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Indian business environment

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    Indian business environment Indian business environment Document Transcript

    • Disha Institute of IT & Management MBA (Two Year) Examination (Second Semester) Indian Business Environment 3.24Q.1 What are the main components of business environment? Account forthe inherent dynamism of business environment.Ans. Generally Business refers to those activities that are related to the buyingand selling of goods.Business Environment consists of all those factors that have a bearing on thebusiness.The survival and success of a business firm depend on its strength, resources atits command, including physical resources, financial resources, humanresources, skill and organisation and its adaptability to the environment and theextend to which environment is favourable to the development of theorganisation. The survival and success of a fir, thus, depend on two sets offactors, viz., the internal factors the internal environment and external factors- theexternal environment.Some of the external factors have a direct intimate impact on the firm (like thesuppliers and distributors) of the firm. These factors are classified asmicroenvironment also known as task environment and operating environment.These are other external factors which effect an industry very generally (such asindustrial policy, demography factors etc.). They constitute what is called macro-environment, general environment or remote environment.Hence business environment has three components. − Internal environment − Micro environment/task environment/operating environment − Macro environment/general environment/remote environmentInternal EnvironmentThe important internal factors which have a bearing on an organisation include: a) Value system: The value system of the founders and those at the helm of affairs has imported bearing on the choice of business, the mission and objective of the organisation, business policies and practices. b) Mission and objectives: The business domain of the company, priorities, direction of development, business philosophy, business policy etc. are guided by the mission and objectives of the company e.g. Ranbaxy’s Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management thrust in to the foreign markets and development have been driven by its mission “to become a research based international pharmaceutical company.” c) Management Structure and Nature: The organisation structures the composition of the Board of Directors, experts of professionalisation of management etc. are important factors influencing business decisions. Some management structures and styles delay decision while some others facilitate quick decisions making. d) Internal Power Relationship: Factors like the amount of support the top management enjoys from different levels of employees, shareholders and board of directors have important influence on the decisions and their implementation. e) Human Resources: The characteristics of the human resources like skill, quality, morale, commitment, attitude etc. could contribute to the strength and weakness of an organisation.Company Image and Brand Equity: The image of the company matters whileraising finance, forming, joint venture or other alliances, soliciting marketingintermediaries, entering purchase or sale contracts, launching new products etc.MicroEnvironment: The microenvironment consists of the actors in thecompany’s immediate environment that affects the performance of the company.These include the suppliers, marketing intermediaries, competitors, customers’etc.Suppliers: Supplier supply the inputs like raw materials and components to thecompany. For the smooth functioning of business, it is important to have areliable source of supply of raw material and components.Marketing intermediaries: Marketing intermediaries are the firms that aid thecompany in promoting, selling and distributing its goods to final buyers.Marketing intermediaries include middlemen such as agents and merchants like:help the company find customers or close sales with them “, physical distributionfirms which assist the company in stocking and moving goods from their origin totheir destination such as advertising agencies marketing research firms etc andfinancial intermediaries which finance marketing activities and insure businessrisk.Competitors: The firm’s competitors include not only the other firms which marketthe same or similar products but also all those compete for the discretionaryincome of the consumers. An implication of these different demands is that amarketer should strive to create primary and selective demand for his products. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementCustomers: The major task of a business is to create and sustain customers. Abusiness exists only because of its customers monitoring the customersensitivities, therefore, prerequisite for the business success. A company mayhave different categories of customers like individuals, households, industriesand other commercial establishments, and government and other institutions.With the growing globalization, the customer environment is increasinglybecoming global. Not only the markets of other countries are becoming moreopen the Indian market is becoming more exposed to the global competition andthe Indian customer is becoming more “global” in his shopping.Macro Environment: The macro environment consists of the societal forces thataffect all the sectors in the company’s macro environment namely, thedemographic, economic, natural, technological, political and cultural forces.These environment forces are beyond the control of a firm, its success willdepend to a very large extend on its adaptability to the environment.Socio-cultural Environment: The buying and consumption habits of the people,their language, beliefs and values, customs and traditions, tastes andpreferences, education etc are the constituents of Socio-economic environment.For a business to be successful, its strategies should be the one that isappropriate in the Socio-cultural environment. The marketing characteristics ofthe market e.g. Nestle, a Swiss multinational company brews more than fortyvarieties of instant coffees as per different national tastes.Natural Environment: Difference in geographical conditions between marketsmay sometimes call for changes in the marketing mix, geographical andecological factors also influence the location of certain industries, climate andweather conditions affect the location of certain industries like the cotton textileindustry. Topographical factors may affect the demand pattern. For example, inhilly areas with a difficult terrain, jeeps may be in greater demand than cars.Demographical Environment: Demographic factors like the size, agecomposition, sex composition etc of the population, family size, educationallevels, language, religion etc are all factors which are relevant to business.The occupational and spatial mobility of population have implications forbusiness if labour is easily mobile between different occupations and regions, itssupply will be relatively smooth and this will affect wage rate.Technological Environment: Technological developments may increase thedemand for some existing products. For example, voltage stabilizers helpincrease the sale of electrical appliances in market characterized by frequent Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementvoltage fluctuations in power supply. However, the introduction of TVs,refrigerators etc. with build-in-voltage stabilizers adversely affects the demand forvoltage stabilizers.Political Environment: Political and government has close relationship with theeconomic system and economics policy. Certain changes in government policiessuch as the industrial policy, traffic policy, fiscal policy etc. may have profocusedimpact on business. In may countries with a view to protecting consumerbusiness. In many countries with a view to protecting consumer interests,regulations have become stronger. Regulations to protect the purity of theenvironment and preserve the ecological balance have assumed greatimportance in many counties.Q. 2 What do you mean by social responsibility of business: Why shouldbusiness oirganisation by socially responsible ?Ans. As business operates in society, it can’t exist and grows unless it cares forsociety. It exist vis-à-vis with society. It is required to meet different needs of thesociety. For meeting these needs, business has certain social responsibilities todischarge. “Cooperate social responsibilities” is defined as considering theimpact of the company’s action on society. A newer concept,” socialresponsibilities”, is defined as the ability of a cooperation to relate it’s operationand policies to social environment in ways that are mutually beneficial to both thecompany and society. Social responsibilities of business are different for differentsections of society, which include responsibilities towards (a) employees (b) consumers (c) Government (d) Society as a wholeResponsibilities towards employee 1. Fair wages and regular payment. 2. Good working conditions and safety 3. Reasonable working standards and norms 4. Labour welfare services,- Health, education, recreation and accommodation 5. Training and promotion 6. Recognition and respect for hard work, honesty, sincerity and loyalty 7. Efficiency of redressing employees grievances.Responsibilities towards customers Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management 1. Providing goods and services at a reasonable price 2. Supply goods and services of promised quality, durability and services. 3. Supply social harmless products. 4. Offering an efficient consumer redressal mechanism 5. Resisting profiteering and black marketing. 6. Improving product quality towards Research & Development.Responsibilities towards government 1. Regular payment of taxes. 2. Resisting bribing, bureaucrat and administers. 3. Cooperating with go of in up gradation of environment. 4. Cooperating with go of in social values.Responsibilities towards society as a whole 1. Prevention of environmental pollution. 2. Preservation of ethical and moral values. 3. Making provision of health education and cultural services. 4. Minimizing ecological imbalance.Q3 Explain the ways in which private corporate sector has been liberalisedunder the new economic policy. Has liberalisation acceleratedindustrialisation process in the country?Ans- In response to the economic crises of 1991, the govt. embarked on a wide-ranging reform of the policy regime. Prior to 1991 the Indian economy was ahighly regulated economy. In the July 1991 the beginning was made to dismantlecontrols which over the time had become a major obstacle to industrial growth.Policy changes made to unshackle the economy from controls and to orient ittowards the free market are known as the Liberalisation measures. Thesemeasures are related to (a) the industrial sector (b) the trade region (c) foreign investment & technology (d) public sector (e) the financial sectorIn the financial sector, barriers to entry for new firms and limits on growth in thesize of existing firms have been removed. Industrial licensing has been abolishedfor most of the industries irrespective of the levels of investment. The MRTP Acthas been amended to remove the threshold limit of one billion rupees on theassets of large business houses. The prior approval from the govt. is no longer Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementrequired for capacity creation, amalgamation, merger or acquisition on the part ofsuch companies.The policy regime for foreign investment and foreign technology has beenliberalized at a rapid pace. The govt. now wants to enlarge non-debt-creatinginflows. Hence, prior approval for foreign investment is not the rule. It may berequired in expected cases. The liberal access to imports to technology aims atfacilitating technology upgradation, which is a necessary condition for increasinginternational competitiveness in industry.The trade policy reforms have a limited quantitative restriction on imports andexports. Further, these has been a substantial reduction in tariffs on importsalong With abolition of subsidies in exports. The exchange rate changes have ledto a sizable depreciation of the rupee. It is hoped that the exposure of domesticfirms to international competition in this manner will compels them to becomemore efficientIn this relatively open environment domestic firms will have to upgradetechnology, reduce cost and improve the quality of product.Till recently the commercial banking system and the domestic capital marketwere over regulated and under-governed. Over the past few years and attempthas been made to improve the health of the financial sector through deregulation.With the reductions in the statutory liquidity ratio and cash reserve ratioresources received by the banks in the form of deposits are not preempted by thegovt. but are made available to the private sector. Interest rates in the domesticcapital have been deregulated.Liberalization has definitely led to increases industrialization. Direct foreign directinvestment has accelerated the industrial growth. Now, it is necessary that Indianfirms penetrate foreign markets. In December 1995, the no. of Indian jointventures abroad was 592 of which 70% were concentrated in just thirteencountries.The Indian corporate business does not consider the presence of foreigncompanies in India beneficial to them. In fact, many Indian companies now findthat they are the target rather than beneficiaries of the increased activity offoreign MNCs. It is argued that under the present circumstances, one need notbecome defeatist about foreign MNCs. The correct approach is to create our ownMNCs. This, however, is easier said than done. The less developed companieshave failed to create major players in the global economy. Indian business at themost can hope to survive only in those industries in which major global playershave little stakes. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementQ4 Explain the major public sector reforms that have been undertakensince 1991. have these reforms improved the performance of public sectorenterprises?Ans- The Public sector has been central to India’s industrialization within themixed economy framework. The industrial Policy Resolution 1956 accorded astrategic role to public enterprises. Accordingly, areas of strategic importanceand core sectors were exclusively reserved for public sector enterprises. Publicenterprise were accorded preference even in areas where private investmentswere possible. Public enterprises grew dominantly in terms of units andinvestments both at the central and state levels. In 1993, number of centralPublic Enterprises stood at 237 with an investment of Rs 1,47,000 crore.However, the performance of public sector enterprises has been far fromsatisfactory. Its protected growth over a period of time, has resulted in manyshortcomings: • insufficient growth in productivity • poor project management • inadequate attention to research & development • low rate of return on investmentAs a result, many public enterprises become a burden rather than an asset. Onethird of public enterprises were accounted for by nationalized sick units. Anumber of public enterprises had come up in non-strategic non-core, consumergoods and service sectors. In 1993, only about 60% of total investment in publicenterprises was in the areas originally envisaged as the “commanding height”. Allthese necessitated a change in approach. Industrial policy 1991 emphasized thatpublic enterprises must be growth oriented and technologically dynamic.Therefore, Industrial Policy 1991 set the future priorities for public enterprises asfollows:# Essential infrastructural goods & services.