UNIT III 3Plan NotesFirst Plan(1951 - 56)Community Development Programlaunched in 1952Focus on agriculture, price stability,power and transportIt was a successful plan primarilybecause of good harvests in the last twoyears of the plan
UNIT III 4Second Plan(1956 - 61)Target Growth: 4.5%Actual Growth: 4.27%Also called Mahalanobis Plan named afterthe well known economist.Focus - rapid industrializationAdvocated huge imports through foreignloans.Shifted basic emphasis from agriculture toindustry far too soon.During this plan, prices increased by 30%,against a decline of 13% during the FirstPlan
UNIT III 5Third Plan(1961 - 66)|Target Growth:5.6%Actual Growth:2.84%At its conception, it was felt that Indianeconomy has entered a take-off stage. Therefore,its aim was to make India a self-reliant andself-generating economy.Based on the experience of first two plans,agriculture was given top priority to support theexports and industry.Complete failure in reaching the targets due tounforeseen events - Chinese aggression (1962),Indo-Pak war (1965), severe drought 1965-66.
UNIT III 6Three Annual Plans(1966-69) Plan holidayfor 3years.Prevailing crisis in agriculture and serious foodshortage necessitated the emphasis on agricultureduring the Annual Plans.During these plans a whole New Agricultural Strategywas implemented. It involving wide-spread distributionof high-yielding varieties of seeds, extensive use offertilizers, exploitation of irrigation potential and soilconservation.During the Annual Plans, the economy absorbed theshocks generated during the Third PlanIt paved the path for the planned growth ahead.
UNIT III 7Fourth Plan(1969 - 74)Target Growth: 5.7%Actual Growth: 3.30%Main emphasis was on growth rateof agriculture to enable othersectors to move forward.First two years of the plan sawrecord production. The last threeyears did not measure up due topoor monsoon.Influx of Bangladeshi Refugeesbefore and after 1971 Indo-Pakwar was an important issue
UNIT III 8Fifth Plan(1974-79)Target Growth: 4.4%Actual Growth: 3.8The fifth plan was prepared and launched by D.D.Dhar.It proposed to achieve two main objectives: removalof poverty (Garibi Hatao) and attainment of selfreliance‘.Promotion of high rate of growth, better distributionof income and significant growth in the domestic rateof savings were seen as key instruments.The plan was terminated in 1978 (instead of 1979)when Janta Party Govt. rose to power.Rolling Plan(1978 - 80)There were 2 Sixth Plans. Janta Govt. put forward aplan for 1978-1983. However, the government lastedfor only 2 years. Congress Govt. returned to power in1980 and launched a different plan.
UNIT III 9Sixth Plan(1980 - 85)Target Growth: 5.2%Actual Growth: 5.66%Focus - Increase in national income,modernization of technology, ensuringcontinuous decrease in poverty andunemployment, population controlthrough family planning, etc.
UNIT III 10Seventh Plan(1985 - 90)Target Growth: 5.0%Actual Growth: 6.01%Focus - rapid growth in food-grainsproduction, increased employmentopportunities and productivity withinthe framework of basic tenants ofplanning.The plan was very successful, theeconomy recorded 6% growth rateagainst the targeted 5%.
UNIT III 11Eighth Plan(1992 - 97)The eighth plan was postponed by two years because ofpolitical uncertainty at the Centre .Worsening Balance of Payment position and inflation during1990-91 were the key issues during the launch of the plan.The plan undertook drastic policy measures to combat the badeconomic situation and to undertake an annual average growthof 5.6%.Some of the main economic outcomes during eighth planperiod were rapid economic growth, high growth of agricultureand allied sector, and manufacturing sector, growth in exportsand imports, improvement in trade and current account deficit.
UNIT III 12Ninth Plan(1997- 2002)Target Growth: 6.5%Actual Growth: 5.35%It was developed in the context of fourimportant dimensions:1. Quality Of Life,2. Generation Of ProductiveEmployment,3. Regional Balance And4. Self-reliance.
