Unit 3

Meghe Group of Institutions
Department
for
Technology Enhanced Learning
1UNIT III

INDUSTRIAL POLICY
Unit 3
2UNIT III

UNIT III 3
Plan Notes
First Plan
(1951 - 56)
Community Development Program
launched in 1952
Focus on agriculture, price stability,
power and transport
It was a successful plan primarily
because of good harvests in the last two
years of the plan

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Second Plan
(1956 - 61)
Target Growth: 4.5%
Actual Growth: 4.27%
Also called Mahalanobis Plan named after
the well known economist.
Focus - rapid industrialization
Advocated huge imports through foreign
loans.
Shifted basic emphasis from agriculture to
industry far too soon.
During this plan, prices increased by 30%,
against a decline of 13% during the First
Plan

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Third Plan
(1961 - 66)
|Target Growth:
5.6%
Actual Growth:
2.84%
At its conception, it was felt that Indian
economy has entered a take-off stage. Therefore,
its aim was to make India a 'self-reliant' and
'self-generating' economy.
Based on the experience of first two plans,
agriculture was given top priority to support the
exports and industry.
Complete failure in reaching the targets due to
unforeseen events - Chinese aggression (1962),
Indo-Pak war (1965), severe drought 1965-66.

UNIT III 6
Three Annual Plans
(1966-69) Plan holiday
for 3years.
Prevailing crisis in agriculture and serious food
shortage necessitated the emphasis on agriculture
during the Annual Plans.
During these plans a whole New Agricultural Strategy
was implemented. It involving wide-spread distribution
of high-yielding varieties of seeds, extensive use of
fertilizers, exploitation of irrigation potential and soil
conservation.
During the Annual Plans, the economy absorbed the
shocks generated during the Third Plan
It paved the path for the planned growth ahead.

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Fourth Plan
(1969 - 74)
Target Growth: 5.7%
Main emphasis was on growth rate
of agriculture to enable other
sectors to move forward.
First two years of the plan saw
record production. The last three
years did not measure up due to
poor monsoon.
Influx of Bangladeshi Refugees
before and after 1971 Indo-Pak
war was an important issue

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Fifth Plan
(1974-79)
Target Growth: 4.4%
Actual Growth: 3.8
The fifth plan was prepared and launched by D.D.
Dhar.
It proposed to achieve two main objectives: 'removal
of poverty' (Garibi Hatao) and 'attainment of self
reliance‘.
Promotion of high rate of growth, better distribution
of income and significant growth in the domestic rate
of 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 a
plan for 1978-1983. However, the government lasted
for only 2 years. Congress Govt. returned to power in
1980 and launched a different plan.

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Sixth Plan
(1980 - 85)
Target Growth: 5.2%
Focus - Increase in national income,
modernization of technology, ensuring
continuous decrease in poverty and
unemployment, population control
through family planning, etc.

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Seventh Plan
(1985 - 90)
Target Growth: 5.0%
Focus - rapid growth in food-grains
production, increased employment
opportunities and productivity within
the framework of basic tenants of
planning.
The plan was very successful, the
economy recorded 6% growth rate
against the targeted 5%.

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Eighth Plan
(1992 - 97)
The eighth plan was postponed by two years because of
political uncertainty at the Centre .
Worsening Balance of Payment position and inflation during
1990-91 were the key issues during the launch of the plan.
The plan undertook drastic policy measures to combat the bad
economic situation and to undertake an annual average growth
of 5.6%.
Some of the main economic outcomes during eighth plan
period were rapid economic growth, high growth of agriculture
and allied sector, and manufacturing sector, growth in exports
and imports, improvement in trade and current account deficit.

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Ninth Plan
(1997- 2002)
Target Growth: 6.5%
It was developed in the context of four
important dimensions:
1. Quality Of Life,
2. Generation Of Productive
Employment,
3. Regional Balance And
4. Self-reliance.

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Tenth Plan
(2002 - 2007)
Goals:
To achieve 8% GDP growth rate
Reduction of poverty ratio by 5 percentage points by 2007.
Providing gainful high quality employment to the addition to the labour force over the
tenth 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 by
2012.
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.

