government industrial policies

1. CENTRAL AND STATE
GOVERNMENT INDUSTRIAL
POLICIES AND REGULATIONS -
INTERNATIONAL BUSINESS

2. Telangana State government policy
• The Telangana government has announced a new
industrial policy, claiming it to be the world's first to
ensure the right to timely clearances through
legislation and holding officials responsible for delays.
• The policy prescribes a single common application
form for all clearances to be accorded by a nodal
agency within 15 days for mega projects akin to the
Singapore Economic Development Board.
•

3. • Telangana is rich in mineral resources and the industrial policy has to tap
the sector to create job opportunities for youth in districts.
• Most Telangana districts are rich in mineral resources like quartz, barytes,
manganese, laterite, dolomite etc.
• Government is trying to develop refineries and manufacturing industries
by utilizing these resources which lead to overall economic development
of Telangana and create a huge employment in the state.
Reach Us @ www.choice-india.com

4. Industrialpolicyof
India

5. Industrial policy resolution of 1948
Industrial policy resolution of 1956
Industrial policy resolution of 1973
Industrial policy resolution of 1977
Industrial policy resolution of 1980
Industrial Policy resolutions
NEW EONOMIC POLICY 1991

6. •Important distinction was made-
Industries to be kept under :
-public sector,
-private sector and the
-joint sector.
•Industrial Department and Regulation Act (IDR
Act) was enacted in 1951.
Industrial policy resolution of 1948

7. Objective of IDR 1951
Empowering the Government to take
necessary steps to regulate the pattern of
industrial development through licensing.
• This paved the way for the Industrial Policy Resolution of
1956, which was the first comprehensive statement on the
strategy for industrial development in India.

8. •Shaped by the Mahalanobis Model of growth, which suggested
that emphasis on heavy industries would lead the economy towards
a long term higher growth path.
The Industrial Policy Resolution - 1956 classified industries into
three categories :
Industrial Policy Resolution - 1956
17 industries :
exclusively under the domain of the Government. These
included inter alia, railways, air transport, arms and ammunition, iron and steel and
atomic energy.
12 industries
which were envisaged to be progressively State
owned but private sector was expected to supplement the efforts of the State.
The third category contained all the remaining industries and it was expected
that private sector would initiate development of these industries but they
would remain open for the State as well.

9. Objectives
• To accelerate economic growth and boost
the process of industrialization as a means to
achieving a socialistic pattern of society.
• Removal of regional disparities through
development of regions with low industrial
base.

10. Improving living standards and working conditions for the mass of the
people.
To reduce disparities in income and wealth.
To prevent private monopolies and concentration of economic power
in different fields in the hands of small numbers of individuals
The State will progressively assume a predominant and direct
responsibility for setting up new industrial undertakings and for
developing transport facilities.
At the same time private sector will have the opportunity to develop
and expand.
The adoption of the socialist pattern of society as the national
objective.

11. It provided for a closer interaction between the agricultural and
industrial sectors. Accorded the highest priority to the generation and
transmission of power.
An exhaustive analysis of industrial products was made to identify
products which are capable of being produced in the small scale sector.
The list of industries exclusively reserved for the small scale sector was
expanded from 180 items to more than 500 items.
Within the small scale sector, a tiny sector was also defined with
investment in machinery and equipment upto Rs.1 lakh and situated in
towns with a population of less than 50,000 according to1971 census
figures, and in villages.
Special legislation to protect cottage and household industries was also
proposed to be introduced.
INDUSTRIAL POLICY RESOLUTION, 1973

12. The Government would promote the development of a system of linkages
between nucleus large plants and the satellite ancillaries
To boost the development of small scale industries, the investment limit in the
case of tiny units was enhanced to Rs.2 lakh, of a small scale units to Rs.20 lakh
and of ancillaries to Rs.25lakh.
A scheme for building buffer stocks of essential raw materials for the Small Scale
Industries was introduced for operation through the Small Industries
Development Corporations in the States and the National Small Industries
Corporation in the Centre.
Industrial processes and technologies aimed at optimum utilisation of
energy or the exploitation of alternative sources of energy would be
given special assistance, including finance on concessional terms.
INDUSTRIAL POLICY RESOLUTION, 1977

