1. Business Environment
By: Dr. Vibhuti Tripathi, SMS

2. Environmental Forces
• Business Environment
• Task Environment
• Competitive Forces in the Task
Environment
• Technological Forces
• Political and Legal Forces

3. The General Environment and Environmental Forces
Affecting Organizations
The General Environment
Cultural Forces
Political - Legal Forces
Technological Forces
Competitive Forces
Organization

4. The General Environment
• Sometimes called the macro-environment.
• Are external factors, such as inflation and
demographics, that usually affect indirectly all
or most organizations.

5. Factors in the General Environment
• Type of economic system and economic conditions
• Type of political system
• Condition of the ecosystem
• Demographics
• Cultural Background

6. Roles of Government in Business
• The government acts as a watchdog over
business
• Provides direction in areas such as:
• Antitrust,
• Monetary policy,
• Defense,
• Human rights
• Environmental matters

7. The Economic System
•
•
•
•
•
•
Privately Controlled Markets
Based On Supply And Demand
Free Market Competition
Private Contracts
Profit Incentives
Technological Advancement

8. Competitive Forces in the Task Environment
Threat
of new
competitors
Suppliers
bargaining
power
Rivalry among
existing firms
in industry
Threat of
substitute
goods/services
Buyers
bargaining
power

9. New Entrants
• Barriers to Entry:
• Economies of scale
– Decrease in per unit costs as volume of
goods/services produced increases
• Product differentiation
– uniqueness in quality, price, design, brand
image, or customer service that gives a product
an edge over the competition

10. New Entrants cont.
• Capital requirements
– Money needed to finance equipment
supplies, advertising, R&D, and the like necessary to
start
• Government regulation
– May bar or severely restrict potential new entrants
to an industry

11. Substitute Goods and Services
• Goods/Services
–that can easily replace the firm’s
goods/services

12. Customers
• Potential Effects of Customers:
– They may drive down prices
– Push for more or higher-quality products

13. Integration
• Developing related business units
• Forward Integration- customer
• Backward Integration- supplier
• Horizontal Integration- competitors

14. Customers cont.
• Exhibit Bargaining Power :
– They purchase a large volume relative to the
supplier’s total sales
– They have readily available alternatives for the
same services/products

15. Suppliers
• Bargaining Power of Suppliers:
– Often controls how much they can :
• Raise prices above their costs
• Reduce the quality of goods and services
– Bargaining Power is increased by patents and copyrights

16. Impact of Technology
– Knowledge, tools, techniques, and actions
• Used to transform material , information, and other inputs
into finished goods and services
– Plays pivotal role in creating and changing an
organization’s task environment

17. Economic Systems
• Capitalism
• Socialistic
• Mixed

18. Capitalistic Economy
• Free Enterprise
• Freedom to save and invest
• Free and healthy competition
Run by price mechanism :
Goods are bought and sold in the market
at a price which is freely determined by
the market.

19. • Distribution of goods is according to market
conditions prevalent in markets.
• Entrepreneurs / Organizations have control over
production & distribution of goods by mobilising
the resources to maximise profits
• Government has a role of regulator only.

20. Socialistic Economy
• Private players do not contribute much.
• Government takes the responsibility of the economic
development wholly to ..
– Strategize the exploitation of resources
– Equitable distribution of goods
– Primary motive is social good.

21. • Entrepreneurship exists in the form of ..
– Representatives nominated by government to plan
and strategize.
– Mobilise the resources
– Allocating and re-allocating resources
– Resources are channelized towards industries of
National importance.

22. • Production and distribution of the
goods is according to the needs of
the people.
• Private entrepreneurs have a
negligible role

23. Mixed Economy
• Government undertakes the production of
capital goods like –
iron, steel, cement, fertilizers etc.
• Production of consumer goods is left to the
private enterprises.
• Runs on both price mechanism as well as
equitable distribution.

24. • Mixed economy tries to solve the problem of
distribution of goods and services in a better way than
capitalist economy.
• Role of government is wider ..
– Formulate different strategies to establish gvt.
owned enterprises.
– Tries to increase production of essential goods and
encourages private entrepreneurship.

25. Deciding Whether to Go Global
• Reasons to consider going global:
– Foreign attacks on domestic markets
– Foreign markets with higher profit opportunities
– Stagnant or shrinking domestic markets
– Need larger customer base to achieve economies
of scale
– Reduce dependency on single market
– Follow customers who are expanding

26. Deciding Which Markets to Enter
• Before going abroad, the company should try to define its
international marketing objectives and policies.
What Volume of Foreign Sales is Desired?
How Many Countries to Market In?
What Types of Countries to Enter?
Choose Possible Countries and Rank Based on Market
Size, Market Growth, Cost of Doing
Business, Competitive Advantage, and Risk Level

27. Strategic Orientations
EPRG Schema
Ethnocentric
Polycentric
Regio/Geocentric
Orientation
Domestic Marketing
Extension
Multidomestic
Marketing
Global Marketing

28. Strategic Orientations…
• Domestic Market Extension Orientation
– Extension of domestic products into foreign markets
– International markets are secondary
– Prime focus—market excess domestic products abroad
– Firm’s orientation is domestic
• Multi-Domestic Market Orientation
– Realizes the difference b/w domestic & foreign markets
– Different countries need different products
– Separate marketing strategies for each country
– Subsidiaries operate independent of one another
– Products are adapted, advertising is localized
– Might not standardize products

29. Strategic Orientations
• Regional/Global Orientation
– Truly global – single market
– Emphasis on standardization—product/process
– Strive for efficiencies of scale by standardizing market
mix across national borders, whenever it is cost or
culture effective
– Pursue a global strategy for major brands or multidomestic strategy for other brands

30. Market Entry Strategies

31. Market Entry Strategies
• Exporting:
– Indirect: working through independent
international marketing intermediaries.
– Direct: company handles its own exports.

32. Market Entry Strategies
• Joint Venturing:
– Joining with foreign companies to produce or
market products or services.
• Approaches:
– Licensing
– Contract manufacturing
– Management contracting
– Joint ownership

33. Joint Ownership
KFC entered Japan through a joint ownership venture with Japanese
conglomerate Mitsubishi.

34. Market Entry Strategies
• Direct Investment:
– The development of foreign-based assembly or
manufacturing facilities.
– This approach has both advantages and
disadvantages.

36. An Overview Of
Liberalization, Privatization
• Indian economy had experienced major policy changes in early
1990s.
• The new economic reform, popularly known
as, Liberalization, Privatization and Globalization (LPG model)
aimed at making the Indian economy as fastest growing
economy and globally competitive.
• The series of reforms undertaken with respect to industrial
sector, trade as well as financial sector aimed at making the
economy more efficient.
• It marks the advent of the real integration of the Indian
economy into the global economy.

37. • The term “Liberalization” stands for “the act of making
less strict”.
• Liberalization in Economy stands for “The process of
making policies less constraining of economic activity."
And also “Reduction of tariffs and/or removal of nontariff barriers.”
• Economic liberalization is a very broad term that usually
refers to fewer government regulations and restrictions in
the economy in exchange for greater participation of
private entities.

38. • In developing countries, economic liberalization refers more to
liberalization or further "opening up" of their respective
economies to foreign capital and investments.
• Five of the fastest growing developing economies today;
Brazil, Russia, India, China and South Africa, have achieved
rapid economic growth in the past several years or decades after
they have "liberalized" their economies to foreign capital.
• Most first world countries, in order to remain globally
competitive, have pursued the path of economic liberalization:
•
partial or full privatization of government institutions and
assets, greater labor-market flexibility, lower tax rates for
businesses, less restriction on both domestic and foreign
capital, open markets, etc.

39. Backdrop of Indian Economy
• The low annual growth rate of the economy of India before 1980, which
stagnated around 3.5% from 1950s to 1980s, while per capital income
averaged 1.3%.
• Only four or five licenses would be given for steel, power and
communications. License owners built up huge powerful empires.
• A huge public sector emerged. State-owned enterprises made large
losses.
• Infrastructure investment was poor because of the public sector
monopoly.
• License Raj established the "irresponsible, self-perpetuating
bureaucracy that still exists throughout much of the country" and
corruption flourished under this system.

40. Benefits of Liberalization
•
•
•
•
•
Increase in Foreign investment
Increase in Foreign Exchange Reserve
Increase in Consumption
Control over price
Reduction on External Commercial Borrowings

41. Definitions Of The Term “Privatization” and
“Economic Privatization”
• The term “Privatization” refers to “The transfer of ownership of property
or businesses from a government to a privately owned entity.”
• The transition from a publicly traded and owned company to a company
which is privately owned and no longer trades publicly on a stock
exchange.
• The process of converting or "selling off" government-owned
assets, properties, or production activities to private ownership.
• After several decades of increasing government control over productive
activities, privatization came into vogue in the 1980s, along with business
deregulation and an overall movement toward greater use of markets.”