# Exploration and exploitation of oil & minerals# Manufacture of goods of strategic importance# Development of technology and manufacturing capabilities in crucial areas forlong term economic developmentThus, public sector would be confined to strategic, high tech industries andessential infrastructure. Chronically sick and unviable public sectors units wouldbe referred to Board for industrial & financial reconstruction (BIFR)Workers of such units would be protected. In February 1992, the govt.established a non-statutory National Renewal Fund (NRF) to provide assistanceto cover the cost of retraining and redeployment of labour and also provide Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementcompensation to labour affected by the closure of unviable public sector unitsetc.There is a greater thrust on the performance improvement through thememorandum of understanding (MOU) by which management is granted greaterautonomy and is held accountable. Technical expertise on the part of the govt. isupgraded to make the MOU negotiations and implementation more effective.In February 1962, the govt. of India announced its decision to permit publicsector undertaking to float bonds. The move was aimed at mobilising extrabudgetary resources for the public sector and was applicable to all stateenterprise fully owned by central govt. the Controller of capital issues in theconnection for floatation of bonds by existing as well as new corporateundertakings including. Finance Corporation issued guidelines.The major aim of economic reforms is to improve the public sector so that rate ofreturn improves. To remedy the situation, it was necessary that the overstaffingof the public sector undertaking (PSUs) be reduced. The govt. has taken steps inthis direction by its Voluntary retirement scheme (VRS). In 1990-91, there were22.19 lakh employees in PSUs of the central govt.. but in 1994-95 their numberhas been reduced to 20.41 lakh. This implies that, as a result of VRS,overstaffing has been reduced by 8%.The net results of the efforts of the Govt. (URS,MOU Policy etc.) was that theoverall net profit earned by central PSEs increased from Rs. 4,545 crores on1993-94 to Rs. 7,217 crores which signify an increase of 58.8% over the previousyear. This is a welcome development.On the whole the reforms of PSUs, including privatization and phasing out ofunviable units have not gathered as much momentum as had been hoped for.Investment has been piecemeal and the funds so raised are being used toreduce budget deficits rather than strengthening of PSUs. Along with this, labourproblems, Political and bureaucratic subordinate. Similarly gestures taken by thelisteners can help the communicator to know their reactions. Essential Qualities of Good Business ReportA well written business report can help avoid semantic and perception barriers. Awell written business report eliminates the possibility of misunderstanding andmisinterpretation. In writing messages, it is necessary to be precise, making themeaning as clear as possible so that it accomplishes the desired purpose. Thelanguage used should be simple, as it will be lost if the words used are complexand do not lend to clear single meaning. Vagueness destroys accuracy whichleads to misunderstanding of the meaning or intent of the message. Accordinglybe specific and to the point. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementThere is great importance of timing in Business communication. Thecommunication should not only be timely so that the decisions and actions canbe taken in time and when necessary but also the timing of the message and theenvironment setting in which the message is delivered and received is equallyimportant. An important message delivered at he wrong time or in a non-conducive environment may lose its effectiveness.Business communication must pass through the proper channels to reach theintended receiver. The communication flow ant its spread must avoid by passinglevels or people. When these concerned levels are omitted or by passed, itcreates bickering distrust confusion and conflict. Accordingly the establishedchannels must be used as required.Unless it is one-way communication that is simply meant to inform al business,communication needs a follow up to ensure that is was properly understood andcarried out. A verbal communication may need to be followed up by writtenconfirmation. The response and feedback to the communication woulddetermine. Whether the action to the communication has been appropriate andaccurate.Business communication should be complete so as not only to meet thedemands of today but should also be based on future need of the organization aswell as individuals. A reasonable projection and assessment of future needsenvironment both work and be incorporate when planning and executingcommunication. The typical business firm usually considers three types of strategy:corporate: business and functional.Corporate Strategy:- It decides a company’s overall direction in terms of itsgeneral attitude towards growth and the management of its various business andproduct lines. Corporate strategies typically fit within the three main categories, ofstability, growth and retrenchment.Business Strategy:- usually occurs at the business unit or product level, & itemplhasizes improvement of the competitive position of a corporations’ productsor services in the specific industry or market segment served by that businessunit.Functional Strategy:- is the approach taken by a functional area to achievecorporate & business unit objectives & strategies by maximising resourceproductivity. It is concerned with developing & nurturing a distinctive competenceto provide a company or business unit with a competitive advantage. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management Business firms use all three types of Strategy Simultaneously. A hierarchyof Strategy is the grouping of strategy types by level in the organization.This hierarchy of strategy is a nesting of one strategy within anther so that theycomplement & support one another.Functional strategies support strategies, which, in turn, Support the corporateStrategy (ies).Policies:- A Policy is a broad guideline for decision making that links the formulationof strategy with its implementation. Companies use polices to make sure thatemployees throughout the firm make decisions & take actions that support thecorporations’ mission, objectives and strategies.Strategy Implementation:-Strategy implementation is the process by which Strateges & polices are put intoaction through the development of programs, budgets & procedures. Thisprocess might involve changes within the overall culture, structure, & ormanagement system of the entire organization. Except when such drasticcorporate-wide changes are needed, however, the implementation of strategy istypically conducted by middle & lower level managers with review by topmanagement. Sometimes referred to as operational planning, strategyimplementation often involves day-to-day decisions is resource allocation.Programs:- A program is a statement of the activities or steps needed to accomplish asingle use plan. It makes the strategy action oriented. It may involve restructuringthe corporation, changing the company’s internal culture, or beginning a nowresearch effort.Budgets:- A budget is a statement of a corporations programs in terms of dollars.Used in planning & control, a budget lists the detailed cost of each program.Many corporations demand & certain percentage return on investment oftencalled a “hurdle rate”, before management will approve a new program. Thisensures that the new program will significantly add to the corporations’ profitperformance & thus build shareholder value. The budget thus not only serves as Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementa detailed plan of the new strategy in action, but also specifies through pro formafinancial statements the expected impact on the firms financial future.Procedures:-Procedures, Sometimes termed StandardOperating Procedures (SOP), are a system of interface have not beeneffectively reduced. Since it is not possible to privatize a large component of thepublic sector, it would be advisable to reform it. UNIT-CQ 5. What is the function of development bank? Explain the leadingpolicies and Criteria of the IDBI.Ans- A Development Bank is a multipurpose institution which sharesentrepreneurial Risk, Changes its approach in tune with the industrial climate andencourages new industrial projects to bring about speedier economic growth.The concept of development banking is based on the assumption that mereprovision of finance will not help to bring about entrepreneurial development.Successful entrepreneurial banking should include the discovery of investmentprojects, undertaking the preparation of project reports, provision of technical willnot help to bring about entrepreneurial development. Successful entrepreneurialbanking should include the discovery of investment projects, undertaking thepreparation of project reports, provision of technical advice and managementservices and finally assisting the management of industrial units. They aredifferent from commercial banks in three ways:i) They do not seek or accept deposits from the publicii) They specialise in providing medium and long-term finance (commercial banks specialise in proving short term finance)iii) Their functions are confined to providing long-term finance.Development banks provide financial assistance to industry in the followingforms:i) term loans and advancesii) subscription to share and debenturesiii) Underwriting of new issuesiv) Guarantees for term loans and deferred paymentsThe first two forms place funds directly in the hands of companies as subscriptionto shares and debentures. The last tow forms facilitate the raising of funds fromother sources. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementThe distinguishing role of development banks is the promotion of economicdevelopment by way of providing investment and enterprise in their chosenspheres (manufacturing, agriculture etc) The factors which led to the growth ofdevelopment banks are the inability of the normal institutional structure to keeppace with the requirement of funds and entrepreneurship of the growing industrialsector. The important development banks are the following. 1) Industrial fiancé corporation of India Ltd. (IFCI) 2) Industrial credit and Investment Corporation of India (ICICI) 3) Industrial Development Bank of India (IDBI) 4) Small Industrial Development Bank of India (SIDBI) 5) Exim bank (Export and Import bank)IDBI (Industrial Development Bank of India) was established as a wholly ownedsubsidiary of RBI in year 1964. However, in year 1976. the IDBI was made anautonomous institution and was thus delinked from the RBI. It is nowindependent public ector financial institution whose ownership vets in theGovernment of India.The functions of the IDBI can be broadly grouped into three categories, viz. i) direct assistance to industrial units in the form of loans and advances. ii) Indirect assistance through refinancing of the loans and advances given by other financial institution. iii) Promotional activities in respect of industrialisation of backward areas, small industrial units etc.Direct Assistance: The industrial development bank of India provides directassistance to industrial units in the form of loans and advances. Besides, it alsosudscribes to their shares and debentures thereby giving then strong financialsupport. The bank can guarantee the loans and advances raised by the industrialconcerns from the scheduled banks, IFCI and other notified sources. It can alsounderwrite the shares and debentures issued by the industrial concern.Indirect Financial Assistance: The promotional activities of the IndustrialDevelopment bank of India include I) special assistance for industrial development in the backward areas. II) Assistance to small scale industries and III) Special assistance by way of soft loan schemeWith a view to promoting the industrial development of the backward areas theIDBI provides confessional finance assistance to the small and medium projects Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementin these areas. This concession assistance is available upto an account of Rs. 2crores and has a longer repayment period.Q. 6 Give an overview of banking sector reforms in India. How have thesereforms affected the performance of public sector bank?Ans. The experience of successful developing countries indicates that repaidgrowth requires a sustained effort at mobilising savings and resources anddeploying them in ways, which encourage efficient production. Financial sector(which includes banking sector) reforms thus constitutes and importantcomponent of the programme of stabilization and structural reforms. The majorreform measures undertaken during the past few years are as follows:1) The government has over the past eight years brought down both statutory liquidity ratio and cash reserve ratio in a phased manner. The effective statutory liquidity ratio has been lowered down to 25 percent. The cash reserve ratio, which is only effective instrument of monetary control in India, is being no longer depended upon to combat inflation. It has thus been brought down to 10 percent.2) The earlier formats of the balance sheet and profit loss account did not reflect the true financial position of the banks. Hence, they have been revised and made effective from the bank accountanting year 1991-92.3) Commercial banks attaining capital adequacy norms and preudential accounting standards have been given freedom to set up new branches without the approval of the reserve bank of India. Banks can also rationalize their existing branch network by relocating branches, opening of specialized branches, setting up controlling offices etc.4) Number of interest rates slabs on banks advances were reduced from about 20 in 1989-90 to 2 in the financial year 1994-95. This attempt to unify interest rate structure aims at reducing the degree of cross-subsidy in the banking system.5) The RBI has announced guidelines for setting up banks in the private sector. These banks should be financially viable and should avoid concentration of credit and crossholding with industrial groups. Further, they will have to observe priority sector lending targets as applicable to other banks.6) The supervisory system of the RBI was strengthened with the establishing of a new board for financial supervision under the chairmanship of Deputy Governor of RBI. The Board will ensure implementation of the regulations with respect to credit management, assets classification, income recognition, capital adequacy with the treasury operations.7) Recovery of debts by banks and other financial institutions in the past has been unsatisfactory. Hence, an act was passed in 1993 under which special recovery of loan areas. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management8) Agreement between the RBI and public sector banks has been made to improve the management and the quality of the performance of the latter. This includes management information system and the internal audit and control mechanism.9) The quickness for determining the maximum permissible bank finance have been made more flexible banks now have greater freedom in determining the working capital needs of the borrowers and responding to local requirements in an appropriate manner.A large part of the addenda for reforms of the financial system relates to theproblems facing the public sector commercial banks, which have dominatedbanking in India since nationalisation was to extend the reach of banking andfinancial services to all parts of the country and to all sections of society. It alsoaimed at widening the net of resources mobilisation.While there are significant achievement, they have been accompanied by serousshortcoming as well. For instance, the quality of customer service has not keptpace with modern standards and changing expectations.Oriented units would be set up the existing units would be expanded for purposeof export. 7. Sick units. The industrial policy statement reiterates that strict actionwould be taken against those industrial units which are sick by their ownmismanagement and financial misappropriation. Government would determinesuch sick units which are found in critical condition. The government would makeeffort to revive such sick units by encouraging them to merge into healthy unitswho are in a position to revive them. 8. Technological self reliance. The industrial policy statement layadequate stress on keeping the technology in use up to date. To achieve this endimport of technology particularly for export oriented and key industries may beliberalised. New Industrial Policy 1991 The Congress (I) Government led by Mr. Narasimha Rao has announcedthe new industrial policy on July 24,1991. The main aim of the new industrialpolicy is to unshackle the Indian industrial economy from the cobwebs ofunnecessary bureaucrate control, to introduce liberalisation with a view ofintegrate the Indian economy with the world economy, to remove restrictions ondirect foreign investment as also to free the domestic entrepreneur from therestrictions of MRTP Act. All these reforms of industrial policy have led the Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementgovernment to take a series of initiatives in respect of policies in the followingareas: (1) Industrial Licensing. In the sphere of industrial licensing, the role ofthe government was to be changed from that of only exercising control to one ofproviding help and guidance by making essential procedures fully transparentand by eliminating delays. This calls for bold and imaginative decisions designedto remove restraints on capacity creation, which at the same time, ensure thatover-riding national interests are not jeopardised. The industrial licensing willhence forth be abolished for all industries, except those specified, irrespective oflevels of investment. These specified industries will continue to be subject tocompulsory licensing for reasons related to security and strategic concerns,social reasons, problems related to safety and overriding environmental issues,manufacture of products of hazardous nature and arcticles of elitist consumption. (2) Foreign Investment. In order to invite foreign investment in highpriority industries, requiring large investment and advanced technology, it hasbeen decided to provide approval for direct foreign investment upto per centforeign equity in such industries. For the promotion of exports of Indian productsin world markets, the government will encourage foreign trading companies toassist Indian exporters in export activities. Beside this, the government willappoint a special board to negotiate with such firm purposive negotiations can becarried out with such large firms which the avenues for large investment in thedevelopment of industries and tech in the national interest. (3) Public Sector Policy. Public enterprises have shown a very to returnon the capital invested. This has inhibited their ability to reg themselves in termsof new investments as well as in technology develop. The result is that many ofthe public enterprises have become a burden than being an asset to theGovernment. The original concept of the public has also undergone considerabledilution. The most striking example is the over of sick units from the privatesector. The category of public sector accounts for almost one-third of the totallosses of central public enter. Another category of public enterprises, which doesnot fit into the origin of the public sector being at the commanding heights of theeconomy plethora of public enterprises which are in the consumer goods and seesectors. It is time therefore that the Government adopt a new approach toenterprises. Units which may be faltering at present but are potentially must berestructured and given a new lease of life. The priority areas for of publicenterprises in the future will be the following: (a) Essential infrastructure goods and services. (b) Exploration and exploitation of oil and mineral resources. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management (c) Technology development and building of manufacturing capable in areas which are crucial in the long term development of economy and where private sector investment is inadequate. (d) Manufacture of products where strategic considerations predom such as defence equipment.Government will strengthen those public enterprises which fall in reserved areasof operation or are in high priority areas or are generating or reasonable profits.Such enterprise will be provided a much greater deg of management autonomythrough the system of memoranda of understand. Competition will also beinduced in these areas by inviting private sec participation. In the case ofselected enterprises, part of Government holding in the equity share capital ofthese enterprises will be disinvested in order provide further market discipline tothe performance of public enterprises. There are a large number of chronicallysick public enterprises incurring losses, operating a competitive market and servelittle or not public purpose. These need to be attended to. (4) Foreign Technology. With a view to injecting the desired leveltechnological dynamism in Indian industry, government will provide automation (8) Abolition of Phased Manufacturing Programmes for new projects.For force the pace of indigenization in manufacturing, Phased ManufacturingProgrammes have been in force in a number of engineering and electronicindustries. The new industrial policy has abolished such programmes in future asthe government feels that due to substantial reforms made in the trade policy andthe devaluation of the rupee, there is no longer any need for enforcing the localcontent requirements on a case-by-case, administrative basis. Various incentivesthat are currently available to manufacturing units with existing PhasedManufacturing Programmes will continue. According to J.C Sandesara, the new industrial policy seeks to raiseefficiency and accelerate industrial production in five different ways. (1) The changes in respect of foreign investment and foreign technologyagreements are also designed to attract capital, technology and managerialexpertise from abroad. This will raise the availability of such scarce resources inthe country on the one hand, and will improve the level of efficiency of productionon the other hand. (2) A number of changes in industrial licensing policy, foreign investment,foreign technology agreements and MRTP Act are such as to do away with theprior clearance of the government. In such cases, project time and ‘getting thingsdone’ will be reduced. Material and human resources engaged in cultivating Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementcontact and ‘getting things done’ will be released for more productive uses. Thusefficiency will improve. (3) Some changes as regards public sector may enchance the ‘allocativeefficiency. Opening up to eleven areas (so far reserved for the public sector) tothe private sector implies an opening for the sector which has, by the large, givena better account of itself. Closure, liquidation or rehabilitation etc, of sick/weakpublic sector units will free resources for more productive use. Similarly,privatisation may make for improved efficiency of the public sector, through itsbeing subjected to the stock market discipline. (4) Greater emphasis in controlling and regulating monopolistic, restrictiveand unfair trade practices and the strengthening of powers of the MRTP.Commission will curb anti-competitive behaviour of firms in the monopolistic,oligopolistic and ineffectively competitive markets and thus promote competitionand efficiency. (5) Other measure in this area such as purposeful formulation andimplementation of Memorandum of Understanding and its monitoring,professionalisation and greater autonomy may be expected to improve theperformance of the enterprise that will remain the public sector. Critics of the new industrial policy, however, point to the dangers of‘opening up’ the economy to too much foreign influence. For instance, H.K.Paranjape argues that the list of high priority industries (in which direct foreigninvestment up to per cent will now be freely permitted) includes industries whichhave been well established in the country for long and where technologicaldevelopment with indigenous R and D should not prove difficult. Invitation toforeign investors in these industries “Would make it possible for largetransnationals to dominate certain growing areas of our economy and push to thewall any Indian concerns which attempt to stand out on their own., the wall anyIndian concerns which attempt to stand out on their own. Indigenous R and D willbe doomed.” Moreoveas correctly pointed out by Parajape, the past record of themultinationals operating in the country does not warrant much enthusiasm. Noneof the multinationals operating in this country has attempted to develop India asan important base for a significant part of its world wide research anddevelopment work. Despite various tax concessions and incentives none of themultinationals tried to expand export markets. they undertook export activitiesonly to the extent they were compelled to do so under export obligations, or whenit was found necessary to do so in order to be able to earn foreign exchange forimporting some of their essential requirements. In fact, instead of developingIndia as a major production and export base, many multinationals have onlyattempted to use their international trade capacities and contact mainly for Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementexporting goods manufactured by other- usually small scale- units. Thus theyhave operated more as trading than as manufacturing and exporting concerns. Moreover, despite talks of globalisation, many rich countries are reluctantto permit unrestricted export to technologies as, in many areas, technologies arecommon for civilian and defence-related items. Multinationals which make atechnological breakthrough are also usually reluctant to permit the use of theirup-to-date technologies even by their subsidiaries unless these are located inpolitically ‘safe countries. India obviously does not satisfy this criterion from theviewpoint of these multinational companies, or the defence authorities of the USAand other rich countries. Coming to the import of foreign technology, Paranjapeagain expresses some reservations. According to him, in the whole eagerness toimport foreign technology, little attention seems to have been paid to thepossibility that production and managerial technologies found more suitable inother countries may not necessarily prove to be the best in our circumstances.As correctly pointed out by him, one of the very purposes of India’sindustrialisation is to ensure that our very large manpower resources areeffectively saving technologies in which ever areas it is feasible to do so. Thismay imply major readjustments in technologies that have developed in the labourscarce and capital abundant rich countries. This will not be an easy task. Industrial licensing PolicyThe Indian government resorted to the licensing system in order to maintaincontrol over industries according to the Industrial, (Development and control Act1951. A license is a written permission granted to an enterprise by thegovernment according to which the product mentioned therein can bemanufactured by the enterprise. The license also includes many other particularsuch as:- (i) The place where the factory is to be established. (ii) The name of the product to be produced. (iii) The limit of production capacity. (iv) Expansion of the enterprises etc. If a new company has to be formed, the industrial license in the firstinstance, is issued in the name of the applicant and later when the company hasbeen formed, the necessary endorsement to that effect will be made in thelicense. It is also subject to a validity period with in which the licensed capacityshould be established. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementObjectives:-Encouraging new entrepreneurs & wider dispersal of industrial ownership,prevention of concentration of economic power, protection & promotion of thesmall-scale sector, regulation of foreign capital & technology & scale economics,achieving demand-supply balance promotion of exports & import substitutionemployment generation etc. Before the policy liber alisation of 1991, a licensewas required for following purposes:- (i) Establisment of new undertaking. (ii) Manufacture of new item. (iii) Substantial expansion of capacity. (iv) Continuation of business in certain cases. (v) Change of location.The New Policy:-The industrial policy announced in July 1991 has abolished industrial licensing,irrespective of the levels of investment, for all industries exempt 18 specifiedindustries. There has been subsequent liberalizations.Industries for which industrial licensing is compulsory now are the following:- 1) Distillation & brewing of alcoholic drinks. 2) Cigars & Cigarettes of tobacco & manufactured tobacco substitutes. 3) Electronic Aerospace & defence equipment all types. 4) Industrial explosives including safety fuses, gen powder & matches. 5) Hazardous chemicals 6) Drugs & Pharmaceuticals.The Compulsory licensing provisions would not apply in respect of small scaleunits taking up the manufacture of any of the above items reserved for exclusivemanufacture in small scale sector.Locational Policy:- Industrial undertakings are free to select the location of a project. In thecase of cities with population of more than a million (as per the 1991Census),however, the proposed location should be at least 25 KM away from theStandard Urban Area limits of that city unless, it is to be located in an areadesignated as an “industrial area” before the 25th July 1991. Electronics,Computer Software & Printing ( and any other industry which may be notified infuture as “non polluting industry”) are exempt from such locational restriction. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementRelaration in the a foresaid locational restriction is possible if an industrial licensein obtained as per the notified procedure. Small Scale Industries SectorThe Central excise Department, on the other hand distinguishes Small Scaleindustries on the basis of annual turnover of the units (upto a maximum limit ofRs 30 million).(1) S.S.I. Undertaking:- An industrial undertaking in which the investment inPlant and Machinery, whether held on ownership terms or on lease/hire-Purchase basis does not exceed Rs 10 million is graded as small scale industrialundertaking. ( The Investment ceiling has been revised from time to time. It wasRs 7.5 Lakkhs in 1966 and Rs 30 million in 1997). However, in 1999 thegovernment decided to lower the investment ceiling from Rs 30 million to Rs 10million).