UNIT III 13Tenth Plan(2002 - 2007)Goals:To achieve 8% GDP growth rateReduction of poverty ratio by 5 percentage points by 2007.Providing gainful high quality employment to the addition to the labour force over thetenth plan period.Universal access to primary education by 2007.Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.Reduction in decadal rate of population growth between 2001 and 2011 to 16.2%.Increase in literacy rate to 72% within the plan period and to 80% by 2012.Reduction of Infant Mortality Rate (IMR) to 45 per 1000 live births by 2007 and to 28 by2012.Increase in forest and tree cover to 25% by 2007 and 33% by 2012.All villages to have sustained access to potable drinking water by 2012.Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012.
UNIT III 14Eleventh Plan(2007 - 2012)Goals:Accelerate GDP growth from 8% to 10%. Increase agricultural GDP growth rate to 4% per year.Create 70 million new work opportunities and reduce educated unemployment to below 5%.Raise real wage rate of unskilled workers by 20 percent.Reduce dropout rates of children from elementary school from 52.2% in 2003-04 to 20% by 2011-12. Increase literacy rate forpersons of age 7 years or above to 85%.Lower gender gap in literacy to 10 percentage point. Increase the percentage of each cohort going to higher education from thepresent 10% to 15%.Reduce infant mortality rate to 28 and maternal mortality ratio to 1 per 1000 live birthsReduce Total Fertility Rate to 2.1Provide clean drinking water for all by 2009. Reduce malnutrition among children between 0-3 years to half its present level.Reduce anemia among women and girls by 50%.Raise the sex ratio for age group 0-6 to 935 by 2011-12 and to 950 by 2016-17Ensure that at least 33 percent of the direct and indirect beneficiaries of all government schemes are women and girl childrenEnsure all-weather road connection to all habitation with population 1000 and above (500 in hilly and tribal areas) by 2009, andensure coverage of all significant habitation by 2015Connect every village by telephone by November 2007 and provide broadband connectivity to all villages by 2012Increase forest and tree cover by 5 percentage points.Attain WHO standards of air quality in all major cities by 2011-12.Treat all urban waste water by 2011-12 to clean river waters.Increase energy efficiency by 20 percentage points by 2016-17.
Industrial PolicyCorrect the imbalancesDirect the flow of scarce resourcesPrevent the wastefulEmpower the governmentDemarcate areasPrevent, through fiscal and monetary policiesGive guidelines for importing foreign capital15UNIT III
Objectives of Industrial Policy1. To maintain a sustained growth in productivity2. To enhance gainful employment3. To prevent undue concentration of economicpower4. To achieve optimal utilization of humanresources5. To attain international competitiveness and6. To transform India into a major partner andplayer in the global arena16UNIT III
Industrial Policy Resolution 1948• Industries were divided into 4 categories:• First Category: Manufacture of arms and ammunition, production andcontrol of atomic energy and the ownership andmanagement of railway transport was to be exclusivemonopoly of the central govt.• Second Category: Covered coal, iron and steel, aircraft manufacture,shipbuilding, manufacture of telephone, telegraphs andwireless apparatus (excluding radio receiving sets) andmineral oils .New undertakings in these industries couldhenceforth be undertaken only by the state17UNIT III
Industrial Policy Resolution 1948• Third Category:– Third category comprised of certain basic industriessuch as salt, automobiles, tractors, earth movers,electric engineering, heavy machinery, machine tools,heavy chemicals, fertilizers, electro-chemicalindustries, non-ferrous metals, rubber manufactures,power and industrial alcohol, cotton and woolentextiles, cement, sugar, paper and newsprint, etc.– Central govt. may take over any existing private sectorvital for national result.18UNIT III
Industrial Policy Resolution 1948• Fourth Category:– Remainder of industrial field, was left for open toprivate enterprises, individuals as well as co-operatives.The aim of Industrial Policy Resolution 1948 was toclear the foggy atmosphere and help the processof investment and also to lessen industrialconflict.19UNIT III
Industrial Policy Resolution 1948• The main thrust of 1948 Industrial Policy wasto lay the foundation of a mixed economy inwhich both the private and public enterprisescould march hand in hand to accelerate thepace of industrial development.20UNIT III
Industrial Policy Resolution 1956• IPR’56 was launched concurrently with theFYP-II.• IPR’56 though not very different from IPR’48but did take into account new ground realitiessuch as adoption of socialistic pattern ofsociety and thrust on heavy industrialisation.UNIT III 21
