Industrial development in india

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Industrial development in india

  1. 1. INDUSTRIAL DEVELOPMENT IN INDIA Dr. Laxmi Narayan Assistant Professor Economics Govt. P.G. College Mahendergarh, Haryana, India E-mail: laxmi_narayan70@yahoo.com
  2. 2. LECTURE OUTLINE  Role of Industrial Development in Economic Development  Evolution of Industrial Policy in India: Transition from Socialist to Market Oriented Economy  Historical Review of Industrial Development during Various Five Year Plans
  3. 3. IMPORTANCE OF INDUSTRIALISATION  Provide Employment  Trickle Down Effect  Development of Social Overhead  Increase in Income and Saving  Increasing Economies of Scale  Increase in Farm Productivity  Better Utilisation of Raw Materials
  4. 4. INDUSTRIAL SECTOR ON THE EVE ON INDEPENDENCE  Weak Industrial Base  Low Capital Intensity  De-industrialisation of the Country  Limited Role of Public Sector  Decline of Handicraft Industry  Iron & Steel and Jute Industries
  5. 5. STRATEGIES FOR INDUSTRIALISATION  State Intervention In Industrial Development.  Role of Public Sector  Regulations for Control and Direction of Industrial Sector.  Industrial Licensing to Regulate Private Sector (IDR act 1951)  Industrial Policy
  6. 6. INDUSTRIAL POLICY  Industrial policy is combination of all government regulation aimed at regulation and control of industrial activities in a country.  Need of Industrial Policy:  Limited Capacity of Private Sector  Regulation of Private Sector  Regulation of Foreign Sector
  7. 7. EVOLUTION OF INDUSTRIAL POLICIY IN INDIA  Industrial Policy Resolution 1948  Industrial (Dev. & Reg.) Policy 1956  Industrial Policy 1977  Industrial Policy 1980  New Industrial Policy 1991
  8. 8. MAIN FEATURES OF IPR 1948  Industries Classification – Public Sector – 03 – Public cum Private Sector – 06 – Controlled Private Sector – 18 – Private and Co-operative Sector  Importance of Foreign Capital  Domestic Protection  Industrial Relations
  9. 9. MAIN FEATURES OF INDUSTRIAL POLICY 1956  Industries Classification: - Public Sector: 17 - Public-cum-Private sector: 12 - Private Sector  Fair Treatment to Private Sector  Balanced Regional Growth  Proper Amenities to Labourers  Efficient Management of PSUs
  10. 10. MAIN FEATURES OF INDUSTRIAL POLICY 1977  More Emphasis on SSIs  Labour Intensive Technologies  Balanced Regional Development  Limited Role of Large Industries  No Expansion of Big Industries  Efficient Management of PSUs
  11. 11. MAIN FEATURES OF INDUSTRIAL POLICY 1980  Balanced Regional Development with Large and Small Industries  Regularisation of Excess Capacity Installed  Development of Backward Areas  Encouragement to EOUs
  12. 12. REVIEW OF PRE-1991 POLICIES  Under Utilisation of Capacity  Concentration of Economic Power  Licensing Promoted Corruption, Rent-seeking and Discrimination  Delay in Processing of Applications  Increased Regional Imbalances
  13. 13. GENESIS OF NEW INDUSTRIAL POLICY 1991  Balance of Payment Crisis  License-Permit- Quota Raj  To Unshackle the Industrial Sector from Administrative and Legal Controls.  To Make Industry Competitive by Increasing Efficiency
  14. 14. PUBLIC SECTOR POLICY  Dilution of Public Sector Role: only 08 industries As on Date Only 03 industries (i) Atomic Energy (ii) Rail Transport and (iii) Radio Active Minerals  Divestment of PSUs  Greater Autonomy to PSUs  Chronically Sick Enterprises to be Referred to BIFR.  Facilities to Labourers
  15. 15.  Abolition of Industrial Licensing: Only 18 Industries Related to Security and Strategic Concerns, Social Reasons, Hazardous Chemicals and Items of Elitist Consumption.  As of Now Only 05 Industries (i) Alcohol (ii) Cigarettes (iii) Hazardous Chemicals (iv) Electronics, Aerospace and Defense Equipments, and (iv) Industrial Explosive Requires Industrial License. INDUSTRIAL LICENSING POLICY
  16. 16. FOREIGN INVESTMENT POLICY  Automatic Approval for FDI up to 51 % Foreign Equity in High Priority Industries.  This is Subsequently Increased to 74% in Some Industries and With the Replacement of FERA (1973) with FEMA (1999), 100% FDI is Permitted in Many Areas.  Automatic Approval for Import of Capital Goods (Maximum Limit 2 Crore)
  17. 17. FOREIGN TECHNOLOGY AGREEMENTS (FTAs)  Automatic Permission will be Given for FTAs in High Priority Industries up to a Lump-sum Payment of Rs. 1 Crore.  5% Royalty for Domestic Sales and 8% for Exports, Subject to Total Payment of 8% of Sales for 10 Year Period  No Permission will be Necessary for Hiring of Foreign Technicians and Foreign Testing of Indigenously Developed Technologies.
  18. 18.  In Cities with Less Than 1 Million population, No Requirement of Obtaining Location Clearance (Except for Industries Subject to Compulsory Licensing)  In Cities with more than 1 Million Population, Industries will be Located Outside 25 kms (other than Non Polluting Industries such as Electronics, Computer Software and Printing) INDUSTRIAL LOCATION POLICY
  19. 19.  Threshold Limit of Assets in MRTP Companies Removed  Abolition of Phased Manufacturing Programme  Reservation for SSIs  Removal of Mandatory Convertibility Clause  Encouragement to Industries in Backward Areas OTHER IMPORTANT FEATURES
  20. 20. IMPLEMENTATION OF NIP 1991  Contraction of Public Sector  Liberalisation of Industrial Licensing Policy: Only Five Industries are under Compulsory Licensing  Introduction of Industrial Entrepreneurs' Memorandum (IEM) for industries not requiring compulsory licensing  Liberalisation of the Location Policy ….cont’d
  21. 21.  Five Year Tax Holidays to Power Generation Industries  Increase in Lending Limit of Banks  Amendments in SICA in 1993 and 2003  Increase in Investment Limit of Small Enterprises  Micro Enterprises – 25 Lakh (10 Lakh)  Small Enterprises – upto 5 Crore (5 Crore)  Medium Enterprises – upto 10 Crore (5 Crore) ….cont’d
  22. 22.  MRTP act Replaced with Competition Act  Tax Holidays for Industries in Backward Areas  Encouragement to Private Sector Participation in Infrastructure  Reimbursement Scheme for Technology Upgradation.  Setting up of Foreign Investment Promotion Board (FIPB) ….cont’d
  23. 23.  Permission to Raise Capital from Foreign Markets  Encouragement to Foreign Investment  Disinvestment of PSUs
  24. 24. POSITIVE IMPACT OF NIP 1991  Increase in Production  Removal of Bureaucratic Hurdles  Increase in Competition  Increase in Efficiency of Public Sector  Increase in Foreign Investment  Increase in Exports  Balanced Regional Development  Less Economic Burden on Government
  25. 25. CRITICISM OF NIP 1991  Concentration of Economic power  Increase in Unemployment  No Evidence of Positive Effect on Productivity  Ignore Social Objectives  Distortion in Production Structure: Growth of Capital Goods Industries Declined
  26. 26.  Adverse Effect of Small Scale Industries  Misplaced Faith in Foreign Investment  Danger of Business Colonisation.  Personalized Relationship and Corrupt Practices still Continue  Increase in Regional Imbalances
  27. 27. Outlay (Rs. Crore) % of total Outlay Tgt Gwth Rate Act. Gwth Rate Large Small 1ST 55 42 4.95 - 7.5 2ND 938 187 24.0 - 6.6 3RD 1726 241 23.0 14.0 9.0 4TH 2864 243 19.7 8.0 4.5 5TH 8989 592 24.3 7.1 5.9 6TH 20407 1780 22.8 6.9 5.5 7TH 25971 3249 13.4 8.7 8.5 8TH 40588 6334 10.8 7.3 7.4 9TH 33587 8384 8.2 8.2 5.0 10TH 52856 6083 3.9 10.0 8.6 11TH 142100 11500 4.2 10.5 8.6/2.8 INDUSTRIAL DEVELOPMENT DURING PLAN PERIOD
  28. 28. IMPORTANT HIGHLIGHTS OF DIFFERENT PLANS First Five Year Plan (1951-56): Many Basic and Heavy Industries, Set Up, Namely: Sindri Fertiliser, Chitranjan Locomotive, HMT, U.P. Cement Industry, Indian Telephones, Indian Cables, DDT and Penicillin Factories. Second Five Year Plan (1956-61): Based on IPR 1956 and Mahalanobis Model; Major Industries: Steel Plants at Bhilai, Durgapur and Rourkela.