42. • Privatization is frequently associated with industrial or
service-oriented enterprises, such as
mining, manufacturing or power generation, but it can
also apply to any asset, such as land, roads, or even
rights to water.
• In recent years, government services such as
health, sanitation, and education have been particularly
targeted for privatization.
• Privatization helps establish a "free market", as well as
fostering capitalist competition, which will give the
public greater choice at a competitive price.

43. Reason for Indian Privatization
1. Crippling Budget deficit
2. Spectacular growth by economies of Korea,
Taiwan, Malaysia in private sector
3. Changes in China

44. 4. Emergence of professional management
5. IMF & World Bank extended arm to capitalism
6.Gulf crisis
7.Lack of demand in economy
8.Integration of world trade
9. Developed local capital market and Financing
Institution

45. Recent Reasons
•To STENGTHEN Competition
•To improve public finance
•To fund Infrastructure Growth
•Accountability of share holders
•To reduce unnecessary interference

46. The main reason for increased efficiency gain as a result
of privatization can be attributed to
(i) Less political interference in decision making
(i) Staff remuneration is more closely linked to productivity
and profitability
(ii)Firm are exposed to open market discipline as opposed to
government support
(iii)Firm’s cost reducing effort are higher under competitive
private ownership

47. Key obstacle to privatization
(i) Lack of strong and high level political commitment to the
privatization program
(ii) Unclear and weak institutional frame workdecentralized or centralized. (ministry and provincial
level)
iii) Lack of proper preparation of enterprise for
privatization or divestment eg. Accounting and auditing
, treatment of losses, social and environmental safety net

48. (iv) Insufficient transparency and flexibility in term
of
the
method
of
privatization, balancing, ownership, and control
(corporate governance)
(v) Vested interest of manager, employees and
customer
(vi) Lack of appropriate legal frame work (eg.
Property right, foreign ownershipbankruptcy
law )
(vii) Underdeveloped capital markets

49. WAYS OF PRIVATIZATION
• DISINVESTMENT (a process in which the public undertaking
reduces its portion in equity by disposing its
shareholding)
• CONTRACTING
• FRANCHISING / LEASING
• PREMITING PRIVATE SECTOR ENTER INTO PSU RESERVED AREA
• LIQUIDATION (Termination of a business operation by using its
assets to pay up its liabilities)

50. ECONOMIC ACTIVITIES

51. Methods of measuring economic activity :
• Consumer spending: consumer demand or consumption is also known as
personal consumption expenditure
• Exchange Rate: also known as the foreign-exchange rate, forex rate or FX
•
•
•
rate) between two currencies specifies how much one currency is worth in terms
of the other.
Gross domestic product: The gross domestic product (GDP) or gross
domestic income (GDI) is a measure of a country's overall official economic
output.
It is the market value of all final goods and services officially made within the
borders of a country in a year.
It is often positively correlated with the standard of living.

52. • Stock Market:
• Interest Rate: a fee paid on borrowed assets. or, money earned by
deposited funds. Paid on percentage of amount deposited or charged on
percentage of amount borrowed.
• National Debt: A broader definition of government debt considers all
government liabilities, including future pension payments and payments
for goods and services the government has contracted but not yet paid.
• can be categorized as internal debt, owed to lenders within the
country, and external debt, owed to foreign lenders.

53. • Rate of Inflation: a rise in the general level of prices of goods and
services in an economy over a period of time.
• When the price level rises, each unit of currency buys fewer goods and
services.
• an erosion in the purchasing power of money.
• uncertainty about future inflation may discourage investment and saving
• may lead to reductions in investment of productive capital and increase
savings in non-producing assets. Selling Stocks and buying gold.

54. • Unemployment:
• Balance of Trade: difference between the monetary value of
exports and imports of output in an economy over a certain
period.
• trade surplus , trade deficit

55. MONEY

56. Few More Terms
• Money Supply – Total volume of money that is circulated in
the economy.
– M1–
– Currency in Circulation
– Demand Deposits of public with banks
– M 2 – Total of M 1 + Post Office savings + Time Deposits
of small denominations
– (M1 & M2 = Narrow Money)

57. • M 3 – Total of M 2 + Large time deposits +
Institutional funds.
• M 4 - All deposits with post office saving(excluding
National Savings Certificates).
(M3 & M4 = Broad Money )
These gradations are in decreasing order of liquidity.
M1 is most liquid and easiest for transactions
M4 is least liquid of all. M3 is the most commonly used
measure of money supply

59. More money = more liquidity = easy to get loans = inflation
central bank money (physical currency, government money)
commercial bank money (money created through loans) sometimes referred to as private money, or chequebook money.
Expansion of Money :
i.
Money is pumped into market through issuing of Currency by
RBI.
ii. Borrowings of Government.
iii. Government meets its budgetary deficits by borrowing from RBI

60. • Contraction of Money :
– Unlimited expansion of money and credit would lead to ?
INFLATION
Role of RBI
Monetary Policy: It is a statement stated bi-annually
through RBI.
Fixed by considering the prevailing prices and growth
patterns of economy and also rate of population growth
and employment.

61. The Reserve Bank estimates the demand for banknotes on
the basis of the growth rate of the economy, the
replacement demand, Inflation and public expenditure
demand by using statistical models/techniques.
All the currency issued is the monetary liability of RBI.
Backed by assets of equal value held.
Assets consist of gold, foreign securities, and the
government’s securities.

62. Devaluation of Rupee
• There is a shortage of dollars.
• Foreign Exchange reserves are almost static around $ 300
billion since last nearly 3 years . This means that we are not
able to increase the reserves and is a poor reflection on our
inability to increase our net earnings in dollar terms.
• Our exports have gone up and in 2011-12 touched the
highest figure of $300 bn but so have the imports also risen
to an ever highest figure of nearly $450+ bn levels. Foreign
Exchange reserves are not going up.

63. • High rate of inflation it erodes the value of rupee
•
High fiscal deficit in the central budget, presently around 5.9% and
expected to go up. requires to resort to increased borrowings
• Increasing burden of subsidies on account of fertilisers, cooking
gas, petrol and diesel prices, NAREGA etc it is a mammoth task to
reduce the overspending to reduce the fiscal deficit to manageable
levels.
• The recent downgrading of India by Standard & Poor international
rating agency has resulted in flight of dollars by FII's who quit from the
share markets thus leading to a furthur shortage of dollars.

64. Monitory Policy
• Expansionary policy, increases the total
supply of money in the economy rapidly
OR
• Contractionary policy, decreases the total
money supply or increases it only slowly.

65. • It Regulates the supply of money and the cost of availability of
credit in the economy.
• Aims at – maintaining price stability and Economic growth
through;
– Changing money supply and interest rates.
– Credit Control Measures :
– Bank Rates: Rate at which the central bank provides credit to
commercial banks.

66. • Increase in bank rates leads to ?
– Increase in lending rate
– Money supply could be checked.
– Acts as a pace setter to all other rates of interests.
– Increase in Bank rates could lead to reduction in
•
•
•
•
Borrowings
Level of inventory holding
Investment
Prices

67. – CRR (Cash Reserve Ratio): Every Bank has to keep
certain amount of cash reserve with the RBI
– SLR (Statutory Liquidity Ratio) : Every bank should
keep certain percentage of its total DEMAND and
TIME deposits with RBI in the form of Liquid assets.
– Open Market Operations: buying or selling of
bonds by RBI in the open market.

68. • The assets purchased or sold are –
– Government Securities / Bonds
– Company Shares
– Foreign Exchange
– Repo rate: Interest rate at which the Reserve
Bank of India lends money to other banks.
– It is a repurchase agreement between RBI &
commercial bank.
(Essentially short term
securities).

69. • When the repo rate increases borrowing from RBI
becomes more expensive.
• If RBI wants to make it more expensive for the
banks to borrow money, it increases the repo rate;
• Similarly, if it wants to make it cheaper for banks to
borrow money, it reduces the repo rate

70. • Reverse Repo rate : rate at which banks park
their short-term excess liquidity with the RBI.
• The RBI uses this tool when it feels there is too
much money floating in the banking system.
• An increase in the reverse repo rate means
that the RBI will borrow money from the banks
at a higher rate of interest.

71. • As a result, banks would prefer to keep their
money with the RBI.
• Repo Rate signifies the rate at which liquidity is
injected in the banking system by RBI.
• Whereas Reverse repo rate signifies the rate at
which the central bank absorbs liquidity from
the banks.

72. Fiscal Policy
• Is a deliberate attempt of the government
to influence the economy by changing
levels of government expenditure and / or
taxation.
• Government must provide equitable
Division of revenue raised nationally
among :
–Centre, state and local

73. • It should be of national interest.
• Consider economic disparity among the
states.
• Budgets must contain:
–Estimates of revenue and expenditure;
differentiating between capital and
current expenditure.
–Proposal for financing and anticipated
deficit for the said period.
– Funding areas could be :
• Agriculture, Education, Health, Social

74. Revenue
Deficit
Fiscal Factors
Output and Employment
 Fiscal deficit can be higher if …
 … public investment is large.
Expenditure

75. Tools of Fiscal Policy
(1)Government Expenditure: Chosen area
(2)Taxes, both direct & indirect: Revenue generation
(3)Deficit financing: Government spends more money than it
receives as revenue, the difference being made up by
borrowing.
issue bonds or to print money
(4)Subsidies: they can alter relative prices and budget
constraints and thereby affect decisions concerning
production, consumption and allocation of resources.