13. Correction of regional imbalances;
Maximum production and achieving higher
productivity; Higher employment generation;
Strengthening of the agricultural base through agro
based industries;
Promotion of export-oriented industries;
Promotion of economic federalism through equitable
spread of investment and dispersal of returns;
Consumer protection against high prices and bad
quality.
INDUSTRIAL POLICY RESOLUTION 1980

14. New INDUSTRIAL POLICY
1991

15.  The spread of industrialization to backward areas of
the country will be actively promoted
through appropriate incentives, institutions and
infrastructure investments.
 Foreign investment and technology collaboration will be
welcomed to obtain higher
technology, to increase exports and to expand the
production base.
 Abolish monopoly
 Workers’ participation in management will be
promoted

16. INDUSTRIAL POLICY 1991
ISSUES
 Government recognizes the need for
• social and economic justice, to end poverty and
unemployment and to build a modern, democratic, socialist,
prosperous and forward-looking India
• India to grow as part of the world economy and not in
isolation
 Enhanced support to the small-scale sector so that it flourishes
in an environment of economic efficiency and continuous
technological up gradation
 Emphasis on building our ability to pay for imports through
our own foreign exchange earnings

17. INDUSTRIAL POLICY 1991
OBJECTIVES
In pursuit of the above objectives,
Government have decided to take a series
of initiatives in respect of the policies
relating to the following areas:
A. Industrial Licensing.
B. Foreign Investment.
C. Foreign Technology Agreements.
D. Public Sector Policy.
E. MRTPAct.

18. A.Industrial Licensing:
 Industrial licensing abolished for all projects except a short list
of 18 industries related to security and strategic concerns, social
reasons, hazardous chemicals etc. (Annex II)
 Areas where security & strategic concerns predominate,
reserved for public sector. (Annex I)
 In projects where imported capital goods are required,
automatic clearance given.
 In locations other than cities of more than 1 million population,
no requirement of obtaining industrial approvals from Central
Government.
 Incentives & investments in infrastructural development, to
promote dispersal to rural and backward areas.
 Existing units enabled to produce any article without additional
investment.

19. INDUSTRIAL POLICY 1991
B. Foreign Investment:
 Approval upto 51 percent foreign equity in high
priority industries.(Annex-III)
 Imports governed by general policy applicable to
other domestic units, payment of dividents
monitored by RBI to ensure that outflows on
account of dividents are balanced by export
earnings.
 Other foreign equity proposals, not covered
above, need prior clearance.
 A special Empowered Board- to negotiate with a
number of large international firms & get FDIs
approved.

20. INDUSTRIAL POLICY 1991
C. Foreign Technology Agreements:
 Automatic permissions for foreign technology
agreements in high priority industries
(Annex-III) upto a lumpsum payment of Rs.
1 crore.
 For industries other than those in Annex
III, automatic permissions if no foreign
exchange is required for payment
 All other proposals need specific approval
 No permission for foreign technicians,
foreign testing of indigenously developed
technologies.

21. INDUSTRIAL POLICY 1991
D. Public Sector Policy:
 Portfolio of public sector investments reviewed with a
view to focus public sector on strategic, high tech &
essential infrastructure.
 Chronically sick public enterprises, referred to Board
of Industrial & Financial Reconstruction (BIFR).
 A part of government’s shareholding in public sector
offered to mutual funds, financial institutions, public
& workers.
 Boards of public sector companies- more professional
& powerful.
 MOU system- managements would be granted greater
autonomy & held accountable.