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Eleventh 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 for
persons 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 the
present 10% to 15%.
Reduce infant mortality rate to 28 and maternal mortality ratio to 1 per 1000 live births
Reduce Total Fertility Rate to 2.1
Provide 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 2016-17
Ensure that at least 33 percent of the direct and indirect beneficiaries of all government schemes are women and girl children
Ensure all-weather road connection to all habitation with population 1000 and above (500 in hilly and tribal areas) by 2009, and
ensure coverage of all significant habitation by 2015
Connect every village by telephone by November 2007 and provide broadband connectivity to all villages by 2012
Increase 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 Policy
Correct the imbalances
Direct the flow of scarce resources
Prevent the wasteful
Empower the government
Demarcate areas
Prevent, through fiscal and monetary policies
Give guidelines for importing foreign capital
15UNIT III

Objectives of Industrial Policy
1. To maintain a sustained growth in productivity
2. To enhance gainful employment
3. To prevent undue concentration of economic
power
4. To achieve optimal utilization of human
resources
5. To attain international competitiveness and
6. To transform India into a major partner and
player in the global arena
16UNIT III

Industrial Policy Resolution 1948
• Industries were divided into 4 categories:
• First Category:
 Manufacture of arms and ammunition, production and
control of atomic energy and the ownership and
management of railway transport was to be exclusive
monopoly of the central govt.
• Second Category:
 Covered coal, iron and steel, aircraft manufacture,
shipbuilding, manufacture of telephone, telegraphs and
wireless apparatus (excluding radio receiving sets) and
mineral oils .New undertakings in these industries could
henceforth be undertaken only by the state
17UNIT III

• Third Category:
– Third category comprised of certain basic industries
such as salt, automobiles, tractors, earth movers,
electric engineering, heavy machinery, machine tools,
heavy chemicals, fertilizers, electro-chemical
industries, non-ferrous metals, rubber manufactures,
power and industrial alcohol, cotton and woolen
textiles, cement, sugar, paper and newsprint, etc.
– Central govt. may take over any existing private sector
vital for national result.
18UNIT III

• Fourth Category:
– Remainder of industrial field, was left for open to
private enterprises, individuals as well as co-
operatives.
The aim of Industrial Policy Resolution 1948 was to
clear the foggy atmosphere and help the process
of investment and also to lessen industrial
conflict.
19UNIT III

• The main thrust of 1948 Industrial Policy was
to lay the foundation of a mixed economy in
which both the private and public enterprises
could march hand in hand to accelerate the
pace of industrial development.
20UNIT III

• IPR’56 was launched concurrently with the
FYP-II.
• IPR’56 though not very different from IPR’48
but did take into account new ground realities
such as adoption of socialistic pattern of
society and thrust on heavy industrialisation.
UNIT III 21

• New classification of industries:
i. Schedule A: Exclusive responsibility of state.
ii. Schedule B: Only State to setup new industries
and private sector to play a supporting role
iii. Schedule C: All remaining industries not
included in Schedule A and B
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• Fair and non discriminatory treatment for
private sector:
– State to facilitate and encourage the development
of industries in private sector by ensuring the
development of transport , power and other
services by appropriate fiscal and other measures.
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• Encouragement to village and small scale
enterprises:
– State to support cottage , village and small scale
industry by way of restricting production,
differential taxing and directly subsidising
UNIT III 24

• Removing regional disparities:
– All round and All around development.
• Need for provision of amenities of labour:
– Labour force being a important stake holder in
process of industrialisation maintenance of
industrial peace was duly necessitated.
• Attitude towards foreign capital:
– Carefully regulated ;allowed only in technology
intensive sectors.
UNIT III 25

• Background:
– The results for industrial field had fallen short of
desired objectives.
– Growth of industrial output barring 1 or two years
was 3-4% only.
– Unemployment had increased also rural urban
disparities had widened.
UNIT III 26

• Objectives of IPR’77:
– Doubling the rate of growth of national income
from 3.5% to 7% p.a
– A rapid increase in the rate of growth of industrial
production
– Creating much larger employment opportunities
– Reducing wide regional disparities and imbalances
UNIT III 27

Industrial Policy Resolution 1977:
PROVISIONS
• Development of small scale sector
– Spreading the net of industries to rural areas and
small towns
• Protecting interest of cottage and household
industries
– Self employment and financial empowerment
UNIT III 28