(2) Ancillary Industrial Under taking:- An industrial undertaking which isengaged or is proposed to be engaged in the manufacture or production of parts,component or rendering the services is termed as ancillary undertaking. Theancillary undertaking has to supply or render or propose to supply or render notless than 50% of its production or services as the case may be, to one or moreother industrial undertaking.(3) Tinny Enterprise:- is a unit treated as tiny enterprise where investment inPlant & Machinery does not exceed Rs 0.5 million, irrespective of cocation of theunit.(4) Small scale service and Business Enterprise (SSSBES): Enterprise renderingindustry related Services business with investment up to Rs 0.5 million in fixedassets, excluding land and building are called SSSBES.EOU (Export Oriented Units)- A unit with an obligation to export at least 30% of its annual production atthe having investment ceiling in fixed assets-plant & Machinery up to 10 million isregarded as an EOU. The definition of SSI is linked to the question of Ownership. SSI unitscannot be controlled or owned a subsidiary of any other industrial undertaking.This combined investment of all the units set up by the same Proprietor/ partnershould not exceed the total investment limit fixed for an SSI. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementAs regards the formation of an SSI as a limited company, the equity investmentby other companies in SSI’s should not exceed 24%.The distinguishing features & major advantages of these industries particularlykhadi & Village industries are:-(1) In an economy, like India, Charactersied by abundant labour supply and theconcomitant Labour force, Khadi, Village and small industries assume specialsignificance because of its high employment potential.(2) Another major advantage is their ability provide employment in the off-season. To a large number of people, agriculture provides only seasonalemployment opportunities during the off-season and help many household’smitigate their problem during off-season.(3) Some to these industries provide employment opportunities within thehousehold premises and some other near the place of residence the locationaladvantage of these industries are thus, very great.(4) Because of low capital-output ratio and low gestation period they promotenon-inflationary growth.(5) Khadi & Village industries have been found to be of particular help to theweaker sections of the society. The participation of scheduled castes, scheduledtribes, women & other weaker sections of Society in this sector is significant.(6) These industries can develop in almost all areas including backward, tribal,hilly and in accessible areas. They are thus, helpful in activities and therebyreducing the regional economic imbalance.(7) They help increases the pace of veiral development through its inputs &output linkages with the other sectors of rural economy.(8) The small industries have acquired more attention in recent years due to veryless ecological problems they create, compared to large industries.(9) As Khadi & village industries do not use or use only very little electric poweror oil, they do not cause energy crisis & foreign exchange crises.(10) The fact that the village and small industries account for about one-third ofour total export earning shows how important they are to the Indian economyconstrained by shortage of foreign exchange. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementMeasures:-(1) Reservation of Products:- Protection has been provided to the small-scale units by the reservation ofitems for exclusive production in small scale sector. Over the gears there hadbeen an increase in number of items so reserved, but has significantly reduced itrecently.(2) Machinery on Hire Purchase:- The National small Industries Corporation (NSIC) arrange supply ofmachines on hire purchase to small scale units.(3) Marketing Assistance:- Including export promotion assistance are provided by institutions. Suchas NSIC Small Industries Development organization (SIDO), kvic etc.(4) Supply of Raw Materials:- Arrangements have also been made for the supply of raw materials,particularly of scarce items, to the small scale units.(5) Training:- Training for existing & potential entrepreneurs and othersassociated with the working of small units are offered by EnterpreneurshipDevelopment Institute of India (EDII), Technical Consultancy Organisations(TCOs), financial institutions and commercial banks, etc.Problems of Small-Scale Sector(1) Problem of Raw Material & Power:- These industries do not get raw material in adequate quantity. Whateverraw material they get is poor in quality and high in price. It increases the cost ofproduction & goods produced are of inferior quality.(2) Problem of Finance:- These industries do not get adequate loan facilities, as they cannot offergood security because of poverty. They get very little financial accommodationfrom commercial banks and industrial co-operative societies. So they largelydepend on money-lenders for finance. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management(3) Old methods of Production:- Old tools & equipments like oil expellers and handlooms, are still in use.The result is fall in the quantity of output & goods produced are of inferior quality.Such goods have little demand.(4) Problem of Marketing:- These Industries have to face lot of difficulties in selling their goods at fairprice & in sufficient quantity for example:-(a) because of high cost of Production, price of finished product increases veryhigh.(b) outward appearance of the finished product is not so appealing.(c) These industries can ill afford to bear advertisement and publicity cost. Sotheir goods are not so popular.(5) High Cost of Production:- Costs of Production are very high in these industries. It is due to high costof raw material industries fail to compete with large industries.(6) Competition with Large scale industries:- One of the main problems of these industries is that they have to facecompetition of large-scale industries, Finished products of large industries arerelatively cheap and of good quantity.(7) More Taxes:- Goods produced by the industries are heavily taxed by local authorities.Hence, their cost of Production goes up & the price of finished products alsorises.(8) Lack of Standardisation:- There is no standarlisation of finished products. For want of classification,workers do not get remunerative prices of their goods.(9) Sick Units:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management In India, about 25% small industries are sick. The sick units are runningunder loss. Growth of Public Sector Public enterprises refers to that industrial institution which is owned,managed and controlled by the state.Objectives:-1) To help in rapid economic growth & industrialisation of country & create thenecessary infrastructure for economic development.2) To earn return on investment & thus generate resources for development.3) To promote redistribution of income & wealth.4) To create employment opportunities.5) To promote balanced regional development.6) To assist the development of small-scale & ancillary industries.7) To promote import substitution, save & earn foreign exchange for theeconomy.Growth and Performance of Public Enterprises:- These had been a phenomenal growth of the Public since thecommencement of Planning. In fact, even before the commencement of planning& adoption of goal of socialistic pattern of society, the Public sector was assignedan important role in industrialisation & economic development of the country. TheIndustrial Policy Resolution of 1948 made it very clear that the manufacture ofarms, and ammunition, the production & control of atomic energy and theownership and management of railway transport would be exclusive monopoly ofcentral government. It was resolved further that in another six industries the Statealone would set up new undertakings. These six industries were: coal, iron &steel, aircraft manufacture, ship-building, manufacture of telephone, telegraphand wireless apparatus, excluding radio receiving sets and mineral oils. The Industrial Policy Resolution of 1956 enlarged the role of Public sector.Schedule A to the Resolution enumerated 17 industries, the future developmentof which would be the exclusive right of the state. Schedule B to the Industrialpolicy Resolution 1956, contained a list of 12 industries which would be Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementprogressively state-owned and in which the state would, therefore, generally takethe initiative in establishing new units. The four decades since the commencement of Planning witnessed asubstantial growth and expansion of Public sector in India. Investment inindustrial undertaking by central government increased from Rs 29 crores in 5units at the commencement of First 5 Year Plan (1951) to Rs 118492 crore at thecommencement of Eighth Plan (1992) in 237 units. It further increased to over 2lakh crore (Rs 201,500 crore) spread over 238 units at the commencement of the9th Plan (1997). At the end of 1998-99, it was about Rs 273700 crore in 235 units. Growth of Public Enterprises At the commencement Investment (Rs. Crore) Total Number of of EnterprisesIst Plan (1-4-1951) 29 52nd Plan (1-4-1956 81 213rd Plan (1-4-1961) 953 484th Plan (1-4-1969) 3902 855th Plan (1-4-1974) 6237 1226th Plan (1-4-1980) 18225 1867th Plan (1-4-1985) 42811 2218th Plan (1-4-1992) 118492 2379th Plan (1-4-1997 201500 238Ason 31st March 1999 273700 235There were also about 100 state level public enterprises (SLPES) with anestimated investment of about Rs 50,000 crores.Major Part of the Central Public Sector investment was in the steel, coal,minerals & metals power & petroleum sectors. Privatisation:-Meaning:- Privatisation means transfer of ownership or management of anenterprise from public sector to private Sector. it also means withdrawal of statefrom an industry or sector partially or fully. Another dimension of privatization isopening up of an industry that has been reserved for Public sector to Privatesector. Due to following problems given below, the governments undertakeprogrammes for shifting public sector into private sector:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management(1) Economic inefficiency in production activities of public sector, with high cost ofproduction and costly delays in delivery of goods purchased.(2). In effectiveness in provision of goods and services, such as failure to meetintended objectives, and political interference in the management of enterprises.(3) Rapid expansion of bureaucracy, causing problems in Labour relations with inpublic sector, inefficiency in government and adverse effect on whole economy.Ways of Privatization:- In Britain, the staff of Privatised company have a priority in buying sharesand are entitled to a discount. One of important way of Privatisation is divestitureor privatization of ownership, through Sale of equity. In countries where there arewell functioning capital markets, this entails selling stock to public. In Republic ofkorea, the government pioneered the establishment of basic industries such asoil refining, steel and machine tools and them sold them to the Private sectoronce their profitability was established, using funds raised to pioneer otherinstruies.Another way of Privatisation is contracting. Government may contract outservices they have planned & specified to other organizations that produce &deliver them.Franchising- authorizing the delivery of certain services in designatedgeographical areas- is common in utilities and urban transport. Contracting iscommon in public works, defence and many specialised services. But there isscope for comuption in contracting & long term contracts tends to encouragemonopolistic behaviour by private supplier Privalisation may also take the form ofprivatisation of management, using leases and management contracts.Obstacles:- As the World Bank points out, government confront Several obstacles likethose mentioned below, when they decide to divest SOE’s.(1) Government usually want to sell the least profitable enterprises, those that theprivate sector is not willing to buy at a price acceptable to the government.(2) Relatively underveloped capital market sometimes make it difficult forgovernments to float shares and for individual buyers to finance large purchases.Conditions for success of Privatisation:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management1) Privatization cannot be sustained unless the political leadership is committedto it and unless it reflects a shift in preferences of public arising out ofdissatisfaction with performance of other alternatives.2) Any alternative institutional arrangements chosen should not stifle competitionamong suppliers.3) The third, related, condition is freedom of entry to provide goods and services.4) Public services to be provided by private sector must be specific or havemeasurable outcome.5) Consumers should be able to link benefits they receive from a service to thecosts they pay for it, since they will then shop more wisely for different services.6) Privately Provided services should be less suspectible to fraud thangovernment services if they are to be effective.Benefits of Privatisation:-1) It reduces fiscal burden of the state by relieving it of the losses of SOES andreducing size of bureaucracy.2) Privatisation of SOES enables the government to nop up funds. Governmentof India’s Budget for 2000-01 proposed to raise Rs 10,000 crore during the yearthrough Privatisation.3) It help the state to trm size of administrative machinery.4) It enables the government to concentrate more on essential state functions.5) It helps accelerate the pace of economic development as it attracts moreresources from Private sector for development.6) It may result in better management of the enterprise.7) It may also encourage enter preneurship.8) It may increases the number of workers & common man who areshareholders.Failure of Privatisation:-(1) Lack of Proper Strategy:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management Regarding industries to be privatised, the methods of Privatisation, extentof divestment, selection of buyer/investor etc.(2) Ambiguity of Objectives:- The real objective of Privatisation is another problem. Is it for makingenterprise competitive? If these are multiple objectives, what is priority list?(3) Poor Financial Strategies:- Many Privatisations are carried out without a good financial strategy.(4) Monopoly Elements:- Privatisation may not produce much beneficial effects, it could evenworsen the situation.(5) Problems of Cultural changes:- Improvement of Performance of an enterprise after the privatization willdepend on bringing about a change in work culture and total enterprise culture.This is no easy task.(6) Wrong Timing:- Many Privatisations schemes could not get a good price because of wrongtiming. A good Price can be obtained if Privatisation is done when performance,market capitalisation and industry prospects are goods. It is pointed out theMaruti could have got a good price had it been privatised when goings weregood. Industrial Sickness Industrial sickness is a matter of serious national concern becausebesides affecting the owners, employees creditors and suppliers, it causeswastage of national resources and social unrest. In terms of definition evolved by RBI, an industrial unit is regarded as sickif it has incurred cash loss for one year and in judgement of the bank, it is likely tocontinue to incur cash loss in two following years and it has imbalance in itsfinancial structure such as current ratio being less than 1:1 and worsening debt-equity ratio. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management The sick Industrial Companies (Special Provision) Act 1985as amended in1993, defines a Sick Industrial Company as an industrial company (being acompany registered for not less than 5 years) which has at the and of anyfinancial years accumulated losses equal to or exceeding its entire not worth. Common symptoms of industrial sickness include failure to pay statutoryliabilities like P.F. & E.S.I. contributions, failure to pay timely installment of capitaland interest on loans taken from financial institutions & through public deposits,increases in inventories with a large number of slow or non-moving items, highrate of rejection of goods manufactured, low capacity utilisation & frequentindustrial disputes.Causes of Sickness(A) Born Sick:- Industrial units born sick are those which are destined for disaster rightfrom their conception due to various causes. Any one or more of the following factors may cause birth of sick units:-i) Lack of experience of promoters, wrong selection of project, faulty projectplanning etc, may give birth to sick units.ii) Lack of funds and faulty financial management may also cause birth of sickunits.iii) Time & cost overruns sometimes prove to be very disastrous. Particularly incase of large projects, delay in project commissioning due to delay in supply ofequipments etc, are very common. Such delays cause cost escalations leadingto capital shortage, liquidity problems, Like in Production cost etc.iv) Technological factors like selection of obsolete or improper technology ortechnology becoming outdated due to innovations while the project is beingexecuted, sub-standard machinery, wrong collaboration etc, also cause sickness.v) Sickness may arise from locational problems.vi) Wrong assessment of market potential or faculty demand forecasting, changein market conditions etc, may also cause birth of sick units. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementB) Achieved Sickness:- Industries which achieve sickness are those which fail after becomingoperational due to internal causes. Such internal causes which are common arethe following:-(i) Bad management which covers a wide range from inexperience, inefficiency,lack of Professional expertise, neglect & internal squabbles to delinquency &dishonesty is import causes of industrial sickness. According to Tiwari Committeeit was found that 65% of large sick units were affected by this problem.(ii) Unwarranted expansion and diversion of resources may also result insickness. Some concerns tend to expand beyond the resources includingmanagerial capability. Diversion of resources to start new units or to acquireinterest in other concerns with out regard to capability of the unit to provide suchfunds sometimes lands the unit in trouble.(iii) Poor inventory management in respect of finished goods as well as inputsmay land a unit in trouble.(iv) Failure to modernise the productive apparatus, change the product mix &other elements of the marketing mix to suit the changing environment is a veryimportant cause of industrial sickness.(v) Poor labour management relationship& associated poor worker morale& lowproductivity, strikes, lockout etc may rain the health of a unit to survive.(C) External Causes:- Are beyond the control of an industrial unit. Some of external causes arethe following:-(i) Energy crises arising out of power cuts or shortage of coal & oil have been aserious problem for many industrial units in India.(ii) In a number of cases the units are not able to achieve optimum capacity dueto shortage of raw materials due to production set-backs in supply industries,poor agricultural output due to natural reasons, changes in import conditions etc.(iii) Infrastructural problems like transport bottlenecks also sometimes causeserious problems.(iv) It is a general complaint of the industrial circles that the credit squeeze veryadvessly affects the industrial sector. According to the Tiwari Committee 24% of Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementthe large sick units were affected by shortage of working capital liquidityconstraints. Thus there are many external and internal factors which can causeindustrial sickness. In many cases, sickness is caused by a combination offactors. MRTP Act The Principal low in India to deal with competition was Moropolistic andRestrictive Trade Practices Act, 1969. The MRTP Act, brough into force form IstJune 1970, was a very controversial piece of legislation. The high levelcommittee on Competition Policy and law, appointed by Government of India,recommended that a new competition. Act may be enacted and MRTP Act maybe repeated. The Government has accepted their recommendation. The MRTPAct, one of the Most, controversial piece of legislation in India, has thus becomea document of historical value. The salient features of this Act is given herbecause of the importance with which it reined the industrial sector of thecountry.The main objectives of MRTP Act 1969 were-(1) Prevention of concentration of economic power to common detriment.(2) Control of Monopolistic, restrictive and unfair trade practices which are prejudical to public interest. The main thrust of the MRTP Act now is the achievement of Prevention ofMonopolistic, restrictive and unfair trade practices. Thus, the ‘M’ las almost beenknocked out of MRTP Act. In other words, large companies have been freed fromMRTPA requirement of prior permission of the government for substantialexpansion of existing undertaking, estables wing new undertakings and MEAs. In accordance with the Provisions of the Act, the Government of India hadset up a Commission known as the Monopolistie & Restrictive Trade PracticesCommision. The MRTP Commission was vested with Power to inquire intorestrictive, monopolistic and unfair trade practices. The MRTP Act empoweredthe central Government to control and Prohibit those monopolistic, restrictive &unfair trade practices that are, or are likely to be prejudicial to the public interest.Monopolistic Trade Practice:- is a trade practice which has, or is likely to have,the effect of unreasonably preventing or lessening competition in the production,supply or distribution of any goods or services, limiting technical developmentand capital investment to the common detriment or allowing quality of goods orservices to deteriorate. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementA Restrictive Trade Practice:- is a trade practice which has the effect, actual orprobable of restricting, lessening or destroying competition. Such trade practicesmay tend to obstruct the flow of production or to bring about manipulation ofprices or condition of delivery etc, to the common detriment.An Unfair trade Practice:- is a trade practice which, for the purpose ofpromoting the sale, use or supply of any goods or the provision of any services,adopts one or more unfair trade practices (like misleading advertisements) &thereby causes loss or injury to the consumers of such goods or services,whether by eliminating or restricting competition or otherwise. The Act also empowered the commission to make any undertaking orperson to pay compensation to the party who suffered a loss or damage as aresult of unfair trade practice carried on by undertaking or person.Criticism:- Because of its defeating Provisions. We had a very inepti situation of notallowing Indian companies to grow by capacity expansion, establishment of newunits or by M&A an because of short supply importing goods produced by foreignmultinationals which were far larger in size than the Indian biggies, spending thescarce foreign exchange. The MRTP Act, besides adversely affecting economic growth, bluntedIndian Companies ability to grow, consolidate and improve competitiveness. Thishad had a very dampening effect on their global competitiveness.Unit-III A Development Bank is multipurpose institution which sharesentrepreneurial risk, changes its approach in tune with the industrial climate andencourages new industrial projects to bring about speedier economic growth.The concept of development banking is based on the assumption that mereprovision of finance will not help to bring about entre preneurial development.Successful entre preneurial banking should include the discovery of investmentprojects, undertaking the prepavation of project reports, provision of technicaladvice & management services and finally assisting the management ofindustrial units.Types of institutions Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementThe most important all India Development Financial Institutions (DFIs) areIndustrial Development Bank of India (IDBI), Industrial Finance Corporation ofIndia (IFCI) and Industrial Credit and Investment Corporation of India (ICICI). INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI) The Industrial Development bank of India (IDBI) was established in 1964by the Indian government under an act of the Indian Parliament, the IndustrialDevelopment Bank of India Act, 1964. IDBI was initially established as a wholly-owned subsidiary of ReserveBank of India. In 1976, the ownership of IDBI was transferred to the Governmentof India (GOI) The IDBI Act was amended in October 1994, to, inter alia, permitIDBI to raise equity from the public, subject to the holding to GOI not falling below51% of issued capital. According to Bank’s Corporate Mission “IDBI Steategic objective is toposition itself as India’s Prenier wholesale bank through a full range of wholesaleproducts-lending, capital market, advisory & risk management-through anintegrated group structure.” According to IDBI sources, its strengths lie 1) Diversified portfolw across different industries, regions and sectors. 2) Long-standing business relationships with all major industrial house. 3) Proven core competence in project financing. 4) Large balance sheet & sound financials. 5) Capacity to take large single party expouce. 6) Capacity to leverage. 7) Sizeable stock of cost-effective, long term funds. 8) Fairly good retail network with a large investor base. 9) Lean organization with a sizeable pool of qualified, experienced professionals.Subsidiary Organisations:-IDBI has set up a host of Subsidaries and associates with a view to expand thefunctional reach of IDBI Group & take advantage of opportunities in a liberalisedmarket economy.SIDBI:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management To give focused attention to the needs of small scale industry, IDBI hadset up the Small Industries Development Bank of India (SIDBI) in 1990 as awholly owned subsidiary. The SIDBI Act was amended in March 2000, enabling,among other things, the transfer of IDBI shareholding to a maximum 51% fromIDBI.IDBI Capital:- A stock broking company, IDBI Capital Market Services limited (IDBICapital) was set up in 1993 to provide a range of capital market related services.It commenced operation as a primary Dealer in November 1999. IDBI capitalmarkets public issues of seclinties through its network of agents. It also acts as aportfolio manager & manages the investment portfolios of several Provident &Pension funds.IDBI Bank:- Consequent upon opening up of commercial banking to the PrivateSector, IDBI Set up a Commercial bank, IDBI Bank limited on 1994.Consequently upon the initial public offering of the equity share in February 1999,IDBI now holds 57.14% of the equity of IDBI Bank limited.INTECH:- To take advantage of the emerging business prospects of the ITsector, IDBI setup IDBI In tech limited (INTECH) in March 2000 to undertake IT-related activities.ITSL:- The new company would be technology driven to provide safety, up todate information & professional services to the subscribers and issuers ofdebentures.Products:- The important products (schemes of assistance) of IDBI are the following:-(1) Project Finance:- The objective of this product is to provide long term finance for newprojects and expansion diversification and modernization of existing projects.(2) Corporate Loan:- This Product has been designed to provide for capital expenditure andlong-term working capital to financially sound companies with net worth of notless than Rs 10 crore, having been in commercial operation for 5 years & makingProfit consistently for last 3 years, Rupee & foreign currency loans are availableunder this scheme. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management(3) Equipment lease:- Financially-sound companies are eligible for financiallease facility for purchase of equipment on lease basis. However, sale & leaseback transactions are normally excluded from this facility.(4) Services:- IDBI also provide some very important services to promote &develop industries. These include, merchant banking, debentures trusteeship &foreign exchange services.IFCI (Industrial Finance Corporation of Indian) The Industrial Finance Corporation of India was established in 1948 underthe IFCI Act, with the object of making medium & long term credit more readilyavailable to industrial concerns in India; IFCI was corporatised in 1993 as a partof financial sector reforms and an initial public offer was made in the same year.Principal Activities:-IFCI’s Financial operations principally include Project Financing, FinancialServices and Comprehensive corporate advisory services.Project financing:-Is the core of IFCI. Financial assistance is provided by way of medium/ long termcredit fo:- (a) Setting up new projects. (b) Expansion/Diversification schemes. (c) Modernisation / Balancing schemes of existing projects.Financial Services:- IFCI provides assistance tailor-made to meet specific needs of corporatesthrough various specially designed schemes:- (a) Equipment finance. (b) Equipment credit, Equipment leasing. (c) Suppliers / buyer’s credit. (d) Leasing and hire purchase concerns. (e) Corporate loans, short term loans. (f) Working capital term loans.Problems Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementThe Committee has looked into the major factors which have led to the sudden &sharp down turn in IFCI’s performance after 1997-98 and is of view that thefollowing are the main contributory factors:-(1) In many cases, financial plan for the projects included raising equity fromcapital market or from internal generation of group companies. However, due toprolonged, depressed conditions, in capital market & the industrial recession inaftermath of South East Asian crises of 1997, the promoters were unable to raisesuch resources as planned which led to time and cost overruns and a number ofprojects remaining incomplete, resulting in loans becoming non-performing.(2) IFCI’s loans portfolio was heavily weighted towards traditional commoditysectors such as iron & steel, textiles, sugar, plastics etc, which were significantlymove exposed to demand recession & price flictuations.(3) Unlike other financial institutions, IFCI has not diversified in to other type ofbusinesses.(4) As credit rating agencies started taking note of IFCI’s deteriorating loan bookquality, they lowered credit ratings. This in turn affected IFCI’s Standing in thedebt market, making resources raising increasing difficult(5) Constraints in resource raising in turn led to cutbacks in disbursements & newbusiness with an inevitable impact of on earnings, thus completing the cycle ofdownward spiral.(6) In this context, the Committee would like to observe that some of factorsreferred to above such as impact of trade policy liberisation & tariff reduction,recessionary conditions in late 90’s, depressed conditions in capital market etc.affected other DFIs & banks as well.Suggestions for Improvements:-According to the analysis and obsewations, the committee has made thefollowing recommendations. 