76. Subsidies, lead to changes in demand/ supply
decisions. ..
By means of creating a wedge between consumer
prices and producer costs,
Subsidies are often aimed at :
• inducing higher consumption/ production
• offsetting market imperfections
• achievement of social policy objectives including
redistribution of income, population control, etc

77. (5)Transfer payments: Transfer payments are
payments made by the government sector to the
household sector with no expectations of productive
activity in return.
The three common transfer payments are:
• Social Security benefits to the elderly and disable,
•unemployment compensation to the unemployed,
•welfare to the poor.

78. Money Market
Money Market is a wholesale market of short
term debt instrument and is synonym of liquidity..
Due to highly liquid nature of securities and their
short term maturities, money market is treated
as a safe place.
As per RBI definitions “ A market for short terms financial
assets that are close substitute for money, facilitates the
exchange of money in primary and secondary market”.

79. It doesn’t actually deal in cash or money but deals with
substitute of cash like trade bills, promissory notes &
government papers which can be converted into cash.

80. Features of Money Market?
It is a market purely for short-terms funds or
financial assets called near money.
It deals with financial assets having a maturity
period less than one year only.
In Money Market transaction take place
informally,
only
through
oral
communication, relevant document and written
communication transaction can be done.

81. Transaction are conducted without the help of brokers.
It is not a single homogeneous market, it comprises of
several submarket like call money market & treasury bill
market.

82. Objective of Money Market?
To provide a parking place to employ short term
surplus funds.
To provide room for overcoming short term deficits.
To enable the central bank to influence and regulate
liquidity in the economy through its intervention in this
market.
To provide a reasonable access to users of short term
funds to meet their requirement quickly, adequately at
reasonable cost.

83. The Players
• Reserve Bank of India
• Acceptance Houses: guarantees the payment of bills used to
finance trade deals and goods in shipment. Its profit is the
difference between the discounted amount it guarantees to
pay and the full amount of the bill that it undertakes to collect
from the original creditor.
• Commercial Banks, Co-operative Banks and Primary Dealers are
allowed to borrow and lend.

84. •Specified All-India Financial Institutions, Mutual
Funds, and certain specified entities are allowed to access
to Call/Notice money market only as lenders
• Companies, Corporate bodies, Trusts and institutions
can purchase the treasury bills, Commercial Papers and
Certificate of Deposits.

85. Composition of Money Market?
Money Market consists of a number of submarkets
which collectively constitute the money market. They are
..
Call Money Market
Treasury bill market

86. Call Money Market
• The day-to-day surplus funds (mostly of banks) are traded.
• The loans are of short-term duration varying from 1 to 14
days.
• The money that is lent for one day in this market is known
as "Call Money", and
• If it exceeds one day (but less than 15 days) it is referred
to as "Notice Money".

87. Banks borrow in this market for the following purpose:
• To fill the gaps or temporary mismatches in funds
• To meet the CRR & SLR mandatory requirements as
stipulated by the Central bank
• To meet sudden demand for funds arising out of large
outflows.

88. Instrument of Money Market?
A variety of instrument are available in a developed
money market.
• Treasury bills
• Certificate of Deposits
• Commercial Papers, promissory notes in the bill
market.
• Repurchase agreement
• Money Market mutual fund

89. Treasury Bills
• Treasury bills, commonly referred to as T-Bills are issued by
Government of India against their short term borrowing
requirements with maturities ranging between 14 to 364 days.
• All these are issued at a discount-to-face value. For example a
Treasury bill of Rs. 100.00 face value issued for Rs. 91.50 gets
redeemed at the end of it's tenure at Rs. 100.00.
Who can invest in T-Bill
• Banks, State Governments, Provident Funds, Financial
Institutions, Insurance Companies, NBFCs, FIIs (as per prescribed
norms), NRIs invest in T-Bills.

90. • At present, the Government of India issues three
types of treasury bills through auctions, namely, 91day, 182-day and 364-day. There are no treasury bills
issued by State Governments.
Amount
• Treasury bills are available for a minimum amount of
Rs.25,000 and in multiples of Rs. 25,000. Treasury
bills are issued at a discount and are redeemed at
par.

91. Certificate of Deposit
• A CD is a time deposit with a bank.
• Like most time deposit, funds can not be withdrawn
before maturity without paying a penalty.
• CD’s have specific maturity date, interest rate.
• The main advantage of CD is their safety.
• Anyone can earn more than a saving account interest.

92. • CDs can be issued by all scheduled commercial banks
• Minimum period 15 days ; Maximum period 1 year
• Minimum Amount Rs 1 lac and in multiples of Rs. 1 lac
• CDs are transferable by endorsement
• CDs may be issued at discount on face value

93. Commercial Paper
• Commercial Paper (CP) is issued in the form of a promissory
note.
• Issued by a corporation typically financing day to day
operation.
• Only company with high credit rating issues CP’s. (CRISIL, ICRA)
• Denomination: min. of 5 lakhs and multiple thereof.
• Maturity: min. of 7 days and a maximum of upto one year from
the date of issue

94. Eligibility for issue of CP
a) the tangible net worth of the company, as per the latest
audited balance sheet, is not less than Rs. 4 crore;
b) (b) the working capital (fund-based) limit of the
company from the banking system is not less than Rs.4
crore
c) and the borrowal account of the company is classified
as a Standard Asset by the financing bank/s.

95. Rating Requirement
• All eligible participants should obtain the credit
rating for issuance of Commercial Paper
• Credit Rating Information Services of India Ltd.
(CRISIL)
• Investment Information and Credit Rating Agency of
India Ltd. (ICRA)
• Credit Analysis and Research Ltd. (CARE)
• Duff & Phelps Credit Rating India Pvt. Ltd. (DCR
India)
• The minimum credit rating shall be P-2 of CRISIL or
such equivalent rating by other agencies

96. Repos
• It is a transaction in which two parties agree to sell and
repurchase the same security.
• Under such an agreement the seller sells specified securities
with an agreement to repurchase the same at a mutually
decided future date and a price
• The Repo/Reverse Repo transaction can only be done at
Mumbai between parties approved by RBI and in securities as
approved by RBI (Treasury Bills, Central/State Govt securities).

97. Importance of Money Market
• Development of trade and industry
• Development of capital market
• Smooth functioning of Commercial banks
• Effective central bank control
• Formulation of suitable monetary policy
• Source of finance to government

98. Need for Development of Capital Market
• Increase in Industrial Units due to ..
– Technological Development
– Increase in Demand
– Competition
• Situation ..
– Capital at the disposal of one individual or a few individuals is
not sufficient.
– Paucity of funds arises .

99. Industrial Securities Market
• Refers to the market for shares and debentures of old
and new companies
• New Issues Market- also known as the primary
market- refers to raising of new capital in the form of
shares and debentures
• Stock Market- also known as the secondary market.
Deals with securities already issued by companies

100. Types of Shares
• Equity shares: These shares are also known as ordinary
shares.
• They are the shares which do not enjoy any preference
regarding payment of dividend and repayment of capital.
• They are given dividend at a fluctuating rate.
• The dividend on equity shares depends on the profits
made by a company.

101. • Preference shares: These shares are those shares which are given
preference as regards to payment of dividend and repayment of
capital.
• Preference shareholders have some preference over the equity
shareholders, as in the case of winding up of the company, they
are paid their capital first.
• Deferred shares: which are held by the founders or pioneer or
beginners of the company.
• They are also called as Founder shares or Management shares.

102. • The right to share profits of the company is deferred, i.e.
postponed till all the other shareholders receive their
normal
dividends.
• IPOs : Initial Public offer , floated by new companies or
for first time to raise funds.
• FPOs: Follow on Public Offer, already listed company
issues more equity shares.

103. Debentures
• Is a document that either creates a debt or
acknowledges it.
• Used for a medium- to long-term debt instrument used
by large companies to borrow money.
• Debenture holders have no voting rights.

104. Mutual Funds
• Promote savings and mobilise funds which are invested in the stock
market and bond market
• Pool funds of savers and invest in the stock market/bond market
• Their instruments at saver’s end are called units
• Offer many types of schemes: growth fund, income fund, balanced fund
• Regulated by SEBI
• Provide a service in terms of analytical knowledge of the investment
opportunities.
• Fund Management expertise

105. Stock Exchange
• Place where trading of shares is done in terms of sale and
purchase.
• At present, there are twenty one recognized stock
exchanges in India.
• Bombay Stock Exchange is the largest, with over 6,000
stocks listed.
• The BSE accounts for over two thirds of the total trading
volume in the country.