22. INDUSTRIAL POLICY 1991
E. MRTP Act: (Monopolistic Restrictive Trade Practices):
 Removal of threshold limits of assets in respect of
MRTP Companies & dominant undertakings.
 Elimination of need of prior approval of Central
Government for establishment, expanding, merger,
amalgamation & takeover.
 Emphasis on controlling & regulating monopolistic,
restrictive & unfair trade practices.
 Enabling the MRTP Commission to exercise punitive &
compensatory powers.

25. POST 1991-
THE REFORM PHASE

26. EIGHTH FIVE YEAR PLAN (1992-97)
Expectation- 7.5 per cent
Annually achievedgrowthrate for industries:
1992-93 : 4.2 percent
1993-94 : 6.8 percent
1994-95 : 9.4 percent
1995-96 : 12.3 percent
1996-97 : 7.7 percent
AverageAnnual Growth Rate- 8.1 percent

27. NINTH FIVE YEARPLAN(1997-2002)
Industrial growth target: 3% p.a.
Achieved: 4.5% p.a.
In 1997-98 and 1998-99, industries reported a
growth of 3.8 percent.
Such slow down was due to a number of
structural and cyclical factors.

28. TENTHFIVE YEAR PLAN(2002-07)
Two major reforms that took place from the year
2002 were:
1)1. RISE IN INTERNATIONAL COMPETITION :
Removal of quantitative restrictions on imports.
2)DECLINE IN ROLE OF PUBLIC SECTOR :
Disinvestment process converted many of the
existing public sector enterprises into non-
governmental enterprises.

29. INDUSTRIAL GROWTH RATES ANNUALLY :
2002-03 : 6.8 percent
2003-04 : 7.9 percent
2004-05 : 8.9 percent
2005-06 : 8.2 percent
2006-07 : 10.6 percent

31. ELEVENTH FIVE YEAR PLAN(2007-12)
Fluctuating trends
2007-08: 15.5 percent
Started declining owing to global economic meltdown
2008-09 : 2.5 percent
2009-10 : 5.3 percent
2010-11 : 8.2 percent
2011-12 : 3.8 percent

34. TWELVTH FIVE YEAR PLAN (2012-17)
CHALLENGES FACING :
A. Dumping in Indian markets
B. Indian Industry needs to be cost effective along with
delivering value.
C.Ensuring that investments made in infrastructure
projects fructify quickly.
D.Growth of labour intensive industries.

35. • Khadi, which symbolized self-reliance and emancipation during the freedom
struggle in India, has lost its sheen over the years.
• In 1957, the Khadi and Village Industries Commission (KVIC) was established
to take over the work of the board. KVIC was formed as a nodal agency to
promote Khadi all over India through its exclusive outlets known as Khadi
Bhandars. There were many bogus Khadi units operating in the country, which
made it extremely difficult to claim rebates from the Government of India for the
sale of Khadi.
• You are the Home Minister of INDIA. Prepare a clause in the existing
Industrial Policy of India to deal with the above stated problem.
ACTIVITY : POLICY DILEMMA

37. INTRODUCTION
MSME
 Msme stands for micro, small and medium enterprises.
 It plays a important role for economic development of our
country.
 The major advantage of the sector is its employment
potential at low capital cost. The labor intensity of the
MSME sector is much higher than that of the large
enterprises.
 it satisfies the demand of local customer.

38. MSME- INDIAN SCENARIO
• 12.5 million MSMEs
• Employ 30 million People
• Contribute approx. 50% of Industrial Production
• Contribute approx. 45% of Exports

39. Industry coming under msme
 Food Processing(kfc product,berger,pasta)
 Agricultural Inputs(Seeds, fertilizer)
 Chemicals & Pharmaceuticals(medicines)
 Engineering; Electricals, Electronics
 Electro-medical equipment
 Textiles and Garments
 Meat products
 Sports goods
 Plastics products
 Computer Software, etc.

40. Brief idea about MSME
• In India, the enterprises have been classified broadly
into two categories
1.Manufacturing
2. services.
• Both categories have been further classified into
micro, small and medium enterprises based on their
investment in plant and machinery or on equipment.