1. IFCI Should transform itself into a fully licessed term credit Bank over a period of time. 2. IFCI should endeavour to reduce the proportion of project finance in their books and diversify into post project and short-term financing business, as well as enter fee-based services. 3. There s a growing basket of newer forms of corporate finance business. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management 4. IFCI need not enter the retail financial market for the present. 5. IFCI functions as a government entity than a vibrant business organization. A new culture has established within the organisation that encourages aggressive business development with adequate risk monitering and control. 6. IFCI needs to develop quickly a range of new products and services before transformation into a bank. 7. IFCI should consider building up a portfolio of selected highly-rated corporate bonds with appropriate maturities. 8. IFCI should activate its treasury operations and view it as an important profit centre. ICICI BankThe Industrial Credit and Investment Corporation of India Limited (ICIC), whichwas merged with the ICICI Bank in 2001, was founded by World Bank, theGovernment of India and representatives of Private Industry on January 5, 1955to encourage and assist industrial development and investment in India.Objectives & functions (1) Providing assistance in the creation, expansion & modernization of Industrial enterprise. (2) Encouraging and Promoting the participation of Private capital, both internal and external in such enterprise. (3) Encouraging & Promoting industrial investment and expansion of investment markets.Over the Year, ICICI has evolved into a diversified financial institution. ICICI’sprincipal business activities include:- (1) Medium- term and long-term project financing for the infrastructure and manufacturing sectors: (2) Corporate finance to meet the treasury requirements of Indian Companies. (3) Lease Finance. (4) A comprehensive range of financial and advisory services.Diversifications:-1) ICICI Venture Funds Management Company Limited: With the recent spurt in enter preneucship in the country, venture capital &private equity capital financing, are fast attaining a role of prominevce. ICICI Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementtherefore, established the ICICI Venture Funds as a wholly owned subsidiary.According of ICICI, strong percentage and offilates provide ICICI Venture withaccess to a board Specturm of Financial analytical resources. The Venturesprimary investment objective is capital investment through investments by way ofequity or equity-related securities in unlisted companies with significant growthpotential.2) ICICI Securities and Finance Company Limited:- i-SEC today is India’s leading Investment Bank and one of the mostsignificant players in the Indian capital markets.3) ICICI Broke rage Services Limited:- Set up in March 1995, ICICI Brokerage Services is a 100% subsidiary of I-SEC. t commenced its securities brokerage activities in Feburary 1996 and isregistered with the National Stock Exchange of India Limited and The StockExchange, Mumbai.4) ICICI Personal Financial Services Limited (ICICI PFS): Formerly ICICI-Credit, was one of the first 4 companies to obtainregistration as Non-Banking financial company (NBFC) fro the Reserve Bank ofIndia (RBI) in 1997. It is now a focal point for marketing and distribution of allretail asset products for ICICI, including auto loans, consumer durable finance &other financial products.5) ICICI Bank:- ICICI Bank, the commercial Banking outfit of the ICICI Group, wasestablished in 1994. In October 2001, the ICICI and two of its retail financesubsidiaries ICICI PFs and ICICI Capital Services Ltd were merged with the ICICIBank. It is now India’s second largest bank. Stock ExchangeStock Exchange is a market in which securities are brought and sold and it s anessential component of a developed capital market.According to Securities Contracts (Regulation) Act, 1956, Stock Exchangemeans anybody of individuals, whether incorporated or not, constituted for thepurpose of assisting, regulating or controlling the business of beinging selling ordealing in securities. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementAccording to this Act, securities include(i) Shares, Scrips, Stocks bonds, debentures, stock or other marketablesecurities of a like nature n or of any incorporated company or body corporate.(ii) Government Securities.(iii) Rights or interest in securities. It provides necessary nobility of to capital & directs the flow of capital intoprofitable and successful enterprises. It may be defined as the place or marketwhere securities of joint stock companies & of government or semi-governmentbodies are dealtion.Dealing on Stock Exchange Stock exchange dealings in India are regulated by the SecuritiesContracts (Regulation) Act and the Securities and Exchange Board of India(SEBI). On the trading floor of stock Exchange, dealings are permitted only n thelisted securities through the members or their authorized clerks during fixedworking hours.There are 2 important types of trading on the stock exchange namely ReadyDelivery contract and Forward Delivery Contract. The important differencesbetween these 2 dealings are the following:-Ready delivery contracts also known as cash trading or cash transactions, are tobe settled either on the same date or within a short period that may extend atbest up to seven days. As against these the forward delivery contracts aredischarged on fixed settlement days. Ready delivery contract can be made inrespect of all securities where as forward delivery contracts are confined to thosesecurities which are placed of the forward list.Speculation on the Stock Exchange:- Stock Exchange transactions are made ether for the purpose ofinvestment or for speculation. Investment transactions are made with theintention of earnings a return on the securities by holdings them more or lesspermanently whereas speculative transactions are made with the intention ofmaking gains by disposing of the securities at favourable prices. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementOrganisation of Stock Exchange in India- There are 23 stock exchange functioning in India including the Over. TheCounter Exchange of India (OTCEI) and National Stock Exchange (NSE). The Bombay Stock Exchange, which was established n 1875 is the oldestone in Asia, the Tokyo Stock Exchange was founded only n 1878. With about 10,000 listed companies, India holds the unique distinction ofhaving the largest number of listed companies in the world. Since the coming into effect of the Securities Contracts Act, 1956, onlythose stock exchange which are recognized by the government can function inthe country. The policy of the Government is that there shall be only one stockexchange in one area. In pursuance of this policy, where more than one stockexchange in one area. In pursuance of this policy, where more than one stockexchange was given reconition and active members of the non-recognised stockexchanges were admitted. Each stock exchange is managed by an Executive Committee/ GoverningBody to which the Government is empowered to nominate not more than 3members. The rules & bye-laws of the stock exchange shall be in conformity withsuch conditions as may be prescribed by the Government. The SecuritiesContracts (Regulation) Act empowers the Government also to withdraw therecognition granted to a stock exchange, in the interest of trade or in publicinterests.Regulation of Stock Exchange:- In India the Development of the stock market is directed and the dealingson the stock exchange are regulated by the Central Government in accordancewith the Securities Contracts (Regulation) Act 1956 (SCRA) and Securities andExchange Board of India (SEBI) established by the Central Government.Securities Contracts (Regulation) Act:- The Securities Contracts (Regulation) Act, Exacted in 1956, come intoforce on Feburary 20, 1957.Objectives:- (1) To empower the Central Government to regulate the dealings n and functioning of the stock exchange in India. (2) To Promote healthy & orderly development of stock market in India. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management (3) To prevent unhealthy speculation & other undesirable activities on the stock exchange. (4) To protect the interest of investors. (5) To provide for reasonable uniformity of the bye laws & rules of the different stock exchange in India.Main Provisions:- 1) The grant of recognition or withdrawal of recognition to any stock exchange. 2) Approval of the bye-laws and rules of stock exchanges. 3) Power to direct the stock exchanges to make or amend roles and bye- laws in certain cases. 4) Power to make or amend bye-laws or roles for stock exchanges. 5) Monitoring the activities & functioning of the stock exchanges by calling for periodic returns & specific information as and when required and by conducting inquiry into certain matters when the situation so warrants. 6) Power to suspend business of stock exchanges. 7) Power to supersede governing body of any stock exchange on account of specific reasons. 8) Regulation of listing of securities.Recognition to Stock Exchanges.: Any stock exchanges which is desirous of being recognized may apply tothe Central Government in the prescribed manner with the required particularsand a copy of the bye-laws of the stock exchange and the rules relating to theconstitution of the stock exchange. The Act lays down that the Central Government Shall not refuse grant ofrecognition to a stock exchange without giving it an opportunity to be heard &that the reasons for the refusal shall be communicated to the stock exchange inwriting.Power of Recognised Stock Exchange to Make Rules Restricting Voting RightsEtc.A Recognised Stock exchange shall have effect until they have been approvedby the Central Government and published by that Government in the officialGazettee.Power to obtain Information & to Conduct Inquiry:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementEvery recognized stock exchange shall furnish the Central Government with acopy of the annual report containing all the particulars prescribed. Further, everyrecognized stock exchange. Shall furnish to the SEBI such periodical returnsrelating to its affairs as may be prescribed. The SEBI is also authorised to call upon any recognized stock exchangeor any members of such exchange to furnish any information or explanationrelating to the affairs of the stock exchange or the members in relation to thestock exchange.Power to supersede Governing Body:- It the Central Government has sufficient reasons to think that thegoverning body of any stock exchange should be superseded, it may do so afterserving a written notice on the governing body & giving the body an opportunityto be heard in this matter. These Powers are exercisable by the SEBI also.Power to Suspend Business of Stock Exchange:- The SCRA empowers the Central Government to suspend the business ofany stock exchange, under certain circumstances, for a period not exceeding 7days in the interest of trade or public interest. The period of suspension may beextended from time to time but after the governing body has been given anopportunity of being heard in the matter. SEBI (Securities and Exchange Board of India)The SEBI was constituted in 1988 by a resolution of Government of India & itwas made a Statutory body by the Securities and Exchange Board of India Act1992.Management:- Section 4 of the Act lays down the constitution of the management ofSEBI. The Board of members of SEBI shall consist of a chairman, two membersfrom amongst the officials of the Ministeries of the Central Government dealingwith finance and law, one member from amongst the officials of Reserve Bank ofIndia, 2 other members to be appointed by the Central Government, who shall beprofessionals & interalia have experience or special knowledge relating tosecuritia market. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementObjectives:-To Protect the Interest of investors in securities & to promote the developmentsof and to regulate, the securities market for matters, connected there with orincidental there with.Powers and Functions:-These measures provide for:- (1) Regulating the business in stock exchange & any other securities market. (2) Registered and regulating the working of collective investment schemes, including mutual funds. (3) Promoting and regulating self-regulatory organizations. (4) Promoting & regulating self-regulatory organizations. Prohibiting fraudulent & on fair trade practices in securities market. (5) Promoting investors education & training of interdiaries in securities market. (6) Promoting investor education & training of interdiaries in securities market. (7) Prohibiting insider trading in securities. (8) Regulating substantial acquisition of shares and take-over of companies. (9) Calling far information from, undertaking inspection, conducting enquiries and audits of the stock exchange & intermediaries & self- regulatory organizations in the securities market. (10) Performing such functions & exercising such power under the provision of the capital issues (control) Act, 1947, (Subsequently repeated) and Securities Contracts (Regulations) Act. 1956 as may be delegated to it by the Central Government. (11) Levying fees or other charges for carrying out the purposes of section 11 of the Act. (12) Conducting research for the above purpose. (13) Performing such other functions as may be presented by the government. International InstitutionsIBRD : International Bank for Reconstruction and Development.IDA : International Development Association.The terms IBRD and IDA are two legally and financially distinct entities of amultilateral development institution called ‘The World Bank’. The purpose of Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementworld banks is to assist its developing member-countries in their economic andsocial progress.The IBRD and IDA have three related functions: - to lend funds - to provide economic advice technical assistance - to serve as a catalyst to investment by others.The IBRD was set up in 1945 to provide international capital for reconstructionand development of western Europe which was devaslated during the secondworld war. The objective has since been achieved. The main function of worldbank is now to provide loans to developing countries for development projectsand programmes. The Banks paid in capital as on June 30, 2001 was $ 11.476bn, and its membership was 183. Non-Banking Financial Institutions NBFC’s are financial intermediaries engaged primarily in the business ofaccepting deposits and making loans and advances, Investments, leasing, hire-Purchase etc. NBCs are a heterogenouslot. NBFC sector is characterized by alarge number of privately owned, decentralized and relatively small sized financialintermediaries. NBFCs are of various types such as loan companies (LCs),investment companies (ICs), here purchase finance companies (HPFCS),equipment leasing companies (ELCs) mutual benefit financial companies(MBFCs) also known as NIdhis, and equipment leasing companies are definedon the basis of the principal activity of their business. Although NBFCs in Indiahave existed for a long time, they shot into prominevce in the second half of the80’s & in the Ist half of the 70’s as deposits raised by them grew rapidly.Customer orientation, concentration in the main financial centres & attractiverates of return offered by them are some of the reason for their rapid growth.Primarily engaged in the area of retail banking, they face competition from banks& financial institutions. Foreign tradeRegulation of Foreign trade:- Control of foreign trade in India dates back to the early year of SecondWorld War. Import Control was introduced in 1940 as a war time measure underthe Defence of India Rules with the Primary objective of conserving the foreignexchange resources and restricting physical import so as to reduce the pressureon the limited available shipping space. Initially, the import of only 68commodities, mainly consumer goods, were brought under control.Subsequently, with the increasing pressure on the foreign exchange resources,import control was extended to other commodities as well. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management After the end of the war, Defence of India Rules Lapsed and hence inSeptember 1946, was Promulgated to continue the import trade Control. Thiswas ultimately replaced by Imports and Experts (control) Act 1947, which comeinto force with effect from 25th March 1947. this Act gave the governmentenormous powers of control over foreign trade of India. The imports and Exports(Control) Act, 1947, was replaced by foreign Trade (Development & RegulationAct), 1992. The major concern of government in the past was restriction of importswith a view to controlling the trade deficit & protection of domestic industriesagainst foreign competition. Imports were, therefore very much restricted byProhibition of imports of many items, import licensing, very high import duties &foreign exchange restrictions. The foreign trade policy was characterised byovertone of regativism.The foreign trade Act 1992 This Act which replaced the Imports and Exports (Control) Act 1947 comeinto force on 19th June 1992. No export or import shall be made by any personexcept in accordance with the provisions of this Act, the orders and rules madeunder this Act and the expert and import policy.Objectives:- Is to provide for development & regulation of foreign trade by facilitatingimports into and augmenting exports from India and for matters connected therewith or incidental thereto.Main Provisions:-(1) Development & Regulation:- The FTDRA empowers central govt to make provision for development &regulation of foreign trade by facilitating imports & increasing exports.(2) Prohibition & Restriction:- The Act also empowers the Central government to make provision forprohibiting, restricting or otherwise regulating the import or export of goods asand when required.(3) Exem Policy:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management The Act lays down that the Central Government may, from time to time,formulate & announce export and import policy & policy & may also amend thatpolicy.(4) Director General of Foreign Trade:- The Act provides for the appointment by Central Government, of a directorGeneral of foreign Trade for the purpose of this Act. The DGFT Shall adviseCentral government in formulation of export & import policy & shall to beresponsible for carrying out that policy.(5) Importer-Exporter Code Number:- The Act lays down that no person shall make any import or export exceptunder an Importer-Exporter Code (IEC) Number granted by the DGFT or officerauthorised by him in his behalf.(6) Issue and Suspension/ Cancellation of licence:- The Director General or any other officer authorised under this Act isempowered to suspend or cancel a licence issued for export or import of good inaccordance with this Act for good & sufficient reasons, after giving licence holdera reasonable opportunity of being heard.(7) Search, Inspection & Seizure Any person authorized by Central govt may search, inspect & seize suchgoods, documents which are imported and suspected. Foreign Investment in India.The flow of direct foreign investment to India has been comparatively limitedbecause of the type of industrial development strategy and the very cautionsforeign investment policy followed by the nation.Direct foreign investment (private) in India was adversely affected by thefollowing factors. (1) The public sector was assigned a monopoly or dominant position in the most important industries and therefore, the scope of private investment, both domestic and foreign, was limited. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management (2) When the public sector enterprises needed foreign technology or investment, there was a marked preference for the foreign government sources. (3) Government policy towards foreign capital was very selective. Foreign investment was normally permitted only in high technology industries in priority areas and is export-oriented industries. (4) Foreign equity participation was normally subject to celeing or 40%, although exceptions were allowed on merit. (5) Payment of dividends aboard, repatriation of capital etc as well as inward remittances were subject to strigent laws like the foreign Exchange Regulations Act (FERA), 1973. These discouraged foreign investment. (6) Corporate taxation was high and tax laws & procedure were Complex.Those factors either limited the scope of or discouraged the foreign investmentin India.Government Policy.:- India was following a very restrictive policy towardsforeign capital and Technology. Foreign collaboration was permitted only in fieldsof high priority and in also where the import of foreign technology was considerednecessary. Import of technology was considered on merits if substantial exportswere guaranted over a powered of 5 to 10 years and if there were reasonableproposals for such exports. The government had issued list of industries where: (i) Foreign investment may be permitted. (ii) Only foreign technical collaboration may be permitted. (iii) No foreign collaboration either financial or technical was considered necessary. The government policy on foreign equity participation was selective. This type of participation had to be justified w.r.t. factors like nature of Technology involved. Foreign share capital was to be by way of cash without being liked to wed Imports of machinery and equipment or to payments for trademark brandnames etc. The Foreign Exchange Regulation Act (FERA) served as a too for implementing the national policy on foreign private investment in India. The FERA empowered the Reserve Bank of India to regulate or exercise direct control over the activities of foreign companies and foreign nationals in India. According to FERA, non-residents, foreign citizens resident in India and foreign companies required the permission of the RBI to accept appointment as agents or technical management advisers in India. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management The trading, commercial and industrial activities in India of persons resident abroad, foreign citizens in India and foreign companies were regulated by The FERA. They had to obtain permission from the RBI for carrying on in India any activity of a trading, commercial and industrial nature, opening branches or other places of business in India acquiring any business undertaking in India and purchasing shares of India companies. The New Policy:- The industrial policy statement of July 24, 1991, which observes that while freeing the Indian economy from official controls, opportunities for promoting foreign investment in India should also be fully exploited has liberalized and Indian policy towards foreign investment & technology. In pre-liberalisation era, foreign equity participation was restricted to 40% and foreign investment and technology agreements needed prior approval. New policy has allowed majority foreign equity with automatic approval in a large no of industries. The new policy also made the import of capital goods automatic provided the foreign exchange requirement for such import is ensured through foreign equity. Salient features of initiatives under new policy includes the following:- The automatic route has subsequently been expanded very significantly &now there are different categories of industries on the basis of the celing offoreign equity participation. (1) Industries in which FDI does not exceed 26%. (2) Industries in which FDI does not exceed 50%. (3) Industries in which FDI does not exceed 51%. (4) Industries in which FDI does not exceed 74%. (5) Industries in which upto 100% foreign equity is permitted.In Feburary 2000, government took a major decision to place all items under theautomatic route for FDI/NRI/OCB (Overseas Corporate Bodies) Investmentexcept for a small negative list which include: (1) Automatic Approval by RBI is available for any proposal with lumpsum payment not exceeding us $2 million and royaltly of upto 5% on domestic sales & eight percent on exports. (2) In all other cases, the Project Approval Board (PAB) considers the proposals and makes recommendations to the Industry Ministry regarding approval.An Evaluation of New Policy:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management GlobalisationGlobalisation as “ The growing economic interdeperdence of countries worldwide through increasing volume & variety of cross border transactions is goodsand services and of international capital flows, and also through the move rapidand widespread diffusion of technology.” India’s economic integration with the rest of the world was very limitedbecause of the rest of the world was very limited because of the restrictiveeconomic policies followed until 1991. Indian firms confined themselves, by andlarge, to the home market. Foreign Investment by Indian firms was veryinsignificant. With the new economic policy ushered in 1991, there has, however, beena change. Globalization has in fact become a buzz word with the Indian firmsnow and many are expanding their overseas business by different strategies. This section takes a look at the hardles to and prospects for globalizationof Indian business and the different globalization strategies.Obstacles to Globalisation:-The Indian business suffers from a number of disadvantages in respect ofglobalization of business. The important problems are the following:-(1) Government Policy and Procedures:- in India are among the most complex, confusing and difficult in the world.Even after the much publicized liberlisation, they do not present a very conducivesituation. One pre requisite for success in globalization is swift and efficientaction. Government policy and bureaucratic culture in India in this respect arenot that encouraging.(2) High Cast:- of many vital inputs and other factors like raw material and intermediates,power, etc. tend to reduce the international competitveness of the Indianbusiness.(3) Poor Infrastructure:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management Infrastructure in India is generally inadequate & inefficient & therefore verycostly. This is a serious problem affecting the growth as well as competitiveness.(4) Obsolescene:- The Technology employed, mode & style of operations etc,are in general, obsolete & these seriously affect the competitiveness.(5) Resistance to change:- There are several socio-political factors which resist change & this comesin a way of modernization, vationalisation & efficiency improvement.Technological modernization is resisted due to fear of unemployment. The extentof excess labour employed by Indian Industry is alarming. Because of this labourproductivity is low and this is some cases more than offsets the advantages ofcheap labour.(6) Poor Quality Image:- Due to various reasons, the quality of many Indian product is poor is poor.Even when the quality is good, the poor quality image India has become ahandicap.(7) Small Size:- Due to various reasons like low level of resources, in many cases Indianfirms are not able to complete with the giants of other countries. Even the largestof Indian companies are small compared to the multinational giants.(8) Supply problems:- Due to various reasons like low production capacity, shortage of rawmaterial and infrastructures like power and port facilities, Indian companies inmany instances are not able to accept large orders or to keep up deliveryschedules.(9) Lack of Experiences:- The general lack of experience in managing international business isanother important problem.(10) Growing Competition:- The Competition is growing not only from the firms in the developedcountries but also from the developing country firms. Indeed, he growing Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementcompetition from the developing country firms is a serious challenge to India’sinternational business.Factors Favouring Globalisation:- Although India has several handicaps, there are also a number offavourable factors for globalization of Indian Business.(1) Human Resources:- In India, there is abundant supply of labour and cheap labour hasparticular attraction for several industries.(2) Wide Base:- India has a very broad resources and industrial base which can support avariety of business.(3) Growing Enterpreneurship:- Many of the established industries are planning to go international in a bigway. Added to this is the considerable growth of new and dynamic entrepreneurswho could make a significant contribution to the globalization of India business.(4) Growing Domestic Market:- The growing domestic market enables the Indian companies toconsolidate their position and to gain more strength to make foray into the foreignmarket or to expand their foreign business.(5) Expanding Markets :- The growing population and disposable income and the resultantexpanding internal market provides enormous business opportunities.(6) NRI’s :- The large number of non-resident Indians who ave resourceful in terms ofcapital, skill, experience, ideas etc. is an asset which can contribute to theglobalization of Indian business. The contribution of the overseas Chinese to therecent impressive industrial development of china may not be noted here.(7) Economic liberalization :- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management in India is an encouraging factor of globalization. The delicensing ofindustries, removal of restrictions on growth, opening up of industries earlierreserved for the public sector, import liberalizations, etc. could courageglobalization of Indian business . Further liberalization in other countriesincreases the foreign business opportunities for Indian business.(8) Competition:- The growing competition, both from with the country and abread, providemany Indian Companies to look to foreign markets seriously to improve theircompetitiveness position & to increases the business. Role of MNC’s According to an ILO repot, “the essential nature of multinationalenterprises lies in the fact that its managerial headquarters are located in onecountry (home country) while enterprises carries out operations in number ofother countries as well. (host countries). Domivance of MNC’sThrough liberlisation there has been expansion & growth of MNC’s. The GDPhas increased from about 5% in beginning of 1980’s to nearly 7% at end of1990’s. The MNC’s are estimated to employ directly, at home and abroad around73 billion people.For example, the US footwear company Nike currently employes 9000 people,while nearly 75,000 people are employed by its independent sub-contractorslocated in different countries.Merits of MNC’s The important arguments in favour of MNC’s are given below:- MNC’s help the host countries in following ways:-1) MNC’s help to increases the investment level & thereby the income &employment in host country.2). The transnational corporations have become vehicles for the transfertechnology, especially to developing countries. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management3) They also kind a managerial revolution in host countries through professionalmanagement and employment of highly sophisticated management techniques.4) The MNCs enable that host countries to increases their exports & decreasestheir import requirements.5) They work to equalize cost of factors of production around the world.6) MNC’s provide and efficient means of integrating national economies.7) The enormous resources of multinational enterprises enable them to havevery efficient research & development systems. Thus, they make acommendable contribution to inventions & innovations.8) MNC’s also stimulate domestic enterprise because to support their ownoperations, the MNC’s may encourage & assist domestic suppliers.9) MNC’s help to increase competition & break domestic monopolies.Demerits:-1) MNC’s may destroy competition & acquire monopoly powers.2) The transfer pricing enables MNC’s to avoid taxes by manipulating prices onintra-company transactions.3) Through their power and flexibility , MNC’s can evade national economicautonomy & control, and their activities may be inimical to national incomeinterests of particular countries.4) MNCs retard growth of employment in home country.5) MNCs technology is designed for world-wide Profit maximization, not thedevelopment needs of poor countries. In general, it is asserted, the importedtechnologies are not adopted to (a) Consumption needs (b) size of domesticmarkets (c) resource availabilities (d) stage of development of many ofdeveloping countries. Multinationals in India Comparatively very little foreign investment has taken place in India due toseveral reasons, some multinationals, Coca Cola and IBM, even left India in late1970s as the government conditions were unacceptable to them. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management A Common criticism against MNC’s is that they tend to invest in lowpriority & high profit sectors in developing countries, ignoring national priobities.However high technology and heavy investment sectors of national importance &export sectors. Firms which had been established non-priority areas prior toimplementation of this policy have, however been allowed to continue in thosesectors. It is not a right approach to estimate the net impact of multinationals onforeign exchange reserves by taking net foreign exchange outflow or inflow. If amultinational is operating in an import substitution industry, the net effect inforeign exchange reserves could be favourable even if there is net foreignexchange outflow of company. EXPORT-IMPORT POLICY [EXIM POLICY] This Policy was announced under foreign Trade 1992 on 31 March. Animportant feature of Exim Policy sence 1992 is freedom. Licensing, quantitativerestrictions & other regulatory and discretionary controls have been eliminated.Exim Policy 2002-2007Features/Proposals are given below:-1) The Mission:- The main aim of this policy is to increase exports from 0.67% to 1% overthis period. This implies that total exports will nearly double from $46 billion toover $ 80 billion achieving a compound annual growth rate of (CAGR) of 11.9%in dollar terms.2) Agricultural Exports:- Agri Export Zones scheme are proposed to be supported withdevelopment of necessary infrastructure, flow of credit & other facilities forpromoting agro exports. Such as processed fruits, vegetables, products of dairy,wheat, rice etc. Packaging, and quantitative restrictions is respect of exportof anumber of agricultural products to Russia were removed.3) SEZ :- The Current Exim Policy offer several fiscal incentives to units in theSEZ’s other proposals include exemption to SEZ units from External CommercialBorrowings restrictions, and freedom to make overseas investment and carry outcommodity hedging. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management4) Towns of Export Excellence:- A number of Industrial Cluster-towns are exporting a substantial portion oftheir products which are world class. A beginning is being made to considerindustrial cluster-townssuch as Tirupur for hosiery, Panipat for wollen blankets tobe eligible for following benefits. Common Service Providers in these areas shallbe entitled for facility of EPCS Scheme.5) Special Focus on cottage Sector and Handicrafts:- The following facilities will be made available to them. Initially an amountof Rs 5 crore has been earmarked for promoting cottage sector exports comingunder KVIC. The Units in handicrafts sectors can also access funds from MarketAccess Initiative (MAI) Scheme for activities including development of website forvirtual exhibition.6) Reduction in Transaction Time, Costs:- The new policy contains several initiatives to immunize export sectoragainst disadvantages arising from sate of infrastructure, power tariffs,interestrate, etc. The simplification of Exem policy schemes being announced innew policy will more effectively rebate all indirect taxes on imports.7) Assistance to States for Infrastructural Development for Exports:- During 2000 Government had announced a Scheme for participation ofstates in export endeavour. 80% of total funds would be allotted to states basedon above criteria and remaining 20% will be utilized by the center for variousinfrastructure activities that act across State boundaries etc.8) Condusion :- The new policy has improve export infrastructure & export production,removal of quantitative restrictions on exports, procedural simplication etc. UNIT-DQues 7 Explain India’s Policy commitment towards: (a) IMF and (b) WTOAns (a) The International monetary fund (IMF) is an international monetaryinstitution established by 44 nations under the Bretton Woods Agreement of July1944. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management The objectives of the funds stated in Articlel of the fund Agreement are asfollows: 1) To promote international monetary cooperation through a permanent institutions which provides the machinery for consultation and collaboration or international monetary problems. 2) To facilitate the expansion and balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of productive resources of all members as primary objective of economic policy. 3) To Promote exchange stability to maintain orderly exchange arrangements among the members and to avoid competitive exchange depreciation. 4) To assist in the establishment of a multilateral systems of payment in respect of current transactions between members and the elimination of foreign exchange restrictions. 5) To give confidence to members by making the fund’s resources temporarily available to them under adequate safeguards. 6) In accordance with the above, shorten the duration and lesson the degree of disequalibrium in the international balance of payments of members, the fund is guided in all policies and decisions by the purposes set forth in the above article. India is on of the founder member of IMF, It signed the fund agreement of27th. December 1945. Till 1970, India’s quota in the fund was the fifth. After May1970 the quota stands at 13th place. However, in absolute terms, India’s quotastood at SDR 3.05 in January 1993. India has been one of the major beneficiaries of the fund assistance.Between 1947 to 1955, India borrowed $ 100 Million twice to tide over its balanceof payment difficulties. It also received SDR 529.01 million from 1 July 1978 to 21February 1981 under the IMF Trust fund in 1979, India entered into agreementswith the IMF for a loan of $5.6 billion or Rs. 5,220 crores under extended fundfacility. After April 1984, India did not take any resources of IMF till December1990. In January 1991, it approached the IMF under compensatory andcontingency Financing Facility (CCFF) to get $0.79 billion a the first credittranche of a stand by arrangement for three months. On 31 October, the IMFapproved a stand by credit of $ 2.2 billion to be disbursed to India n 8 branchesover a solve world trade problems. But the WHO is a properly establishedpermanent world trade organization. It has a legal status and enjoys privilegesand immunities on the same footing as the IMF and the World Bank. It includes: (1) The GATT as modified by the Uruguay Round. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management (2) All agreements and arrangements concluded under the GATT and (3) The complete results of the Uruguay round. 104 members signed an agreement for the setting up to the WTO. The WTO agreement came into force from January 1, 1995 and India has become a founder member of the WTO, ratifying the WTO Agreement on Dec, 30The World bank and the GATT secretariat have estimated that the income effectsof the implementation of the Uruguay package will add between 213 and 274billion U.S. Dollars annually to world income. The GATT secretariat furtherprojects that the largest increases will be n the areas of clothing, agriculture,forestry and fishery products and processed food and beverages. According toGovernment of India, since our country’s existing and potential exportcompetitiveness lies in these products group, it is logical to believe that India willobtain large gains in these sectors. Assuming that India’s market share in theworld export improves from 0.5 percent to percent and that we are able to takeadvantage of the opportunities thus created, the government believes that thetrade gain may conservatively be placed at 2.7 billion dollars extra exports peryear. A generous estimate will range from 3.7 to 7 billion US Dollars per year. Evaluation of the Policy:-1) Through liberalization Indian firms can obtain their raw material and morecompetitively including from a broad. This would help them tot control costs &improve quality.2) Liberlisation of capital goods imports will help reduce project & productioncost and may encourage technological upgradation.3) Because of imports which they can make with their foreign exchange earningsseveral companies pay special attention to exports.4) It promote efficient & import substitution of self-reliance under a deregulatedframe work for foreign trade 6) This policy minimize quantitative, licensing & other discretionary controls. 7) The recent import liberalization has substantially changed the competitive environment in India making it very difficult for a large number of Indian companies to survive the competition. Many companies have reformulated their strategies. 8) This policy prohibit or Control imports & exports. The objective of Import and Export Act 1947 reflects a positive and dynamic attitudeThe exam policy since 1992 acknowleges that trade can flourish only in regine ofsubstantial freedom. It also recognizes need for reasonable stability of the policy,by making duration of policy 5 years. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & ManagementSICA – Sick Industrial Companies Act. An important price of legislation dealing with industrial sickness was theSick Industrial Companies (Special Provisions) Act, 1985. The objectives of the(SICA) were: (1) The timely detection of sick and Potentially sick companies owning industrial undertaking. (2) The speedy determination by a board of experts of the Preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies. (3) The expeditions enforcement of the measures so determined and for matters connected therewith or incidental thereto.According to the SICA amended in 1993, a sick industrial company meant andindustrial company registered for not less than 5 year) which had at the end ofany financial year accumulated losses equal to or exceeding its entire networth. An industrial company was regarded as potentially sick, if the accumulatedlosses of an industrial company as at the end of any financial year had resultedin the erosion of 50% or more of its peak networth during the immediatelypreceding 4 financial year. Under the Central Government established a Board for Industrial andFinancial Reconstruction to exercise the jurisdiction and powers and dischargethe function and duties conferred or imposed on the Board by the Act. The SICA required the Board of Director of a sick industrial company tomake a reference to the BIFR for determination of the measures to be adoptedwith respect to the company. The BIFR could dired any operating agency like thefinancial institution to prepare the scheme for revival of the sick unit. The schemecould provide for any one or more of the following measures:- (1) The Financial reconstruction of the company. (2) The Proper management of the sick industrial company by change in or takeover of management of sick industrial company. (3) The amalgamation of the sick industrial company with any other company, or any other company with the sick industrial company. (4) The sale or lease of apart or whole of industrial undertaking of sick industrial company. Where the BIFR was of the opinion that the sick industrial company was not likely to make its networth exceed its accumulated losses within a reasonable time and that it was not likely to become viable in future & that it was just and Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Managementequitable that the company should be wound up, it could imitate proceedingswith the High Court, for Industrial Disputes“ According to Sec 2 of Industrial Disputes Act 1947, Industrial dispute meansany dispute or difference between employers & employers or betweenemployers and workmen or between workmen and workmen, which isconnected with the employment or non-employment or terms of employmentor with the conditions of labour of any person.” Industrial disputes are symptoms of industrial unrest. Industrial unrest maytake either unorganized or organized from. When it is unorganized it ismanifested inform of low morale, low productivity, frustraton etc. organizedfrom of industrial unrest includes strikes, demonstration, gheraos, boycottsetc.Forms:-(a) Strikes- is a very powerful weapons to get its demand accepted by a trade union. Itmeans quitting work by a group of workers for the purpose of bringingpressure on their employers to accept their demands.There are may types of strikes.(a) Economic Strike:- Under this type of strike, members of trade Union stop work to enforcetheir economic demands such as increase in wages, bonus & other benefits.(b) Sympathetic Strike:- When members of a Union collectively stop work to support or expresstheir sympathy with the members of other union who are on strike.(1) General Strike:- Means a strike by numbers of all or most of unions in a region or anindustry. If may be strike of all workers in a particular region to force demandscommon to all workers.(2) Sit Down Strike:- Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org
    • Disha Institute of IT & Management When workers do not leave their place of work but cases work, they are said to be on sit down or stay in strike. (3) Slow Down Strike:- Employers remain on their jobs under this type of strike. They do not stop work but restrict rate of output in an organized manners.Lock-Out:- Is declared by employers to put pressure on their workers. It is an act onthe part of the employers to close down the place of work until workers agree toresume work on terms & conditions specified by employers.Gherao:- Denotes a collective action initiated by a group of workers under whichmembers of management of an industrial establishment are prohibited fromleaving their business or residential promises by workers who block their throughhuman barricade. Disha Institute of IT & Management Delhi Office: +91-11-65238118,65238119 Bahadurgarh Office : 01276-324593,232700,232800 E-mail : info@dishainstitute.org