106. Working of Stock exchanges
• Placing an order with a broker –
–
–
–
–
Only members are allowed to trade.
Outsiders trade through members.
Opening of an account with the broker
Order placed with the broker
• Execution of the order– Broker or his clerk approaches the SE
– Quotations are asked or quoting his own price
– Negotiation on word of mouth and noted
for, quantity, description, name of party
– Transaction appears in SE’s daily official list – including no. of
shares and price.

107. • Reporting the deal to the client –
– Contract note is prepared – security bought or sold,
price, broker’s commission, date of settlement.
• Settlement of transaction –
1. Ready delivery (Spot Delivery) – cash settlement
made immediately on transfer of securities or within
1-7 days through clearing houses.
2. Forward Delivery – settlement within a fixed
duration, normally 15 days.
3. Carry forward transactions- postponing the
transaction to next settlement period by paying carry
forward charge.

108. • Clearing Houses: agencies given the
responsibility of settling the amounts payable
between counter parties.
• It is separate arm; for BSE – Bank of India
• Clearing the transactions on commission.

109. Flaws in Stock Exchanges
• Lack of integration – leading to variation in
prices.
• Settlement system varies.
• No nation wide platform.

110. National Stock Exchange (NSE)
•
•
•
•
Established in 1994 in Mumbai.
There was a need for a nation wide trading
Equal access to investors across the country.
Meet international securities market standard.

111. Working of NSE
• Fully automated screen based trading system.
• Trader can put various conditions in terms of
type, price and quantity
• Orders received are stacked in price and time
priority.
• Computer searches for compatibility
• In case of no-match the order is kept pending

112. • When the deal is stuck a confirmation slip is printed
to give details of price and quantity.
• Identity of the trader is not revealed.
• Done through registered brokers.
• NSE to Start Mobile Trading from Early October
(Read the hand out distributed)

113. SPECULATION :
• Definition : it involves the buying, holding, selling, shortterm selling of
stocks, bonds, commodities, currencies, collectibles or
any valuable financial instrument to ..
• Profit from fluctuations in its price as opposed to buying
it for use or for income via method like dividends or
interest.

114. Kinds of speculation
• Bull Market (Tejiwala): purchasing the shares at
current prices to sell at a higher price in the near
future and make a profit.
Only if expectations come true. Also called a long
buyer.
• Bear Market (Mandiwala) : Selling security in the
hope that he will be able to buy them back at lesser
price. Also called “short selling”.

115. • Stag : Applying for a large number of a shares in a new
issue with the intention of selling them at a premium.
Insider trading
• The trading of a corporation's stock or other securities
(e.g. bonds or stock options) by individuals with
potential access to non-public information about the
company.

116. Why do we need a regulatory body ?
 India is an ` informationally ' weak market.
 Investors are less aware.
 Boosting capital market demands; restoring the
confidence of investors who have been beaten down
by repeated scams.

117. FEW SCAMS, Which shook the Investors’
confidence.
• During 1992 : ‘Big Bull’, Harshad Mehta’s Securities Scam.
Many Banks were involved.
• 1993 : Preferential Allotment Scam, issuing of equity
allotments to their respective controlling groups at steep
discounts. To the tune of Rs. 5000 crores lost.
• 1993 – 94 : Disappearance of companies; Stock market
shot up 120%; 3,911 companies raised over Rs. 25,000
crores and vanished / did not set up their projects.

118. • 1995-97 : Plantation Companies’ Scam, NBFCs promised
high returns; collected Rs. 50,000 crores
• 1999 – 2000 UTI Scam Rs. 32 crores.
• IT Scam; firms changed their names to include infotech;
IT sector was booming.
• Satyam Fiasco : Inflated (non-existent) cash and bank
balances. Insider Trading; corporate-mis-governance.

119. Mission of SEBI
• Securities & Exchange Board of India (SEBI) formed
under the SEBI Act, 1992 with the prime objective of
– Protecting the interests of investors in securities,
– Promoting the development of, and
– Regulating, the securities market and for matters
connected therewith or incidental thereto.’
Focus being the greater investor protection, SEBI has
become a vigilant watchdog

120. FUNCTIONS OF SEBI
1.
A review of the market operations, organizational structure and
administrative control of the exchange
2.
Registration And Regulation Of The Working Of
Intermediaries
Primary Market
Secondary Market
Merchant Bankers
Stock brokers
Underwriters
Sub- Brokers
Portfolio Managers

121. 3.
Registration And Regulation Of Mutual Funds, Venture
Funds & Collective Investment Schemes
Capital
Promoting and protecting the interest of mutual funds
and their unit-holders, increasing public awareness of
mutual funds, and serving the investors' interest by
defining and maintaining high ethical and professional
standards in the mutual funds industry'.
Every mutual fund must be registered with SEBI and
registration is granted only where SEBI is satisfied with
the background of the fund.
SEBI has the authority to inspect the books of accounts,
records and documents of a mutual fund and its trustees.

122. • SEBI (Mutual Funds) Regulations, 1996 lays down the provisions for the
appointment of the trustees and their obligations
• Every new scheme launched by a mutual fund needs to be filed with SEBI and
SEBI reviews the document in regard to the disclosures contained in such
documents.
• Regulations have been laid down regarding listing of funds, refund procedures,
transfer procedures, disclosures, guaranteeing returns etc
• SEBI has also laid down advertisement code to be followed by a mutual fund in
making any publicity regarding a scheme and its performance
• SEBI has prescribed norms / restrictions for investment management with a
view to minimize / reduce undue investment risks.
• SEBI also has the authority to initiate penal actions against an erring MF.
• In case of a change in the controlling interest of an asset management company,
investors should be given at least 30 days time to exercise their exit option.

123. 4. Prohibiting Fraudulent And Unfair Trade Practices In The
Securities Market
– SEBI is vested with powers to take action against these
practices relating to securities market manipulation and
misleading statements to induce sale/purchase of
securities.
5. Prohibition Of Insider Trading
an investor who has in excess of 5 per cent of the stake in a
company has to disclose any transaction that has the effect
of altering his ownership stake by more than 2 per cent.
It has to do so within four working days following the day
when its trade resulted in crossing the 2 per cent threshold.

124. 6. Investor Education And The Training Of Intermediaries
– SEBI distributed the booklet titled “A Quick Reference Guide for
Investors” to the investors
– SEBI also issues a series of advertisement /public notices in national as
well as regional newspapers to educate and caution the investors about
the risks associated with the investments in collective investment
schemes
– SEBI has also issues messages in the interest of investors on National
Channel and Regional Stations on Doordarshan.
7.
Inspection And Inquiries
8.
Regulating Substantial Acquisition Of Shares
And Take-overs

125. Gilt Edged
• Securities of government and semi-government
organisations are marketed.
• Securities are backed by RBI.
• Investors are predominantly institutions, which
are compelled by law to invest a certain portion of
their funds in Government securities.
• Thus called a captive market for Government
securities.

126. All Over Again
Capital Market -- The market for relatively long-term
(greater than one year original maturity) financial
instruments.
Primary Market -- A market where new securities are
bought and sold for the first time (a “new issues”
market).
Secondary Market -- A market for existing (used)
securities rather than new issues.

127. • Market for long-term capital. Demand comes
from the industrial, service sector and
government
• Supply comes from individuals, corporates,
banks, financial institutions, etc.
• Can be classified into:
– Gilt-edged market
– Industrial securities market (new issues and stock
market)

128. Development Financial Institutions
After industrial revolution in India Existing Financial
Institutions were inadequate in number to provide
funds to large scale industries.
Government of India Established DFIs
These institutions subscribe to shares and debentures of
new and old companies and also give them loans.

129. – Industrial Finance Corporation of India (IFCI)
– State Finance Corporations (SFCs)
– Industrial Development Finance Corporation (IDFC)
– Industrial Credit and Investment Corporation of India
(ICICI)
– Industrial Development Bank of India (IDBI)
– Small Industries Development Bank of India (SIDBI)

130. Non-Banking Finance Companies
• Those who are not approaching DFIs due to not matching
the requirements.
• NBFCs provide credit to them.
• No minimum liquidity ratio is mandatory
• Also give loans to self-employed individuals.
• Subject to extreme insecurities;
– Loans are not protected.
– Higher rates of interest

131. Financial Intermediaries
Merchant Banks: are issue houses rendering various services
to industrial projects and new companies.
Reasons to establish :
– To encourage small and medium industrialists who
require specialist services.
– Complexity in rules and procedures of government
norms.
Merchant banking is brought under the regulatory framework
of SEBI

132. Activities of Merchant Banker
• Issue Management :
– Structuring of instrument
– Preparation of offer document- (prospectus, need for
money, expenditure, nature of instrument, information
about management, future plans etc. )
– Obtaining statutory and other clearances
– Assistance in selection of brokers, registrars, printers,
ad agency and other intermediaries.
– Post Issue activities- Collecting application forms,
money, dispatch of share certificate.