41. CATEGORIZATION OF ACTIVITIES UNDER
Manufacturing or Services under
the MSMED Act 2006-
Manufacturing service
1. Printing 1.publishing
2.Medical Equipment 2.hospitals
3.Ayurvedic Product 3. Restaurant
3.Beedi/ Cigarette Manufacturing 4.hotels
and other tobacco products. 5.education
4. Generation of electricity 6.training
though windmill. 7.software service

42. Classification Investment ceiling for plant, Machinery
or Equipments
Manufacturing
Enterprises
Service
Enterprises
Micro Upto Rs. 25 lakh Upto R. 10 lakh
Small Above Rs. 25 lakh &
upto Rs. 5 crore
Above Rs. 10
lakh & upto Rs. 2
crore
Medium Above Rs. 5 Crore an
upto Rs. 10 crore
Above Rs. 2
crore & upto Rs.
5 crore

43. AIM OF MSME
MSME development as a tool of state policy aims at :
• Generation of Employment
• Dispersal of Economy
• Utilization of local skills and resources
• Meet demands locally

44. FISCAL BENEFITS
• following fiscal benefits covering the categories
of
(a) Micro/Small Enterprises (b) Medium
Enterprises & Large Industries (c)
Scheduled Caste & Scheduled Tribe
Entrepreneurs (d) Women Entrepreneurs

45. FISCAL BENEFITS 1
Stamp duty Land cost rebate Lease shed rebate
Micro and Small
Enterprises (MSE’s)
100% 25% 25%
SC ST 100% 33% 100%
Power cost Investment subsidy for
fixed capital
Vat/cst
Micro Enterprises .75/unit 15% 100%
Small .75/unit 15% 50%
SC ST 1.00/unit 35%
Women sc st 40%
Women sc st triball areas 45%

46. FISCAL BENEFITS 2
Pavala Vaddi Interest
subsidy upto 12%
Quality certification Vat/cst
Micro Enterprises Excess of 3% 50% 100%
Small Excess of 3% 50% 50%

47. ORDER
(1) This Order is titled as ‘Public Procurement Policy for Micro and Small
Enterprises (MSEs) Order, 2012’.
(2) It shall come into force with effect from 1stApril 2012.
Public Procurement Policy for Micro and Small Enterprises (MSEs) Order
Whereas, the Central Government Ministries, Departments and Public
Sector Undertakings shall procure minimum of 20 per cent of their annual value of
goods or services from Micro and Small Enterprises;
s
Special provisions for Micro and Small Enterprises owned by Scheduled Castes or
Scheduled Tribes. ─ Out of 20 per cent target of annual procurement from Micro and
Small Enterprises, a sub-target of 20 per Cent (i.e., 4 per cent out of 20 per cent) shall
be earmarked for procurement from Micro and Small Enterprises owned by the
Scheduled Caste or the Scheduled Tribe entrepreneurs.

48. SCHEMES AVAILABLE
• Tool Rooms & Technical Institutions
• Micro & Small Enterprises-Cluster Development
Program(MSE-CDP)
• Micro Finance Programme
• Micro, Small & Medium Enterprises(MSME) Credit
Monitoring Cell
• Credit Linked Capital Subsidy Scheme under Technology
Upgradation (CLCSS)
ISO9001/ISO 14001
Certification Reimbursement Scheme
• National Manufacturing Competitiveness Programme
(NMCP)

49. International Business
Environment
zignyas@gmail.com

50. International Business
• The buying and selling of the goods and
services across the border.
• The national border are crossed by the
enterprises to expand their business
activities like manufacturing, mining,
construction, agriculture, banking,
insurance, health, education,
transportation, communication and so on.

51. Trade
• Trade means exchange of goods and services
for the satisfaction of human wants.
• When trade is confined to the geographical
limits of a country, it is a domestic or national
trade.
• International or foreign trade refers to the
trade between two countries.
• Technically, domestic trade and International
trade are more or less identical and are based
on the same basic principles of trades.

