was not able to gear up anti-dumping machinery to Face the challenge. 4/11/2013
  20. 20. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS 9th Plan (1997-2002) – The policies adopted were: Encouraging infrastructure of industries in backward areas Development of small scale industries Close down sick units Slow down in world economy further decelerated the growth of the Indian sector. targeted growth rate 8% for industry Achieved only 5% even lower then 7.3 % of 8th plan. Ninth plan was failure. 4/11/2013
  21. 21. INDUSTRIAL DEVELOPMENT UNDER - FIVE YEAR PLANS 10th Plan (2002-2007) – To give more space to private sector. The private sector was expected to contribute towards production, employment and income generation. The target of 10% growth for industrial sector was set. Achievement of target is in the hands of private people as less role of public sector. 4/11/2013
  22. 22. Five year plan Total outlay Industry % allocation 1st plan 1,960 cr. 55 cr. 2.8% 2nd Plan 4672 cr. 938cr. 20.1% 3rd plan 8577cr. 1726cr. 20.1% 4th plan 15,77cr. 2864cr. 18.2% 5th plan 39,426cr. 8989cr. 22.8% 6th plan 1,09,292cr. 15,002cr. 13.7% 7th plan 2,18,730cr. 25,979cr. 11.9% 8th plan 4,34,100cr. 40,588cr. 9.3% 9th plan 8,59,200cr. 65,148cr. 7.6% 10th plan 5,25,639cr. 58,939cr. 3.9% 4/11/2013
  23. 23. Changes in Industrial structure during the planning period 1. Increase in the share of industrial sector in GDP – The share of GDP has slowly but consistently increased over planning period. 1950-51 - It was 13.3% 2003-2004- 24.6% 2. Growth of infrastructure industries like electricity , coal, steel cement crude Petroleum etc have increased 4/11/2013
  24. 24. Changes in Industrial structure during the planning period 3. Building up of heavy and capital goods industries : The second plan gave a pride place to the development of heavy industries with a view of strengthening the industrial base of the economy. 4. A well diversified industrial structure: there is good growth in different sectors of metallic. Non metallic, chemical, heavy, industries etc., 4/11/2013
  25. 25. Changes in Industrial structure during the planning period 3. Changes within the consumer goods sector: this sector increase by more than 100% due to the opening of the industrial economy. 4. Declining role of Public sector: with increasing emphasis on liberalization and privatization, the government of India is gradually withdrawing from the industrial sector. 4/11/2013
  26. 26. SMALL SCALE INDUSTRIES DURING THE PALNS Define SSI Industrial undertaking in which the investment in fixed assets in plant & machinery whether hold on ownership terms, or by lease or by hire purchase, does not exceed Rs. 1 crore is called as SSI Small scale service business enterprise the investment ceilling is 10 lakhs. 4/11/2013
  27. 27. SMALL SCALE INDUSTRIES DURING THE PALNS Define Ancillary Unit: An industrial undertaking which is engaged in the manufacturing of parts, components, sub –assemblies, tooling or intermediates or rendering services to one or more industries whose investment in plant & machinery whether hold on ownership terms or by lease or by hire purchase, does not exceed Rs. 1 crore is called 4/11/2013
  28. 28. SMALL SCALE INDUSTRIES DURING THE PALNS Define Tiny unit Industrial undertakings in which the investment in fixed assets in P & M does not exceed Rs. 25 lakhs is called as tiny unit. 4/11/2013
  29. 29. SMALL SCALE INDUSTRIES DURING THE PALNS Important measures undertaken by the GOI to promote small scale and cottage industries in the planning period. 1. No. of items reserved for SSI has been increased. 2. Procedures and conditions of financial assistance from commercial banks and other institutions have been liberalized. 3. RBI advised schedules banks to ensure appropriate credit facilities to SSI 4/11/2013
  30. 30. SMALL SCALE INDUSTRIES DURING THE PLANS 4. Comprehensive range of consultancy services and technical, managerial economic and marketing assistance is provided to SSI by SIDO- Small Industries Development Organization through its network of service and branch institutes. 5. The Small enterprise policy 1991 –Ceiling of investment in the case of tiny enterprises was raised to Rs. 5 lakh from Rs. 2 lakh . 6. Vocational restrictions on setting up of these enterprises were removed. 7. Modernization and technological up gradation were encouraged. 4/11/2013
  31. 31. Five year plan Allotment First paln Rs. 42 crores allotted to SSI and village industries Second plan Rs. 187 Cr allotted to SSI and village industries Third plan Rs 241 Cr were spent on te SSI’s Fourth plan Rs. 132 Cr. Were spent on the SSI’s Fifth Plan Rs. 251 Crs allocated Sixth Plan Rs. 1952 crores allocated Seventh Plan Increase in production with very high annual average growth rate achieved Eighth Plan Provided growth impetus in infrastructure facilities financial support measures etc., Ninth Plan Strengthening efforts to build self reliance ALLOCATION OF RESOURCES FOR SSI UNDER PLAN PERIODS 4/11/2013
  32. 32. PUBLIC SECTOR & INDIAN PLANNING Prior to 1947 was virtually no public sector in the Indian economy. The expansion of public sector is taken after independence. Industrial Policy – 1956 gave public sector a strategic role in the Indian economy. Public sector – engine for self reliant economic growth. OBJECTIVES • Creation of infrastructure • Generate financial resources for development • Create employment opportunities • Promote balanced regional growth • Encourage the SSI and ancillary industries. • To promote export on one side and import substitution on the other • Strong industrial base 4/11/2013