133. • Corporate advisory services:
–
–
–
–
Valuation
Advise on mergers / Acquisitions
Restructuring of business and finance
Selling of assets
Underwriting:
contractual obligation whereby the
underwriter agrees to subscribe to a certain number of shares
if they are not subscribed by the company.
DSP MeryLynch and J P Morgan Stanley

134. Venture Capital Financing
• Development of any entrepreneurship would
require combination of three vital factors :
– Innovative ideas
– Competency in project preparation &
implementation
– Project financing
Many ideas are profitable but risky; solution ---VENTURE CAPITALISTS

135. • Venture Capital firms take up such risky projects.
• ICICI, IDBI, IFCI have venture capital divisions.
• Private banks too have such divisions.

136. Socio-cultural Environment

137. Cultural Forces
• Culture is the shared characteristics, values, and
beliefs of a group that distinguishes them from
another group
• Such as religion, language, and heritage

138. Demographics
• Characteristics of a population such as
age, race, gender, ethnic origin, and social
class
• determine the characteristics of work
groups, organizations, specific markets, or
nations population.
• Demographics influence
marketing, advertising, and human resources
decisions.
• Such as the number of individuals the ages of
18 to 25
• They change all the time.

139. The social environment encompasses various aspects
like:
The religious aspects,
Language, Customs, Traditions and Beliefs;
Tastes and Preferences;
Social Satisfaction; Social Institutions;
Buying and Consumption Habits
All very important factors for business

140. Socio-cultural Factors
1. Population demographics
Ethnic composition
Aging of population (India is a young country)
Regional changes in population growth
decline
2. Social mobility
3. Lifestyle changes;
and

141. 4. Attitudes to work and leisure
5. Education – spread or erosion of educational
standards
6. Health and fitness awareness
7. Multiple income families

142. One of the important reasons for the failure of a number
of companies in foreign markets is
Their failure to understand the cultural environment of
these markets and to suitably
formulate their business.
Even when people of different cultures use the same
basic product,
The mode of consumption, conditions of use,
Purpose of use or the perceptions of the product
attributes may vary.

143. The product attributes, method of
presentation, positioning or method of promoting the
product
may have to be varied to suit the characteristics of
different markets.
The differences in language sometimes pose a serious
problem, even necessitating a change in the brand name.
The values and beliefs associated with colour vary
significantly between different cultures.

144. Social inertia (inactivity) and associated factors come in
the way of the promotion of certain products, services or
ideas.
We come across such social stigmas in the marketing of
family planning ideas, use of biogas for cooking etc.
In such circumstances, the success of marketing
depends, to a very large extent, on the success in
changing social attitudes or value systems.

145. While dealing with the social environment, we must also
consider the social environment of the business, which
encompasses
Social responsibility and the alertness or vigilance of the
consumers and of society at large.

146. The number and proportion of the women in the work
force have been rising in most of the countries.
Birth control has been a contributory factor in raising the
proportion of women employees.
The rise in the number of double income households
increases the demand for a number of products like
household appliances,
electronic gadgets, packaged food products etc.

147. Demographic trends may confine to certain countries
only, the strength of other trends vary greatly between
nations.
There are a number of social behaviours that have
different meanings in other cultures.
Americans generally consider it impolite to mound food
on a plate, make noises when eating, and belch, while….
Chinese feel it is polite to take a portion of every food
served and consider it evidence of satisfaction to belch.

148. Saudi Arabia, it is an insult to:
question a host about the health of his spouse,
show the soles of one’s shoes,
or touch or deliver objects with the left hand.
In Korea, both hands should be used when
passing objects to another person,
It is considered impolite to discuss politics, communism,
or Japan.

149. In Indonesia, it is considered rude to point at another
person with a finger.
However, one may point with the thumb or gesture with
the chin.
In Venezuela,; close friends greet each other with a full
embrace and a hearty pat on the back;
In Indonesia, a social kiss is in vogue, and a touching of
first the right then the left cheek
as one shakes hands.
In Malaysia, close friends grasp with both
hands;

150. Although many of the social behaviors mentioned vary
from the home-country norm, negative judgments should
not be made about them.

151. In addition to knowing specific
Courtesies, Personal space, Language and
Communication, and Social Behavioral differences,
There are numerous intercultural socialization behaviors
that an international business person should be knowing.

152. It is not always necessary for an international business
traveler to understand the “whys” of a culture, but it is
Important to accept them and to abide by them while on
foreign soil.
Becoming aware of the culture in which one is visiting or
working will pay dividends.

153. Impact of Social Environment in International
Marketing on Consumer Products
Consumer products are more sensitive to cultural differences than the
industrial products.
Hunger is a basic physiological need; everyone needs to eat, but what
we want to eat can be strongly influenced by culture.
CPC International failed to win popularity for Knorr dehydrated
soups among Americans.
90 percent of the soup consumed by households was canned.

154. Hofstede’s Cultural Dimensions
1. Power distance
2. Uncertainty avoidance
3. Individualism/collectivism
4. Masculinity/femininity

155. • Power distance: Less powerful members
accept that power is distributed unequally
– High power distance countries: people
blindly obey superiors; centralized, tall
structures (e.g., Mexico, South Korea, India)
– Low power distance countries:
flatter, decentralized structures, smaller
ratio of supervisor to employee
(e.g., Austria, Finland, Ireland)

156. • Uncertainty avoidance: people feel threatened by
ambiguous situations; create beliefs/institutions to
avoid such situations
– High uncertainty avoidance countries: high need for
security, strong belief in experts and their knowledge;
structure organizational activities, more written rules, less
managerial risk taking (e.g., Germany, Japan, Spain)
– Low uncertainty avoidance countries: people more willing
to accept risks of the unknown, less structured
organizational activities, fewer written rules, more
managerial risk taking, higher employee turnover, more
ambitious employees (e.g., Denmark and Great Britain)

157. • Individualism: People look after selves and
immediate family only
– High individualism countries: High value on
autonomy; Individual achievement, Privacy
• High collectivism countries: High value on group
(Family, clan, organization); Loyalty; Devotion;
Conformity

158. • Masculinity: dominant social values are
success, money, and material
– High masculine countries: stress on
earnings, recognition, advancement, challenge, we
alth; (e.g., German countries)
– High feminine countries: emphasize caring for
others and quality of life; cooperation, friendly
atmosphere., employment security, group decision
making; low job stress (e.g., Norway)

159. How Culture Affects Managerial Approaches
Centralized vs. Decentralized Decision Making:
Safety vs. Risk:
Individual vs. Group Rewards:
Informal Procedures vs. Formal Procedures:
High Organizational Loyalty vs. Low Organizational Loyalty:
Cooperation vs. Competition:

160. INDUSTRIAL POLICY of INDIA

161. Introduction
• The Industrial Policy indicates the respective
roles of the public, private, joint and co-operative
sectors; small, medium and large scale industries.
• It underlines the national priorities and the
economic development strategy.

162. • It also spells the Government’s policy towards
industriestheir
establishment, functioning, growth and
management;
foreign
capital
and
technology, labor policy, tariff policy etc. in
respect of the industrial sector.
• The Industrial Policy of India has determined
the pattern of economic and industrial
development of the economy. The Industrial
Policy reflected the socio-economic and
political ideology of development.

163. Industrial Policy upto 1991
The objective of the policy were to :
• Reduce disparities in income and wealth
• Prevent monopolies and concentration of
economic power
• Build a large and heavy public sector and manage
the same effectively
• Develop heavy and machine making industries
• Accelerate the rate of industrialization and
economic growth
• Higher employment generation

164. • Focus on development of small scale sector
• Optimum utilization of installed capacity
• Rural Industrialization
• Promotion of export oriented units (Industrial
Policy 1980)
• Industrial Dispersal and decentralization
(Industrial Policy 1990)

165. The industrial policy of India prior to liberalization in
1991 was characterized by the following features:
• Dominance of Public Sector
• Entry and Growth Restrictions
• Restrictions on Foreign Capital and Technology
Dominance of Public Sector:
• Future development of 17 important industries
such as arms and ammunition, atomic energy, coal,
iron and steel, air transport, railway transport etc.
was exclusively reserved for the public sector.

166. • Under the Schedule B; 12 industries such as machine
tools, fertilizers, synthetic rubber, road, transport etc;
industries were progressively state owned and the State
would take the initiative to establish new undertakings.
Entry and Growth Restrictions:
• License was mandatory for establishing new units with
investments above a specified limit, for manufacturing of
new products and for undertaking substantial expansion.
• Large firms of Rs. 100 crore or above and dominant
undertakings (those with a market share of 25% or more)
had to obtain clearance under the Monopolies and
Restrictive Trade Practices Act in addition to the industrial
license.

167. Restrictions on Foreign Capital and Technology:
• In industries where foreign capital was
allowed, it was subjected to a ceiling of 40% of
the total equity although there were certain
exception. Operations of foreign companies in
India and issue of securities abroad by Indian
Companies was regulated by the Foreign
Exchange Regulation Act, FERA 1973.