Industrial Policy Resolution 1977:
PROVISIONS
• Promotion of khadi and village industries:
– Modernisation and implementation of new
marketing strategy's.
• Development of appropriate technology:
– Emphasis on development of technology in
country with India-centric approach.
• Expanding role of public sector:
– Encouraging ancillary industries and contribute to
decentralised production.
UNIT III 29

• Financial support to small units
• Correcting regional imbalances
• Generation of employment and higher
production
• Liberalization of existing licensed capacities
• Streamlining licensing procedures
• Encouraging Export Oriented Units
UNIT III 30

Industrial Licensing Policy
• To limit industrial capacity within the targets set by the
plans
• To direct investment in industries according to plan
priorities
• To regulate the location of industrial units so as to secure
a balanced regional development
• To prevent both monopoly and concentration of wealth
• To protect small-scale industries against undue
competition from large-scale industries
• To foster technology and economic improvements in
industries by ensuring units of economic size and
adopting modern processes
• To encourage new entrepreneurs to start industrial units,
thus broadening the entrepreneurial base.
UNIT III 31

• 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

OBJECTIVES
• Self-reliance to build on the many sided gains already
made.
• Encouragement to Indian entrepreneurship, promotion
of productivity and employment generation.
• Development of indigenous technology through greater
investment in R & D and bringing in new technology to
help Indian manufacturing units attain world standards.
• Removing the regulatory system and other weaknesses.
• Increasing the competitiveness of industries for the
benefit of the common man.
UNIT III 33

• Incentives for the industrialisation of backward
areas.
• 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 field
of manufacture except on strategic or security
grounds.
• To link Indian economy to the global.
UNIT III 34

Foreign Investment
• Limit on foreign equity holdings raised from
40% to 51% in a wide range of industries
• Foreign Equity Proposals need not to be
accompanied by Foreign Technology Transfer
Agreement
• Procedure for FDI streamlined by creating a
Foreign Investment Promotion Board to
consider individual application case by case

Foreign Technology Agreements
• Foreign technology agreements in high-
priority industries upto Rs. 1 crore were given
automatic permission.
• No permission was required for hiring foreign
technicians and foreign testing of indigenously
developed 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 to
raise finance for development, bring in greater
accountability & help create a new culture in their
working for improved efficiency

MRTP Act
• Removed the threshold limits of assets in respect of MRTP
companies and dominant undertakings
• Eliminated the requirement of prior approval of Central Government
for
– 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 to
initiative investigations on complaints received from individual
consumers or classes of consumers in regard to monopolistic,
restrictive and unfair trade practices.

UNIT III 39
Objectives of MRTP Act
Regulation of monopolies and prevention of concentration
of economic power and
Prohibit monopolistic, restrictive and unfair trade practices.
After the amendment, the first objective has become
irrelevant as the relevant provisions to achieve the
objective have been deleted. The objectives now are:
Controlling monopolistic trade practices, and
Regulating restrictive and unfair trade practices.

Privatisation Routes
UNIT II 40
I. Sale to outsiders
II. Management-employee buy-out
III. Equal-access voucher
IV. Spontaneous privatisation
V. Cross-holding
VI. Warehousing
VII.Golden share
VIII.Strategic sale

UNIT II 41
Arguments for and Against Privatisation
For Privatisation Against Privatisation
Improves efficiency Absence of well developed
capital markets
Correct fiscal imbalances Revenue maximisation has
been main motive
Presence of country conditions Lack of cooperation from labour
The capital-output ratio is high Lack of transparency
in PSUs. This needs to be Lack of strong will in the
rectified government
Dismal performance of PSUs Scope for creation of private
sector monopoly

UNIT II 42
Changes in the Definitions of SSI’s AND ANCILLARIES
Year Units Investment
The Industries (Development SS Rs.5 lakhs and employing less
than 50 persons
and Regulation) Act, 1951 with power and less than 100 persons
without power
1966 SS Not exceeding Rs.7.5 lakh
1975 SS Rs.10 lakh
Au Rs.10 lakh
1980 SS Rs.20 lakh
Au Rs.25 lakh
1985 SS Rs.35 lakh
Au Rs.45 lakh
1990 SS Rs.60 lakh and Rs.75 lakh for EOU
1991 Au Rs.75 lakh
1997 SS Rs.3 Crore – but later reduced to Rs.1
cr
Tiny 25 lakh