Industrial Policy Resolution 1956• New classification of industries:i. Schedule A: Exclusive responsibility of state.ii. Schedule B: Only State to setup new industriesand private sector to play a supporting roleiii. Schedule C: All remaining industries notincluded in Schedule A and BUNIT III 22
Industrial Policy Resolution 1956• Fair and non discriminatory treatment forprivate sector:– State to facilitate and encourage the developmentof industries in private sector by ensuring thedevelopment of transport , power and otherservices by appropriate fiscal and other measures.UNIT III 23
Industrial Policy Resolution 1956• Encouragement to village and small scaleenterprises:– State to support cottage , village and small scaleindustry by way of restricting production,differential taxing and directly subsidisingUNIT III 24
Industrial Policy Resolution 1956• Removing regional disparities:– All round and All around development.• Need for provision of amenities of labour:– Labour force being a important stake holder inprocess of industrialisation maintenance ofindustrial peace was duly necessitated.• Attitude towards foreign capital:– Carefully regulated ;allowed only in technologyintensive sectors.UNIT III 25
Industrial Policy Resolution 1977• Background:– The results for industrial field had fallen short ofdesired objectives.– Growth of industrial output barring 1 or two yearswas 3-4% only.– Unemployment had increased also rural urbandisparities had widened.UNIT III 26
Industrial Policy Resolution 1977• Objectives of IPR’77:– Doubling the rate of growth of national incomefrom 3.5% to 7% p.a– A rapid increase in the rate of growth of industrialproduction– Creating much larger employment opportunities– Reducing wide regional disparities and imbalancesUNIT III 27
Industrial Policy Resolution 1977:PROVISIONS• Development of small scale sector– Spreading the net of industries to rural areas andsmall towns• Protecting interest of cottage and householdindustries– Self employment and financial empowermentUNIT III 28
Industrial Policy Resolution 1977:PROVISIONS• Promotion of khadi and village industries:– Modernisation and implementation of newmarketing strategys.• Development of appropriate technology:– Emphasis on development of technology incountry with India-centric approach.• Expanding role of public sector:– Encouraging ancillary industries and contribute todecentralised production.UNIT III 29
Industrial Policy Resolution 1980• Financial support to small units• Correcting regional imbalances• Generation of employment and higherproduction• Liberalization of existing licensed capacities• Streamlining licensing procedures• Encouraging Export Oriented UnitsUNIT III 30
Industrial Licensing Policy• To limit industrial capacity within the targets set by theplans• To direct investment in industries according to planpriorities• To regulate the location of industrial units so as to securea balanced regional development• To prevent both monopoly and concentration of wealth• To protect small-scale industries against unduecompetition from large-scale industries• To foster technology and economic improvements inindustries by ensuring units of economic size andadopting modern processes• To encourage new entrepreneurs to start industrial units,thus broadening the entrepreneurial base.UNIT III 31
Industrial Policy Resolution 1991• IPR’91 has to be seen through the prism of :– Industrial Licensing– Foreign Investment– Foreign Technology Agreements– Public Sector Reforms– Abolition of MRTP Act 1969• (subsequently replaced by Competition Act,2002)UNIT III 32
Industrial Policy Resolution 1991OBJECTIVES• Self-reliance to build on the many sided gains alreadymade.• Encouragement to Indian entrepreneurship, promotionof productivity and employment generation.• Development of indigenous technology through greaterinvestment in R & D and bringing in new technology tohelp Indian manufacturing units attain world standards.• Removing the regulatory system and other weaknesses.• Increasing the competitiveness of industries for thebenefit of the common man.UNIT III 33
Industrial Policy Resolution 1991• Incentives for the industrialisation of backwardareas.• Enhanced support to the small-scale sector.• Ensure running of public sector undertakings(PSUs) on business lines and cut their losses.• Protect the interests of workers.• Abolish the monopoly of any sector in any fieldof manufacture except on strategic or securitygrounds.• To link Indian economy to the global.UNIT III 34
Foreign Investment• Limit on foreign equity holdings raised from40% to 51% in a wide range of industries• Foreign Equity Proposals need not to beaccompanied by Foreign Technology TransferAgreement• Procedure for FDI streamlined by creating aForeign Investment Promotion Board toconsider individual application case by case
Foreign Technology Agreements• Foreign technology agreements in high-priority industries upto Rs. 1 crore were givenautomatic permission.• No permission was required for hiring foreigntechnicians and foreign testing of indigenouslydeveloped technologies.