168. The New Industrial Policy 1991
The Industrial Policy announced on July 24, 1991
heralded the economic reforms in India and sought to
drastically alter the industrial scenario in our country.
The most visible sign of the country’s economic crisis in
early 1991 was:
• Extremely low foreign exchange reserves of Rs. 2400
crore (just enough to buy from abroad only three weeks
requirements.)
• Inflation was as high as 13.5%

169. This policy expanded the scope of the private sector by
opening up most of the industries for the private sector
and did away with the entry and growth restrictions. The
most important initiatives are with respect to the virtual
scrapping of industrial licensing and registration
policies, an end to the monopoly law and a welcoming
approach to foreign investments, apart from redefining
the role of the public sector.
Words like “dramatic”, revolutionary” and “drastic have been
used to describe this policy.
.

170. The New Policy has four features:
Liberalisation; privatisation, globalisation and
stabilisation
Redefinition of the role of the Public Sector:
The number of industries reserved for the public
sector was reduced to eight and it was later
pruned to two i.e. atomic energy and railway
transport.

171. Main features :Objectives of the Industrial Policy
of the Government are –
• to maintain a sustained growth in productivity;
• to enhance employment;
• to achieve optimal utilization of human
resources;
• to attain international competitiveness
• Development of indigenous technology through
greater investment in R&D
• bring in new technology to help Indian
manufacturing units
• Incentive for industrialization of backward areas

172. • Ensure running of 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 transform India into a major partner and player in the
global arena.
Policy focus is on –
• Deregulating Indian industry;
• Allowing the industry freedom and flexibility in
responding to market forces and
• Providing a policy regime that facilitates and fosters
growth of Indian industry.

173. Evaluation of the New Industrial Policy
Positives of the new policy are:
• Delicensing of most industries will help
entrepreneurs to quickly seize business
opportunities.
• Removal of controls under the MRTP Act will
facilitate expansion and growth.
• There will be greater inflow of foreign capital
and technology due to easing of restrictions.
• Burden on the public sector will be reduced
and reforms relating to the public sector like
transferring sick units to BIFR will help
improve their performance.

174. Watch- outs :
• The policy environment is much more
conducive for both domestic and foreign
investment than in the past. However, a host of
countries are now trying to woo foreign
investment with a much more conducive
economic environment than in India.
• cultural factor do also tend to tilt the balance in
favor of other nations.

175. • Foreign investors still regard the policy and procedural system in
India confusing. Rather many feel that policy and development
environment in China is superior to India.
This Policy has been criticized on the following grounds:
• The policy is a total departure from Nehru’s model of socialism.
• It will lead to domination of MNC on the Indian Economy.
• Trade Unions oppose the policy due to fear of unemployment which
may arise due to privatization.

176. • Monopolies and concentration of economic
power in a few hands is likely to increase.
• Distortion in industrial pattern would occur due
to slow pace of investment in few basic and
strategic industries. Absence of a mechanism
would slow down the development of backward
areas.
• Government is silent about tackling the growing
industrial sickness. The Government has not
announced a clear exit policy for sick units.

177. Second Generation Reforms
• The 1991 reforms have considerably helped in
improving the economic growth of the country. Yet
much more needs to be done to reap the full
benefits. There is a need for Second Generation
Reforms:
• A. Exploiting the Knowledge based Global Economy:
– Revolutionizing the telecom sector to help
integrate India’s economy into the world economy.
– Build institutes for higher education
– A system of intellectual property rights to reward
innovations adequately.
– Venture capital funds to finance risk projects of
the knowledge based economy.

178. B. Growing Indian Transnational Corporations:
– Indian firms to enjoy flexibility in entry and exit.
Freedom to diversify and close down unsuccessful
units.
– Liberalize and move towards capital account
convertibility.
C. High Growth of Agriculture:
– State to ensure that adequate investments are
made in irrigation, agricultural research and
infrastructure
• D. Empowering the Poor:
– Integrate and consolidate anti poverty measures.
– Set up a system for old age security.

179. E. Human Development
– Primary education made compulsory.
– Involve private sector to provide better primary education.
F. Clean Environment:
– Arrest damage to environment
– Promote clean and healthy environment.
H. Improvements to Governance:
– Rationalize electricity prices
– Bring in legal reforms that ensure inexpensive and speedy
justice and at the same time facilitate economic growth.

180. Current Changes
• FDI in Multiple Sectors
• Disinvestment of PSE a process in which the public undertaking
reduces its portion in equity by disposing its shareholding
• disinvestments are being done to finance the budget
deficit it has reached unsustainable levels.
• “Strategic Disinvestment”. The government should be
the minority shareholder in these entities to give them
more autonomy and increase their competitiveness.

182. Role of AGRICULTURE in Economic
Development

183. Why Agriculture Is Important
Before the Green Revolution, agriculture was widely seen as a
stagnant, low-productivity, and residual sector
Agriculture came to be seen as a growth sector that could:
1. Generate more food and raw materials at lower prices;
2. Free up foreign exchange for the importation of
strategic industrial and capital goods;
3. with rising rural incomes, provide a growing domestic
market for nascent national industries;
4. reduce poverty by increasing labor productivity and
employment in rural areas,

184. Role in Economic Development:
1. Contribution to National Income
2. Major source of Livelihood
3. Provider of Employment
4. Industrial development
5. International Trade
6. Capital Formation and Investment
7. Food and Fodder

185. Simon Kuznets identifies four factors contributing to the overall
economic development.
1.Product contribution i.e., making available food and raw
materials.
2. Market contribution i.e., providing the market for producer
goods and consumer goods produced in the
non-agricultural sector.
3.Factor contribution; making available labour and capital
to the non-agricultural sector
4. Foreign Exchange contribution.

186. Relationship between Agricultural and non-agricultural sector
During the process of development, inter-dependence
Between agriculture and industry has become stronger
Production Linkages
Arise from the interdependence of agriculture and
industry for productive inputs.
Linkages have got further strengthened with agriculture’s
dependence on industry reflecting the modernization of agricultural
sector.

187. Demand linkages
There are strong demand linkages between the two sectors.
There is an impact of income and industrialization on the demand
for food and agricultural raw materials.
Savings and Investment linkages
There is an impact of rural income on industrial
consumption goods, i.e., clothing, footwear, sugar, edible oils, TV
sets, washing machines, refrigerators, motor bikes, etc.
“Rural bazaar out buys urban market”.

188. Features of Indian Agriculture
Dependency on Monsoons
Multiplicity of Crops
Diversity in other Spheres
Semi-commercialized farming
Predominance of small farmers
Low level of productivity

189. Factors responsible for the backwardness of agriculture.
Factors can be classified as under:
1. Demographic factors
2. General factors
3. Technological factors

191. 1. Demographic factors
Important Demographic factor responsible for low yield in
agriculture is the increasing pressure of population on land.
Increasing population has fallen back on land for its
livelihood,
Created problems like fragmentation and subdivision of holdings;
The supply of improved practices and services has always fallen
short of requirements.

192. General Factors
Excess or surplus labour in Agriculture
Discouraging climate
Inadequate non-farm services
Size of holdings
Defective land tenure structure
Indebtedness of the farmers

193. Technical Factors
Inadequate Research
Inadequate irrigation facilities
Poor inputs and techniques

194. Agriculture Policy of India
Agricultural policy followed during the last five decades can be
broadly distinguished In 3 phases.
The period from 1950/51 to mid 1960s which is also called pre green
revolution period witnessed:
1. Tremendous agrarian reforms,
2. Institutional changes and
3. Development of major irrigation projects.

195. The intermediary landlordism was abolished, tenant operations
were given security of farming and ownership of land.
Land ceiling acts were imposed by all the states to eliminate
large sized holdings
Cooperative credit institutions were strengthened to minimise
exploitation of Cultivators by private money lenders and traders
Expansion of area was the main source of growth in the pre green
revolution period.

196. The scope for area expansion diminished considerably in the green
revolution period
Increase in productivity became the main source of growth
in crop output
There was significant acceleration in yield growth in green
revolution period.
The country faced severe food shortage and crisis in early 1960s
which forced the policy makers to realise that;
Continuous reliance on food imports and aid imposes
Heavy costs in terms of political pressure and economic instability

197. There was a desperate search for a quick breakthrough in
agricultural production.
One choice before the country was to go for spread of new seeds of
high yielding varieties (HYV) of wheat and rice
This marked second phase of agriculture policy in the country.
The green revolution technology involved use of modern farm
inputs, its spread led to fast growth in agro input industry.

198. Agrarian reforms during this period took back seat while;
Research,
Input supply,
Credit,
Marketing,
Price support and
Spread of Technology
were the prime concern of policy makers

199. Two very important institutions were created in this period, namely:
Food Corporation of India
To maintain buffer stock to guard against adverse impact of
year to year fluctuations in output on price stability.
Agricultural Prices Commission,
To ensure remunerative prices to producers, maintain reasonable
prices for consumers.
These two institutions have mainly benefited rice and wheat crops
which are the major cereals and staple food for the country.

