study materials of management students

1. BUSINESS ENVIRONMENT
UNIT 3
INDUSTRIAL POLICY
DR. KANCHAN KUMARI
FACULTY OF MANAGEMENT AND INTERNATIONAL BUSINESS

2. Industrial Policy
 Industrial Policy is defined as the strategic effort by the state to
encourage economic transformation, i.e. the shift from lower to higher
productivity activities, between or within sectors
 industrial policy involves prioritising certain sectors over others, and
this support is conditional on their export performance. Thus, it is a
dynamic process, and the learning process, whether by the government or
firms, is one of the key ingredients of success.
 The term industrial policy refers to policy towards industries their
establishment, functioning, growth
 and management. It is the most important document which indicates
relationship between
 government and business

3. Main features of industrial policy 1991
 The primary objective of the said Policy was to cause the acceleration of
economic growth. The main features of Industrial Policy 1991 were –
 (1) public sector de-reservation,
 (2) industrial licensing abolished,
 (3) disinvestment in the public sector,
 (4) allowing foreign capital investment, etc.

4. Rationale of Industrial Policy
 Corrects imbalance in development of industries and brings desired balance and
 diversification in them.
 • Directs the flow of scarce resources in the most desirable area of investment.
 • Prevent wastage of scarce of resources and ensures their conversation.
 • Empowers government to regulate private industries and their expansion.
 • Demarcation of private, public and joint sectors of the industrial sector.
 • Enables government towards formation of monopoly and restrictive trade practices.
 • Gives guidelines for foreign capital and explains the conditions on which foreign
capital should
 be allowed to enter the country

5. Industrial policy resolution of 1948
 Acceptance of importance of both private and public sector.
 • Division of industrial sector
 • Role of small and cottage industries.

6. Industrial policy 1956
 17 industries were listed in first category (A). It included, defence
equipment, iron and steel, machine building industries.
 • 12 industries were listed in second category (B). It included minerals
extruding, fertilizers, tools making, drugs, rubber.
 • Rest of industries were open for the private sector.
 • State provided infrastructural facilities to the industries.
 • Mostly this policy was criticized for depending on public sector for
growth

7. Industrial policy 1991 Objectives
 On 24th July 1991, government under Mr P.V Narsimharao, introduced an industrial policy to
drastically alter industrial scenario in our country.
 • Self reliance to build on many sided gains already made.
 • Encouragement to Indian Entrepreneurs for technology and employment promotion.
 • Development of indigenous technology
 • Removing regulatory system and other weakness.
 • Increasing competitiveness of industries.
 • Incentives for industrialization of backward areas.
 • Enhance support for small scale sector.
 • Ensure functioning of PSU’s and decreasing their losses.
 • Protect interests of workers.
 • To abolish monopoly.
 • To link Indian economy to global markets

8. Small Scale Industries
 An industry which has an investment up to Rs. 1 Crore in plant and
machinery is termed as Small Scale Industry.
 The limit has been increased to Rs. 5 Crore for 71 items so that
technological updates can be done by SSI’s and still the business can be
termed as SSI.
 Presently, the investment for tiny/micro sector is Rs. 25L

9. Socio-economic implications of Liberalization
 Liberalisation increases the growth rates in a very short span of time.
This also helps to result in higher imports than exports.
 The higher growth rate in developed countries and increment in the
income of developing economies helps to reduce the trade deficits of
developing economies.
 For the developing countries, liberalisation has opened economic
borders to foreign companies and investments.
 Earlier, the investors had to encounter difficulties to enter countries with
many barriers.
 These barriers included tax laws, foreign investment restrictions,
accounting regulations, and legal issues.

10. Effects of liberalization on Indian economy and society
 Economic liberalisation led to higher economic growth rates in India.
 It attracted foreign investments, increased the ease of doing business
 Stimulated various sectors of the economy,
 contributing to overall growth and development.

11. Privatization
 The transfer of ownership, property or business from the government to
the private sector is termed privatization.
 The government ceases to be the owner of the entity or business.
 The process in which a publicly-traded company is taken over by a few
people is also called privatization.
 Privatization of public services has occurred at all levels of government
within the country.
 Some examples of services that have been privatized include airport
operation, data processing, vehicle maintenance, corrections, water
and wastewater utilities, and waste collection and disposal

12. Globalisation.
 Globalization is the word used to describe the growing interdependence of the
world’s economies, cultures, and populations, brought about by cross-border
trade in goods and services, technology, and flows of investment, people, and
information. Countries have built economic partnerships to facilitate these
movements over many centuries. But the term gained popularity after t 1990s,
as these cooperative arrangements shaped modern everyday life. This guide
uses the term more narrowly to refer to international trade and some of
the investment flows among advanced economies, mostly focusing on
the United States.
 Globalisation enables the coming together of individuals, corporations and
resources from different countries. The unique characteristics of globalization
have allowed people with diverse backgrounds to interact freely. It is the
vehicle that has helped global trade scale new heights .

13. EFFECTS OF GLOBALIZATION
 Globalization encourages each country to specialize in what it produces
best using the least amount of resources
 This concept makes production more efficient
 It promotes economic growth, and lowers prices of goods and services,
 It also make item more affordable especially for lower-income households.

14. Characteristics of Globalisation
 Free Trade – Globalisation has helped improve trade volumes between
nations with minimal interference. The reason is that governments are not
micromanaging every minute aspect of business transactions.
 Liberalization – One of the main characteristics of globalisation is the
improvement in the business climate for corporations. It has helped
entrepreneurs to set up businesses and transact both within and outside
the country.
 Increase in Employment – Every industry is responsible for generating both
direct and indirect jobs. And when production increases, it has a positive
effect on employment.
 Increased connectivity between nations – Globalisation has helped
countries improve trade relations with each other.

15. THANK YOU !
Dr. Kanchan Kumari