Public Sector Policy• List of industries reserved for the public (Schedule A)reduced from 17 to 8• List of sector reserved for dominance by public sector(Schedule B) effectively abolished• Disinvestment in selected public sector enterprise toraise finance for development, bring in greateraccountability & help create a new culture in theirworking for improved efficiency
MRTP Act• Removed the threshold limits of assets in respect of MRTPcompanies and dominant undertakings• Eliminated the requirement of prior approval of Central Governmentfor– Establishment of new undertakings– Expansion of undertakings– Merger, Amalgamation and Takeover– Appointment of Directors under certain circumstances.• The newly empowered MRTP Commission will be authorised toinitiative investigations on complaints received from individualconsumers or classes of consumers in regard to monopolistic,restrictive and unfair trade practices.
UNIT III 39Objectives of MRTP ActRegulation of monopolies and prevention of concentrationof economic power andProhibit monopolistic, restrictive and unfair trade practices.After the amendment, the first objective has becomeirrelevant as the relevant provisions to achieve theobjective have been deleted. The objectives now are:Controlling monopolistic trade practices, andRegulating restrictive and unfair trade practices.
Privatisation RoutesUNIT II 40I. Sale to outsidersII. Management-employee buy-outIII. Equal-access voucherIV. Spontaneous privatisationV. Cross-holdingVI. WarehousingVII.Golden shareVIII.Strategic sale
UNIT II 41Arguments for and Against PrivatisationFor Privatisation Against PrivatisationImproves efficiency Absence of well developedcapital marketsCorrect fiscal imbalances Revenue maximisation hasbeen main motivePresence of country conditions Lack of cooperation from labourThe capital-output ratio is high Lack of transparencyin PSUs. This needs to be Lack of strong will in therectified governmentDismal performance of PSUs Scope for creation of privatesector monopoly
UNIT II 42Changes in the Definitions of SSI’s AND ANCILLARIESYear Units InvestmentThe Industries (Development SS Rs.5 lakhs and employing lessthan 50 personsand Regulation) Act, 1951 with power and less than 100 personswithout power1966 SS Not exceeding Rs.7.5 lakh1975 SS Rs.10 lakhAu Rs.10 lakh1980 SS Rs.20 lakhAu Rs.25 lakh1985 SS Rs.35 lakhAu Rs.45 lakh1990 SS Rs.60 lakh and Rs.75 lakh for EOU1991 Au Rs.75 lakh1997 SS Rs.3 Crore – but later reduced to Rs.1crTiny 25 lakh
Small Scale IndustriesUNIT VII 43The investment limits have now been revised upwards since 2006.SSIs are now being categorised into micro, small and mediumenterprises all broadly classified into manufacturing and servicesectors. The investment limits are as follows:
UNIT II 44Manufacturing and Service SectorsManufacturing Sector(Manufacturing enterprises are defined in terms of investment in plant andmachinery)Micro — Does not exceed Rs.25 lakhSmall — More than Rs.25 lakh but does not exceed Rs.5 cr.Medium — More than Rs.5 cr. but does not exceed Rs.10 cr.Service Sector(Service sector units are defined in terms of investment in equipment)Micro — Does not exceed Rs.10 lakhSmall — More than Rs.10 lakh but does not exceed Rs.2 cr.Medium — More than Rs.2 cr. but does not exceed Rs.5 cr.
UNIT II 45Facilities for SSI SectorA. Policies and incentivesB. SSI policy after economic reformsC. Infrastructure facilitiesD. Small industry clustersE. Growth centresF. MarketingG. Pollution preventionH. Facilities for women entrepreneursI. Central Government networkJ. Credit facilities
UNIT II 46Skills to Run SSI UnitsSkills Needed to run small businesses successfullyTechnical Skills• Writing • Monitoring environment• Technical business management • Technology• Ability to organize • Network building• Management style • Coaching• Being a team playerBusiness Management Skills• Planning and goal setting • Decision making• Communication • Human relations• Marketing • Finance• Accounting • Management• Control • Negotiation• Venture launch • Managing growthPersonal Entrepreneurial Skills• Inner control/disciplined • Risk taker• Innovative • Change oriented• Persistent • Visionary leader• Ability to manage change
UNIT II 47SWOTSmall Sector: The SWOTStrengths Flexibility in production volumes and design changesFaster decision makingLower labour costsLower overheadsWeaknesses Often lack of management, marketing or financial skillsTechnological obsolescencePoor financingLack of marketing strength
UNIT III 48Opportunities Large companies are outsourcing more to reduce their owncostsPromising export marketsHigher investment limits mean companies can expand andmoderniseBig companies can take a larger equity stake in small onesThreats With concessions disappearing, inefficient units will dieWith dereservation, competition will come from largecompaniesWith import liberalisation, competition will come from MNCsand cheap inputs.Smaller, less aggressive companies will suffer(Source: Business India, June 15, 1995).
Global Outsourcing : Rationale• Outsourcing refers to an organization contracting work out toa 3rd party.• While off-shoring refers to getting work done in a differentcountry, usually to leverage cost advantages.• Its possible to outsource work but not offshore it; forexample, hiring an outside law firm to review contractsinstead of maintaining an in-house staff of lawyers.• It is also possible to offshore work but not outsource it; forexample, a Dell customer service center in India to serveAmerican clients.UNIT III 49
Global Outsourcing : Rationale• Outsourcing is the practice of hiring a vendorusually to lower costs and take advantage of– the vendors expertise– economies of scale– large and scalable labour poolUNIT III 50
Global Outsourcing : Gains• Lower operational and labor costs are among theprimary reasons why companies choose tooutsource.• When properly executed it has a defining impact ona company’s revenue recognition and can deliversignificant savings.• Companies also choose to outsource or offshore sothat they may continue focusing on their corebusiness processes while delegating mundane timeconsuming processes to external agencies.UNIT III 51
Global Outsourcing : Gains• Outsourcing and off-shoring also enable companiesto tap in to and leverage a global knowledge base,having access to world class capabilities.• Freeing up internal resources that could be put in toeffective use for other purposes is also one of theprimary benefits realized when companies outsource• Many times stranded with internal resourcecrunches, many world class enterprises outsource togain access to resources not available internally.UNIT III 52
Global Outsourcing : Gains• Outsourcing, many a time is undertaken to save costsand provide a buffer capital fund to companies thatcould be leveraged in a manner that best profits thecompany.• By delegating responsibilities to external agenciescompanies can wash their hands off functions thatare difficult to manage and control while stillrealizing their benefits.UNIT III 53
Global Outsourcing : Gains• Outsourcing and especially off-shoring helpscompanies mitigate risk and is also among theprimary reasons embarked upon.• Some companies also outsource to help themexpand and gain access to new market areas, bytaking the point of production or service deliverycloser to their end users.UNIT III 54
Global Outsourcing : Looses• Possible loss of control over a company’s businessprocesses• Problems related to quality and time• Sluggish response times coupled with slow issueresolutions• Shortcomings in performance vis-à-vis expectations• Lower than expected realization of benefits and results• Issues pertaining to lingual accent variation• An irate customer base coupled with enraged employeeunionsUNIT III 55
Global outsourcing :India’s Perspective• ASSIGNMENTUNIT III 56