200. The next phase in Indian agriculture began in early 1980s.
While there was clear change in economic policy towards delicensing and deregulation in Industry sector, agriculture policy
lacked direction and was marked by confusion.
There has been a considerable increase in subsidies and support to
agriculture sector during this period
Investments by farmers kept on moving on a rising trend

201. The rural economy started witnessing process of diversification
which resulted into fast growth in non food grain output like
milk, fishery, poultry, vegetables, fruits etc which accelerated growth
in agricultural GDP during the 1980s.
Though green revolution has been widely diffused in irrigated areas
throughout the country,
The dryland areas did not see benefit of technological
breakthrough.

202. National Agricultural Policy in July 2000.
Formulated to meet challenges facing Indian agriculture
Grouped in four categories relating to
(1) Growth
(2) Sustainability
(3) Efficiency and
(4) Equity.

203. There are also other important concerns like;
Food security,
Livelihood,
Employment,
Improvement in standard of living of agricultural population.
The National Policy on Agriculture seeks to actualize the vast
untapped growth potential of Indian agriculture

204. Over the next two decades, the national agriculture policy
aims to attain:
• A growth rate in excess of 4 per cent per annum in the
agriculture sector
• It is based on efficient use of resources and conserves our
soil, water and bio-diversity
• With equity, i.e., growth which is widespread across
regions and farmers
• It
should be demand driven and caters to domestic
markets and
• Maximizes benefits from exports of agricultural
products

205. Growth that is sustainable technologically, environmentally
and economically
Food and nutrition security
Food and nutritional security has remained central to India’s
agricultural and development policy since Independence.
However, importance being accorded to food and nutrition security
has receded during 1990s because of two reasons.
There was accumulation of very large stock of grains in government
stock after April 1998 which.
Reduction in cereal consumption

206. Credit Facility
To curtail Exploitation from money lenders credit facilities
Were provided to farmers through co-operatives, regional
Rural banks and government loan.
NABARD (National Bank for Agriculture and Rural
Development)
There has been steady increase in the flow of Institutional
Credit to agriculture over the years
Loans are provided to farmers for farming and other related
Activities like; well digging, equipments etc.

207. Kisan Credit Card Scheme:
Introduced in 1998 -99. Banks have issued more than
435 lakh cards in 2006.
The objective was to provide adequate and timely support
from baking system to the farmers for their cultivation need.
The card is coupled with a passbook where as per the credit
limit the transactions are recorded.
The limit is fixed on the basis of operational land holdings,
And cropping pattern and cycle.
Each withdrawal is to be repaid within 12 months.

208. Self Help Groups
These are linked to banks to offer support to the farmers or
rural population in variety of income generating programs.
There are various Insurance schemes and different covers
Introduced specifically for farmers.
These are linked to banks to offer support to the farmers or
rural population in variety of income generating programs.

209. Provision for Irrigation facilities
In spite of irrigation being given importance since 1950 – 51
There is a wide gap between potential and actual irrigation.
AIBP (Accelerated Irrigation Benefits Program) was launched
To encourage the states for completion of ongoing irrigation
Projects.
Fast Track Program in 2002 was launched through Central
Loan Assistance
Provision for Irrigation facilities
Subsidies for fertilizers, electricity, seeds

210. Provision for Proper Marketing
Cooperative marketing is started by government to ensure
Reasonable prices to the farmers.
Regulated markets are being set up through out the country.
A committee was formed to analyze agriculture marketing in
India in 2002; the recommendation given were :Contract farming
Development of agricultural markets in private and
Cooperative sector.
Use of information technology to provide in time
information

211. Establishment of direct purchase centres
Complete Transparency in pricing
Payments to be done on the same day.
Provision and expansion of storage and warehousing
Government worked on provision of cooperative storage
Food Corporation of India
Central Warehousing Corporation
State Warehousing Corporation
Institutions are engaged in Scientific Storage in rural India.

212. Food Security
Public Distribution System
Traditional food problem in India is caused by large
fluctuations in production of food-grains
Lead to gravity due to absence of suitable transport systems
And infrastructure.
Qualitative Deficiency
Rapid Growth of Population
Large part of income is spent in necessities, thus a rise in
Income leads to a large demand for food grains.

213. Government’s Food Policy
Government has been taking various steps to solve the food
Problem. Which constitute as food policy.
Important measures:
Increasing Supplies:
Increase in production through the extension of
Irrigation, propagation of high yielding varieties of
Crop.
Efforts are made to save food-grains: Scientific Storage
Pest control measures are also popularized

214. Improving Distribution:
Strengthening the distribution network
Wide network of ration / fair price shops
Statutory rationing of food grains in case of severe shortage
For Insulating prices from the market fluctuations, bufferStock operations are undertaken.
In case of shortage releases are made from the stocks to
Ensure lowering of prices
Provision has been made to supply food grains to the poor at
Prices lower than that for the others.

215. Stabilizing Prices:
Fixation of minimum support price
Procurement on announced prices for building reserves and
Feeding public distribution system
Fixation of issue prices usually lower for fair price shops
Subsidies for ration shops
In case of excessive supplies food grains are purchased and
stocked to prevent prices from falling below the MSP
State Trading has also been under taken to reduce distribution
Costs and to check speculative trading on the part of private
traders

216. Controlling Demand : Government has adopted three
measures
1. Rationing
2. Wholesale Traders and retailers are required to declare their
stocks
3. Measures are adopted to reduce population growth
Reducing Poverty: 3 types of measures are relevant
1. Augmenting general growth; expansion of SSI and cottage
industry; employment generation
2. Measures adopted to transfer resources to the poor;
agriculture credit, subsidies, land ceilings

217. 3. Formulating anti-poverty programs like:
Swaran Jayanti Gram Swarozgar Yojana
Jawahar Gram Samridhi Yajana
Prime Minister’s Rozgar Yojana etc…
These programs are meant to improve the economic conditions
Of the poor
To expand employment opportunities for the weaker section

218. Suggestions to Revive The Agriculture Growth
1. Increase the area under double cropping cultivation
2. Increase the Fertiliser use :
28 kg / hectare in Assam &
328 kg / hectare in Punjab
3. Increase in Electric Supply for promoting irrigation
9 kw / hectare
30 kw / hectare
34 kw / hectare
80-300 kw/h
1000 kwh
Assam
Orissa
Himachal Pradesh
Kerala, J & K, Bihar, M P, WB, UP
AP, Rajasthan, Punjab, Tamilnadu
4. Augmenting Irrigation Programs

219. Public Distribution System
The name suggests that it is a mere means of making available
Some essential food items at low price but it has other
relevance too
Instrumental in development of the economy
Real wages of the workers are protected (food security)
Price levels of several consumption goods is kept stable
Anti – Poverty Measures
Food security for the poor, under employed

220. Steps that are involved in Public Distribution System
Procurement: for the purpose of collecting produce from
Farmers at a fixed and profitable price government fixes
MSP before the harvest.
FCI undertakes operations to procure and distribute food
Grains.
Storage: Food grains are stored in a scientific manner ;
Buffer stock; and selling stock
Distribution: objective is, unbiased distribution to vulnerable
Sections.
The distribution should be timely and location should be
Closer to the buyers

221. Food Corporation of India
Food Corporation of India (FCI) is the main agency responsible for
the execution of the food policies of the Central Government.
Functions of the FCI primarily relate to the purchase, storage,
movement, transportation, distribution and sale of foodgrains on
behalf of the Central Government.

223. FCI is a perfect example of an efficient supply chain
Minimum Support Price
PROCUREMENT
FARMERS
DISTRIBUTION
To the PDS and To the Deficit Areas
Central Point

224. Role of FCI
Increase Level of Procurement
Insulation from price fluctuations
Dependence on Imports should decline
Reduction in storage losses
Uninterrupted supplies and advanced planning
Integrated approach
Continuous regulated expansion to cover all areas

225. Public Private Partnership

226. • A Public Private Partnership (PPP) is a partnership between the public
and private sector for the purpose of delivering a project or
service, which would traditionally be provided by the public sector.
•
PPPs involve the private sector partner providing a 'bundle' of services
such as design, construction and maintenance.
• Bundling thus differs from traditional contracting out, whereby separate
contracts are let for each service.
• Public-Private Partnerships (PPP) are collaborative efforts, between
private and public sectors, with clearly identified partnership
structures, shared objectives, and specified performance indicators for
delivery

227. There are a number of reasons governments are
attracted to PPPs.
• Value for money;
• Appropriate risk transfer to the private sector
• Early project delivery;
• Gains from innovation;
• Avoiding the need to borrow to finance
infrastructure investment;
• Access to improved services.

228. There are four major ‘drivers’ to determine whether a PPP
is value for money.
• Risk transfer,
• Whole-of-life costing
• Innovation and
• Asset utilization.
Risks Involved:
1. construction,
2. the market demand for services (demand risk),
3. the cost of operations and maintenance,
4. declarations of force majeure, (an unexpected and
disruptive event that may operate to excuse a party
from a contract)
5. changes to the law and regulations.

229. • TDC - Traditional Design and Construction
The Government, as principal, prepares a brief setting out
project requirements before inviting tenders for the
design and construction of the project.
Private sector contractors undertake to design the project
in accordance with the brief, and construct it for an
agreed sum, which may be fixed or subject to escalation.
• O&M - Operation and Maintenance Contract
These projects involve the private sector operating a publiclyowned facility under contract with the Government.

230. • LDO - Lease - Develop - Operate
This type of project involves a private developer being given a
long-term lease to operate and expand an existing facility.
The private developer agrees to invest in facility improvements
and can recover the investment plus a reasonable return over the
term of the lease.
• BOM - Build - Own - Maintain
This type of arrangement involves the private sector developer
building, owning and maintaining a facility. The Government
leases the facility and operates it using public sector staff.

231. • BOOT - Build - Own - Operate - Transfer
Projects of the Build-Own-Operate-Transfer (BOOT) type involve a
private developer financing, building, owning and operating a facility
for a specified period.
At the expiration of the specified period, the facility is returned to
the Government.
• BOO - Build - Own - Operate
The Build-Own-Operate (BOO) project operates similarly to a BOOT
project, except that the private sector owns the facility in perpetuity.
The developer may be subject to regulatory constraints on
operations and, in some cases, pricing.

232. Special Economic Zones
• A Special Economic Zone (SEZ) is a
geographical region that has economic and
other laws that are more free-market-oriented
than a country's typical or national laws.
• "Nationwide" laws may be suspended inside a
special economic zone.

233. • “….it is a specifically delineated duty-free
enclave and shall deemed to be a foreign
territory for the purposes of trade operations
and duties and tariffs”
• The purpose - “... to provide an internationally
competitive and hassle-free environment for
exports”

234. what is special?
• Exemption from taxes, various subsidies and tax sops hassle-free
• Exemption from stringent labour and environment regulations
• Single window clearance
• Land acquisition upto 1000 hactare Only.
• 35% of the area for industrial activity – the rest of the area for
entertainment and residential as well as other commercial
activities!

235. Reasons to develop SEZs
• Enhance foreign investment and promote
exports from the country.
• Need for a level playing field for the domestic
enterprises and manufacturers to be
competitive globally.
• Growth Inclusiveness.

236. • India was one of the first in Asia to recognize the
effectiveness of the Export Processing Zone (EPZ) model in
promoting exports, with Asia's first EPZ set up in Kandla in
1965.
• With a view to overcome the shortcomings experienced on
account of the multiplicity of controls and clearances;
absence of world-class infrastructure, and an unstable
fiscal regime and with a view to attract larger foreign
investments in India, the Special Economic Zones (SEZs)
Policy was announced in April 2000.

237. The main objectives of the SEZ Act
(a) Generation of additional economic activity
(b) Promotion of exports of goods and services;
(c) Promotion of investment from domestic and
foreign sources;
(d) Creation of employment opportunities;
(e) Development of infrastructure facilities;

238. - Main benefits sought from SEZs are:
*
Faster economic growth
*
Employment generation on a large scale
*
Earning more foreign exchange
*
Infusion of modern technologies & their
demonstration and spread effects
*
Economies in production due to
clustering

239. FACILITIES NOTIFIED FOR DEVELOPERS OF SEZs
• 100% FDI allowed for:
i. townships with residential, educational and
recreational facilities.
ii. Franchise for basic telephone service in SEZ.
Income Tax exemption to developers for any block of
10 years in 15 years
• Duty free import/domestic procurement of goods for
development, operation and maintenance of SEZs
• Exemption from Service Tax and the Central Sales Tax

240. • Income of infrastructure from investment in SEZ
exempt from Income Tax .
• Investment made by individuals etc in a SEZ also
eligible for exemption under section 88 of
Income Tax Act.
• Developer permitted to transfer infrastructure
facility for Operation and Maintainence, inclusive
of Income Tax benefits.

241. • Guidelines issued on generation, transmission
and distribution of power in SEZs.
• Allocation of power to SEZs from central quota.
• Freedom in allocation of space and built up area
to approved SEZ units on commercial basis.
• Authorised to provide and maintain services like
water, electricity, security, restaurants and
recreation centers on commercial lines

242. FACILITIES NOTIFIED FOR SEZ UNITS
• No license required for import.
• In addition to manufacturing, trading and
services also allowed.
• Freedom to subcontract.
• Single window approval by Development
Commissioner of the zone.

243. • No license needed to manufacture items
reserved for SSI sector
• 100% FDI allowed in manufacturing through
automatic route except in sectors such as
defense, atomic energy.
• No cap on foreign investments for items
reserved for SSI.

244. • Customs and Excise : Duty free import or
domestic procurement of goods for
development,
operation
and
maintenance of SEZ units.
• Central Sales Tax Act : Exemption to sales
made from Domestic Tariff Area to SEZ
units.

245. • Income Tax Act:
• 100% IT exemption (10A) for first 5 years, 50% for 2
years thereafter and 50% of reinvestment for 3 years
.
• Permitted to carry forward losses.
• Offshore Banking Units allowed to have full IT
exemption for 3 years and 50% for next two years.
• Service Tax: Exemption from Service Tax to SEZ units.

246. Types of SEZ
• Free trading and Warehousing Zones
– Focus is on warehousing
– Objective: to focus on developing trade related
infrastructure to facilitate import and export of
goods and services.
• SEZ for Multi-product
– Units may be set up for manufacturing of two
or more goods / services in a sector. OR
– Goods / Services falling in two or more sectors

247. • SEZ for Specific Sectors
– Meant exclusively for one or more products /
services in a sector.
– Mundra SEZ : Promoted by Adani Group for
Textile
– Has strategic location for raw material access
– Has multi-modal connectivity for convenient
logistics. (in-zone sea, air, and rail tracks)

248. •
•
•
•
•
•
•
•
•
Nokia
Tamil Nadu
QuarkCity
Chandigarh
Flextronics
Tamil Nadu
Mahindra World City
Tamil Nadu
Motorola, DELL and Foxconn
Apache SEZ (Adidas Group)
Andhra Pradesh
Divvy's Laboratories
Andhra Pradesh
Rajiv Gandhi Technology Park
Chandigarh
ETL Infrastructure IT SEZ
Chennai
Hyderabad Gems Limited
Hyderabad
For further information visit, www.sezindia.nic.in

249. Infrastructure

250. Infrastructure contributes to economic growth,
• Both through supply and demand channels by reducing
costs of production,
• Contributing to the diversification of the economy and
• Providing access to the application of modern technology,
raising the economic returns to labour.
• contributes to raising the quality of life by creating
amenities, providing consumption goods (transport and
communication services) and contributing to
macroeconomic stability

251. Infrastructure sector plays an important role to
counter balance against slowing economic activity
and lower consumption.

252. Multiple Issues on Infrastructure Development
Cross-Border
Infrastructure
Regional Level
International
Coordination, planning
and finance
Regional Integration
Managing Disparities
National Level
National Networks
Decentralization
Inclusive Development
Sub-national Level
Rural Networks
Modality of Financing. Public Private Partnership
Poverty Reduction
Participatory
Development

253. Low spending on infrastructure has been a major impediment
for growth in India
Recognizing the need Gvt. Of India has increased investment
on Infrastructure in Budget 2009-10 and 2010-11
Rural Infrastructure
Rs. 1200 crs.
Power Generation
Rs. 800 crs.
National Highway Development
Rs. 10,667 crs.
Road cum railway bridge projects have been taken up as
National Projects

254. Various Infrastructure Elements
ENERGY
BANKING & FINANCE
WATER
INSURANCE
ROAD
OIL & GAS
AVAIATION
RAILWAYS
PORTS & SHIPPING
MINING & METALS

255. Power
India is power deficient :
Energy shortages of approx. 8%
Peak power shortages of approx. 10-12%
T&D losses are high: 30% - 50%.
The Government plans to add 1 lakh MW of
generation capacity by 2012 - 77,000 MW in
the public sector and 23,000 MW from the
private sector.
Hydel projects aggregating 50000 MW to be developed by
2017 – huge untapped potential in the North-East and
Jammu & Kashmir

256. Transmission sector - Capital investment of
USD 150 billion required in next 10-15 years
to develop a National Grid, first
transmission system in private sector.
Distribution
sector
–
Successful
implementation of distribution reforms (as
in Delhi) expected to encourage similar
steps in other urban areas in the country.

257. Power
Progress
Electricity Act aims to revitalize the power sector
(commercially viable)
Generation (including captive power plants) freed
from licensing
Sale of power to third parties (other than bankrupt
state utilities) allowed
Distribution reform encouraged
PPP in transmission – 1200 km transmission line
project by Powerlinks Transmission Limited under
implementation

258. T & D Losses
Divided into Three Parts
Technical Losses
Thefts by State Electricity Board Staff; where Meters
are installed unofficially off the record
Theft by consumers; either by hooking or hampering
the meter

259. How they Can be handled
Reduction in Technical Loss is easier part
Initially distribution lines were extended in haphazard manner
leading to load development
Reconfiguring the loads offers an immediate scope for loss
reduction
It could be done using load flow analysis
Detecting unofficial loads
Physical detection
RPF & Tala took over Noida and North Delhi a PPP model

260. