Indian business environment ch 2
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Indian business environment ch 2

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Indian business environment ch 2 Indian business environment ch 2 Presentation Transcript

  • INDIAN BUSINESS ENVIRONMENT UNIT II Pankaj Kumar RBS
  • Industrial growth in India
    • India has made considerable economic progress since Independence.
    • Expansion and diversification of production both in industry and agriculture.
    • An entirely new class of entrepreneurs have come up with the support system from the Government, and a large number of new industrial centers have developed in almost all parts of the country.
  • Industrial growth in India
    • Promotion of entrepreneurial Institute.
    • New technologies were introduced in many industries. The index of industrial production has gone up from 7.9 in 1950-51 to 154.7 in 1999-2000.
    • This economic expansion contributed to a steady and impressive growth in India’s GNP.
  • Indian Industrial Policy
    • Industrial Policy Resolution, 1948
    • Industrial (Development & Regulation) Act, 1951
    • Industrial Development And Regulation Act, 1951 (Idr)
    • Industrial Policy Resolution, 1956
    • Industrial Policy Statement, 1973
    • Industrial Policy Statement, 1977 :
  • Indian Industrial Policy
    • Protection To Indian Industries
    • Levying higher tariff.
    • During the Second and Third plans, the emphasis was on the development of capital goods industries.
  • Indian Industrial Policy
    • Levy High Customs Tariffs:
    • Build Financial Infrastructure:
    • Control of Indian Business by Govt.:
    • Regulations under the Foreign Exchange and Regulation Act (FERA) restricted foreign investment in a company to 40%.
  • Indian Industrial Policy
    • Encouragement To Small Industries
    • Investment In Infrastructure:
    • Oil And Natural Gas:
  • Indian Industrial Policy
    • Training And Skills Development:
    • Scientific Research
    • Backward Area Development
  • Industrial Licensing Policy
    • After 1980, an era of liberalization started and the trend was gradually to dilute the strict licensing system and allow more freedom to the entrepreneurs .
  • Industrial Licensing Policy
    • FEATURES :
    • Re-endorsement of licenses
    • Automatic re-endorsement of licensed
    • capacities
    • Broad banding and selective
    • delicensing (1985-86) extended to 25
    • industries.
  • Some Important Policy
    • Liberalization of Industrial Licensing Policy
    • Introduction of Industrial Entrepreneurs' Memorandum
    • Liberalization of the Location Policy .
    • Policy for Small Scale
    • Non-Resident Indians Scheme
    • Policy for Foreign Direct Investment (FDI
  • Industrial Licensing Policy
    • The policy statement considerably expanded the list of exemption from licensing for all new units and those having an investment of Rs.2.5 crores in fixed assets, and an entitlement to import upto 30% of the total value of plant and machinery
  • Industrial Licensing Policy
    • Location restrictions were removed.
    • Investment ceiling for small industries were removed.
    • Investment of foreign equity up to 40% was freely allowed.
  • Public Sector
    • The part of the economy concerned with providing basic government services. The composition of the public sector varies by country, but in most countries the public sector includes such services as the police, military, public roads, public transit, primary education and healthcare for the poor.
  • Private Sector
    • The part of a nation's economy which is not controlled by the government.
  • Growth of Public Sector As on March 31 No. of Units Total Investment (Rs Cr) 1951 5 29 1961 47 950 1980 179 18,150 1990 244 99,330 2001 242 2,74,198, 2002 240 3,24,632
  • Small Scale Industry
    • The small scale sector has played a very important role in the socio-economic development of the country during the past 50 years. It has significantly contributed to the overall growth in terms of the Gross Domestic Product (GDP), employment generation and exports.
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  •  
  • Problems Of Small Scale Industry
    • As entrepreneurs increased their problems as to production, marketing, infrastructure and Financing, also increased. Many people vaguely quoted it as managerial problems.
    • * The production problems include raw material availability, capacity utilization, and storage problems.
    • * The marketing problems arises because of dealing in only one product, cut throat competition, adopting cost oriented method of pricing, lack of advertisement, not branding their products etc.,
  • Problems Of Small Scale Industry
    •  The financial problems include investment risks, procurement of loan from banks and their repayment, meeting day to day expenses and the like.
    •  The labour problems include highly demanding employees, absenteeism lack of skilled workers and transportation of workers.
  • Problems Of Small Scale Industry
    • Infrastructure problems also add coal to the fire. Unless and until you have the infrastructure in its place the rest of the efforts are futile.
    •  Personal problems like spending less time with family and for the whole sweat exerted the rewards have not been favorable.
  • Privatization
    • Privatization in India generally goes by the name of ‘disinvestment’ or ‘divestment’ of equity.
    • The major element in industrial deregulation has been the Industrial Policy statement of June 1991 which, among other things, drastically reduced the number of sectors of industry reserved for the public sector from 17 to 8.
  • Privatization
    • Privatization is the incidence or process of transferring ownership of business from the public sector (government) to the private sector (business).
    • In a broader sense, privatization refers to transfer of any government function to the private sector including governmental functions like revenue collection and law enforcement
  • Demerits of Privatization
    • Performance . A democratically elected government is accountable to the people through a legislature, Congress or Parliament, and is motivated to safeguarding the assets of the nation. The profit motive may be subordinated to social objectives.
    • Improvements . the government is motivated to performance improvements as well run businesses contribute to the State's revenues.
    • Corruption . Government ministers and civil servants are bound to uphold the highest ethical standards, and standards of probity are guaranteed through codes of conduct and declarations of interest.
  • Demerits of Privatization
    • Accountability . The public does not have any control or oversight of private companies.
    • Civil-liberty concerns . A democratically elected government is accountable to the people through a parliament, and can intervene when civil liberties are threatened.
  • Demerits of Privatization
    • Goals . The government may seek to use state companies as instruments to further social goals for the benefit of the nation as a whole.
    • Capital . Governments can raise money in the financial markets most cheaply to re-lend to state-owned enterprises.
    • Lack of market discipline . Governments have chosen to keep certain companies/industries under public ownership because of their strategic importance or sensitive nature
  • Demerits of Privatization
    • Cuts in essential services . If a government-owned company providing an essential service (such as the water supply) to all citizens is privatized, its new owner(s) could lead to the abandoning of the social obligation to those who are less able to pay, or to regions where this service is unprofitable.
    • Natural monopolies . Privatization will not result in true competition if a natural monopoly exists.
    • Concentration of wealth . Profits from successful enterprises end up in private, often foreign, hands instead of being available for the common good
  • Demerits of Privatization
    • Political influence . Governments may more easily exert pressure on state-owned firms to help implementing government policy.
    • Downsizing . Private companies often face a conflict between profitability and service levels, and could over-react to short-term events.
    • Profit . Private companies do not have any goal other than to maximize profits. A private company will serve the needs of those who are most willing (and able) to pay, as opposed to the needs of the majority, and are thus anti-democratic.
  • MRTP Act
    • The MRTP Act,1969 has its genesis in the Directive Principles of State Policy embodied in the Constitution of India. Clauses (b) and (c) of Article 39 of the Constitution lay down that the State shall direct its policy towards ensuring:
  • MRTP Act
    • (i) That the ownership and control of material
    • resources of the community are so
    • distributed as best to sub-serve the
    • common good; and
    • (ii) That the operation of the economic system
    • does not result in the concentration of
    • wealth and means of production to the common
    • detriment.
  • Provisions Relating to Monopolistic, Restrictive and Unfair Trade Practices
    • Section 10 of the MRTP Act, 1969 empowers the MRTP Commission to enquire into
    • monopolistic or restrictive trade practices upon a reference from the Central Government
    • The MRTP Act, 1969 also provides for appointment of a Director General of Investigation and Registration for making investigations for the purpose of enquiries by the MRTP Commission and for maintenance of register of agreements relating to restrictive trade practices.
  • Provisions Relating to Monopolistic, Restrictive and Unfair Trade Practices
    • The MRTP Commission receives complaints both from registered consumer and trade associations and also from individuals either directly or through various Government Departments.
    • 4. Complaints regarding Restrictive Trade Practices or Unfair Trade Practices from an association are required to be referred to the Director General of Investigation
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  • SICA Act -
    • Sick Industrial Companies (Special Provisions) Act, 1985, as indicated by its title and preamble, was a special legislation enacted in public interest with the twin objects of
    • Securing the timely detection of sick and potentially sick companies
    • Speedy determination and enforcement of remedial measures