  33. 33. JOINT SECTOR Joint Sector – a form of partnership between the government and the private sector. After 1956 Industrial Policy Resolution in 1956, Govt started No. of companies in collaboration with the private sector by sharing their managements, control and ownership. Ex: Cochin Refineries started in 1963 Madras Refineries Gujarat State Fertilizer Company 4/11/2013
  34. 34. JOINT SECTOR Role of Joint sector 1. Social control over industries : effective way to control monopoly and concentration of economic power and curb business malpractices. 2. Better Industrial Growth 3. Broad –basing of industrial enterpreneurship-participation of the government – can instill confidence in small and medium entrepreneurs and they might come forward to set up new industrial units. 4/11/2013
  35. 35. Private sector • Private sector is called as the corporate industrial sector. It is one of the dominant sectors in India. The growth of SSI’s credit goes to private sector as most of the SSI is started by private people. • Role of public sector • The dominant sector • Importance for development • Extensive modern industrial sector • Potentalities due to personal incentive in small sector 4/11/2013
  36. 36. Problems of Private sector • Lack of positive role in economic development- profit generation is the soul motive of the PS. This make them to invest in those sectors which give them more profits & neglect those which are basic for the development of the country. • Monopoly & concentration: concentration of wealth & economic power in a few hands has been further strengthened by liberalization of the indl. Policy. • Industrial disputes: regarding wages & bonus, retrenchment & other issues frequently. 4/11/2013
  37. 37. Problems of Private sector Industrial sickness: small, medium & large units in PS. substantial amount of loan able funds of financial institutions is locked, which affects the healthy growth of In indl. Economy. Threat from foreign competition: Process of liberalization in 1991 has opened up the gates to foreign investors & the government . The competition between giant MNC’s and dwarf Indian enterprises have created an unequal competiton. 4/11/2013
  38. 38. Public sector & Private sector • Character of Indian economy – Mixed economy • In India PS co-exists with PS- character of the economy as mixed. • After independence area of Public sector expanded –rapid speed . • Two indl. Policy resolution of 1948 & 1956 ensured that the private sector & its activities will not be unduly curbed . • These policy resolutions divided the industries into different categories. • Entire field of consumer goods industries having high & early returns was left to the private sector. • Public sector: Banks, financial corporations, Railways, air transport. • Agricultural sector –(largest sector) has been left for the private sector 4/11/2013
  39. 39. Public sector & Private sector • Character of Indian economy – Mixed economy • After independence area of Public sector expanded –rapid speed . • Two indl. Policy resolution of 1948 & 1956 ensured that the private sector & its activities will not be unduly curbed • In India PS co-exists with PS- character of the economy as mixed. 4/11/2013
  40. 40. Public sector & Private sector • Govt. intervention in the form of expansion of public sector was historical necessity. • Economic planning as practiced in India over the past decades and the development of the public sector in this period were thus meant to move a standstill economy. 4/11/2013
  41. 41. MULTINATIONALS (MNC’S) • A company which has gone global is called a multinational (MNC) or transnational (TNC). • MNC are huge industrial organisations which extends their industrial & marketing operations through a network of their branches or their majority owned Foreign Affiliates. • MNC’s are also known as Transnational Corporations (TNSs). 4/11/2013
  42. 42. MULTINATIONALS (MNC’S) • Reasons for growth in the MNC’s • 1. Expansion of market territory • 2. Marketing superiorities • 3. Financial superiorities • 4. Technological superiorities • 5. Product innovations 4/11/2013
  43. 43. MULTINATIONALS (MNC’S) Subject to legal requirement, international agreements and commercial treaties, a multinational Co can organize its operations in different countries thru either of the following five alternatives. • 1. Branches • 2. Subsidiaries • 3. Joint Venture Companies • 4. Franchise holders 4/11/2013
  44. 44. MULTINATIONALS (MNC’S) REASONS FOR THE GROWTH OF MNC’S  Expansion of market  Marketing superiorities  Financial superiorities  Technological superiorities  Product innovation 4/11/2013
  45. 45. Benefits of MNC It helps is capital formation in the country It promotes in the spread of modern technology It encourage the establishment of ancilliary unit It helps in faster growth of economy It brings welfare to the people of host country It provides employment opportunities It increased National income an percapita income It provides wide choice to the customers 4/11/2013
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