52. Differences between Domestic and
International Business
• Difference in Currencies
• Difference in Natural and Geographical Conditions
• Mobility of Factors of Production
• Sovereign Political Entities
– Imposition of tariffs and customs duties on imports and
exports;
– Quantitative restrictions like quotas;
– Exchange control;
– Imposition of more local taxes etc.
• Different Legal Systems

53. Importance of IBE
• Helps in expansion: Geographic expansion may be used
as a business strategy. Even though companies may
expand their business at home.
• Helps in managing product life cycle: Every product has
to pass through different stages of product life cycle-
when the product reaches the last stages of life cycle in
present market, it may get proper response at other
markets.
• Technology advantages: Some companies have
outstanding technology advantages through which they
enjoy core competency. This technology helps the
company in capturing other markets.
Cont…

54. Importance of IBE
• New business opportunities: Business opportunities in
overseas markets help in expansion of many companies.
They might have reached a saturation point in domestic
market.
• Proper use of resources: Sometimes industrial resources
like labor, minerals etc. are available in a country but are
not productively utilized.
• Availability of quality products: When markets are open,
better quality goods will be available every where.
Foreign companies will market latest products at
reasonable prices. Good product will be available in the
markets.
Cont…

55. Importance of IBE
• Earning foreign exchange: International business
helps in earning foreign exchange which may be
used for strategic imports. India needs foreign
exchange to import crude oil, deface equipment,
raw material and machinery.
• Helps in mutual growth: Countries depend upon
each other for meeting their requirements. India
depends on gulf countries for its crude oil supplies.
• Investment in infrastructure: International business
necessitates proper development of infrastructure.

56. Problems in International Business
• Controlling the market: Multinational try to control
the market of the host country. Whenever they enter a
new country, the first strategy is to eliminate the
competitors either by taking over their business or
forcing them out of market by following price
reduction policies.
• Exhausting natural resources: Multinational
corporations set up their production facilities in those
countries where natural resources are available in
sufficient quantities.
• Importance to luxuries: Multinational corporations
enter those areas where margin of profits is high.
Cont…

57. Problems in International Business
• Trade practices: Since multinational corporations have
their head office in one country and the trade practices
followed there are adhered to.
• Economic development: It is generally felt that the entry of
businessmen from outside may help in the economic
development of that country . The actual practice in many
countries is different.
• Shifting of investment: International business is related to
profitability of its operations. If a business is getting
sufficient profits in a particular country then the
investment remain there.

58. Need for International Business
– causes the flow of ideas, services, and capital across the
world
– offers consumers new choices
– permits the acquisition of a wider variety of products
– facilitates the mobility of labor, capital, and technology
– provides challenging employment opportunities
– reallocates resources, makes preferential choices, and
shifts activities to a global level

59. Trends in IB
• Trade between partners of Regional Trade
Agreements (RTAs)
• Developing countries’ trade
• South-South trade
• Air Cargo; Express cargo
• Global production network
• Intra-firm trade
• E-commerce

60. Developing countries’ trade
• It is observed that developing countries are
increasingly becoming an important
destination for the exports of developed
countries.
• Some problems have been recognized in
identifying tariff classification and assessing
the Customs value of second-hand goods
such as used cars, computer equipment,
machinery and clothing.

61. South-South trade
• Merchandise trade between developing
countries, i.e. South-South trade.
• Intra-regional trade, in particular
through RTAs, played a central role in the
rise of South-South trade.

62. Air Cargo; Express cargo
• It is reported that world air cargo accounts at present for a
small portion of world merchandise trade by weight, but a
significant portion by value.
• This important growth in express traffic can be attributed
to several factors
– globalization and associated Just-In-Time production
and distribution systems
– increased trade in high-value low-weight products and
– the provision of a service that assists SMEs to compete
effectively in an increasingly global market

63. Global Production Network
• The share of manufactured goods within world merchandise
trade has grown significantly throughout the world.
• The share of parts and components exports of total
merchandise exports has greatly increased in all six regions of
the world, for example from 6% in 1980 to 15% in 2002 in the
East Asia region.
• Exported goods contain a significant portion of imported
intermediate inputs. In the “international segmentation of
production”, intermediate inputs are exported for more
processed intermediate inputs, which are then exported to
the next stage in production.

64. Intra-firm trade
• Intra-firm trade, i.e. trade within the same
company around one-third of world
merchandise trade, although aggregate data
are only available for a few countries.
• Intra-firm trade between high and middle-
income countries was directly related to the
internationalization of production.
• The affiliates in the middle-income countries
were mostly instructed to manufacture goods
destined for other markets, including the
country of the parent company.

65. E-commerce
• It has dominant factor in international trade and
business, although traditional methods of trade
and business continue to be utilized widely.
• It can reduce business costs in seeking potential
foreign business partners, as well as improve a
firm’s visibility in global marketing services, in
particular for SMEs.
• It enables firms to take more opportunities to
expand their business in global markets.

66. International Trade Theories
• Theory of Mercantilism
• Theory of Absolute Cost Advantage
• Theory of Comparative Cost Advantage
• Heckscher-Ohlin Model Leonief Paradox

67. Theory of Mercantilism
• This theory is during the sixteenth to the
three-fourths of the eighteenth centuries.
• It beliefs in nationalism and the welfare of
the nation alone, planning and regulation
of economic activities for achieving the
national goals, curbing imports and
promoting exports.
• It believed that the power of a nation lied
in its wealth, which grew by acquiring gold
from abroad.

68. Theory of Mercantilism
• Mercantilists failed to realize that simultaneous
export promotion and import regulation are not
possible in all countries, and the mere possession
of gold does not enhance the welfare of a people.
• Keeping the resources in the form of gold reduces
the production of goods and services and, thereby,
lowers welfare.
• It was rejected by Adam Smith and Ricardo by
stressing the importance of individuals, and
pointing out that their welfare was the welfare of
the nation.

69. Theory of Absolute Cost
Advantage
• This theory was propounded by Adam
Smith (1776), arguing that the countries
gain from trading, if they specialise
according to their production advantages.
• The pre-trade exchange ratio in Country I
would be 2A=1B and in Country II IA=2B.

70. Theory of Absolute Cost
Advantage
• If it is nearer to Country I domestic exchange
ratio then trade would be more beneficial to
Country II and vice versa.
• Assuming the international exchange ratio is
established IA=IB.
• The terms of trade between the trading partners
would depend upon their economic strength and
the bargaining power.

71. Theory of Comparative Cost
Advantage
• Ricardo (1817), though adhering to the absolute
cost advantage doctrine of Adam Smith, pointed
out that cost advantage to both the trade
partners was not a necessary condition for trade
to occur.
• According to Ricardo, so long as the other
country is not equally less productive in all lines
of production, measurable in terms of
opportunity cost of each commodity in the two
countries, it will still be mutually gainful for them
if they enter into trade.

72. Theory of Comparative Cost Advantage
• In the example given, the opportunity cost of one unit of
A in country I is 0.89 unit of good B and in country II it is
1.2 unit of good B. On the other hand, the opportunity
cost of one unit of good B in country I is 1.125 units of
good A and 0.83 unit of good A, in country II.

73. Theory of Comparative Cost Advantage
• The opportunity cost of the two goods are different in
both the countries and as long as this is the case, they will
have comparative advantage in the production of either,
good A or good B, and will gain from trade regardless of
the fact that one of the trade partners may be possessing
absolute cost advantage in both lines of production.
• Thus, country I has comparative advantage in good A as
the opportunity cost of its production is lower in this
country as compared to its opportunity cost in country II
which has comparative advantage in the production of
good B on the same reasoning.

82. Types of International Business
Export-import trade
Foreign direct
investment
Licensing
Franchising
Management
contracts