Small Scale Industries
UNIT VII 43
The investment limits have now been revised upwards since 2006.
SSIs are now being categorised into micro, small and medium
enterprises all broadly classified into manufacturing and service
sectors. The investment limits are as follows:

UNIT II 44
Manufacturing and Service Sectors
Manufacturing Sector
(Manufacturing enterprises are defined in terms of investment in plant and
machinery)
Micro — Does not exceed Rs.25 lakh
Small — 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 lakh
Small — 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 45
Facilities for SSI Sector
A. Policies and incentives
B. SSI policy after economic reforms
C. Infrastructure facilities
D. Small industry clusters
E. Growth centres
F. Marketing
G. Pollution prevention
H. Facilities for women entrepreneurs
I. Central Government network
J. Credit facilities

UNIT II 46
Skills to Run SSI Units
Skills Needed to run small businesses successfully
Technical Skills
• Writing • Monitoring environment
• Technical business management • Technology
• Ability to organize • Network building
• Management style • Coaching
• Being a team player
Business Management Skills
• Planning and goal setting • Decision making
• Communication • Human relations
• Marketing • Finance
• Accounting • Management
• Control • Negotiation
• Venture launch • Managing growth
Personal Entrepreneurial Skills
• Inner control/disciplined • Risk taker
• Innovative • Change oriented
• Persistent • Visionary leader
• Ability to manage change

UNIT II 47
SWOT
Small Sector: The SWOT
Strengths Flexibility in production volumes and design changes
Faster decision making
Lower labour costs
Lower overheads
Weaknesses Often lack of management, marketing or financial skills
Technological obsolescence
Poor financing
Lack of marketing strength

UNIT III 48
Opportunities Large companies are outsourcing more to reduce their own
costs
Promising export markets
Higher investment limits mean companies can expand and
modernise
Big companies can take a larger equity stake in small ones
Threats With concessions disappearing, inefficient units will die
With dereservation, competition will come from large
companies
With import liberalisation, competition will come from MNCs
and 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 to
a 3rd party.
• While off-shoring refers to getting work done in a different
country, usually to leverage cost advantages.
• It's possible to outsource work but not offshore it; for
example, hiring an outside law firm to review contracts
instead of maintaining an in-house staff of lawyers.
• It is also possible to offshore work but not outsource it; for
example, a Dell customer service center in India to serve
American clients.
UNIT III 49

Global Outsourcing : Rationale
• Outsourcing is the practice of hiring a vendor
usually to lower costs and take advantage of
– the vendor's expertise
– economies of scale
– large and scalable labour pool
UNIT III 50

Global Outsourcing : Gains
• Lower operational and labor costs are among the
primary reasons why companies choose to
outsource.
• When properly executed it has a defining impact on
a company’s revenue recognition and can deliver
significant savings.
• Companies also choose to outsource or offshore so
that they may continue focusing on their core
business processes while delegating mundane time
consuming processes to external agencies.
UNIT III 51

• Outsourcing and off-shoring also enable companies
to tap in to and leverage a global knowledge base,
having access to world class capabilities.
• Freeing up internal resources that could be put in to
effective use for other purposes is also one of the
primary benefits realized when companies outsource
• Many times stranded with internal resource
crunches, many world class enterprises outsource to
gain access to resources not available internally.
UNIT III 52

• Outsourcing, many a time is undertaken to save costs
and provide a buffer capital fund to companies that
could be leveraged in a manner that best profits the
company.
• By delegating responsibilities to external agencies
companies can wash their hands off functions that
are difficult to manage and control while still
realizing their benefits.
UNIT III 53

• Outsourcing and especially off-shoring helps
companies mitigate risk and is also among the
primary reasons embarked upon.
• Some companies also outsource to help them
expand and gain access to new market areas, by
taking the point of production or service delivery
closer to their end users.
UNIT III 54

Global Outsourcing : Looses
• Possible loss of control over a company’s business
processes
• Problems related to quality and time
• Sluggish response times coupled with slow issue
resolutions
• 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 employee
unions
UNIT III 55

Global outsourcing :
India’s Perspective
• ASSIGNMENT
UNIT III 56

SUMMARY
• FYP
• IPRs
• IPR’s 1991
• SSI
• Privatisation
• Globalisation
UNIT III 57

Citations/References
• Business Environment.
• AC Fernando (1st Ed; Pearson Publishers)
UNIT III 58

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