  29. 29. Third Five Year Plan (1961- 66): Focus on Expansion of Heavy Industries. Major Industries: Bokaro Steel Plant, Machine Tool Factory at Pinjore and Hyderabad Fourth Five Year Plan (1969-74): No Worth While Change in Industrial Structure Fifth Five Year Plan (1974-79): Focus on Development of Core/Basic and Export Industries, Balanced Development, Modern Technology
  30. 30. Sixth Five Year Plan (1980-85): Main Objective - Optimum Utilisation of Existing Capacity and to Increase Productivity. Focus: Capital Goods Industries Specially Electronic Industry, Adoption of New Technologies. Seventh Five Year Plan (1985-90): Main Objective - Increasing Production of Consumer Goods and to Increase Productivity. Focus: Achievement of Self Sufficiency in Defense Production, Development of Sunrise Industries like Electronics.
  31. 31. Eighth Five Year Plan (1992-97): More Importance to Private Sector, Public Sector in Core and Basic Industries only; Top Priority to Capital Goods Industries. Ninth Five Year Plan (1997-2002): More Importance to Private Sector, Development of Backward Areas, Increasing Industrial Efficiency, MRTP Ceiling Removed. Tenth Five Year Plan (2002-07): Focus on Infrastructure Development, R&D, Technical Development and Modernization. Special Concessions to EOUs.
  32. 32. ELEVENTH FIVE YEAR PLAN(2007-12)  Strengthening Manufacturing Sector, Making Indian Industries more Competitive, strengthening infrastructure,  Focus On Pharmaceuticals, Auto- Components and Textiles  Special Concessions for MSME and Labour Intensive Industries  Emphasis on Technological Improvement  Wider Role for Private Sector  Flexible Labour Laws
  33. 33. ACHIEVEMENTS DURING PLANNING PERIOD  Vast Network of Infrastructure Developed  Increase in the Share of Industrial Sector in National Income: 16% to 25.9%.  National Defense and Self independence  Development of Public Sector  Moderanisation  Increase in Foreign Collaboration  Increase in Government Income
  34. 34. INDUSTRIES UNITS 1950-51 2007-08 Finished Steel Lakh Tonnes 10 552 Electricity Bn. kwh 5.1 704 Crude Oil Lakh Tonnes 03 341 Fertilisers Thousand Tonnes 18 14738 Cement Lakh Tonnes 27 1683 Passenger Cars Thousands 7.9 1545 Cloth bn. sq. Mtrs 4.5 55 DEVELOPMENT OF STRONG INDUSTRIAL BASE
  35. 35. WEAKNESS OF INDUSTRIAL EVELOPMENT DURING PLANS  Under-utilisation of Capacity  Irregular Increase in Industrial Production  Increase in Monopoly Power  Poor Performance of Public Sector  Industrial Sickness  Industrial Disputes  Poor Quality Production  Regional Imbalances
  36. 36.  FDI – Foreign Direct Investment  SSIs – Small Scale Industries  EOUs – Export Oriented Units  PSUs – Public Sector Units.  MRTP - Monopolistic & Restrictive Trade Practices  FERA - Foreign Exchange Regulation Act  FEMA - Foreign Exchange Management Act  SICA – Sick Industries Companies Act  BIFR – Board for Industrial & Financial Reconstruction ABBREVIATIONS USED
  37. 37.  Excess Capacity  Trickle Down Effect  Competition Act  Labour Relation  Memorandum of Understanding (MOU)  License-Permit-Quota Raj  Balanced Regional Growth  Phased Manufacturing Programme NEW/KEY TERMS
  38. 38.  S.C. Kuchhal, “Industrial Economy of India” Chaitanya Publishing House.  R.K. Misra AND V.K.Puri, “Indian Economy” Himalaya Publications. Ruddar Dutt and K.P.M. Sundaram, “Indian Economy” Sultan Chand. Uma Kapila, “Understanding the Problems Of Indian Economy” Academic Foundation. REFERENCES
  39. 39.  Evaluate Industrial Development during the Period of Planning in India.  What Have been the Causes of Slow Industrial Growth during Planning Period?  Explain the Industrial Policy Resolution of 1991. What New Changes have been Introduced in it? Evaluate it.  Discuss the Main Features and Shortcomings of New Industrial Policy of India. FAQs

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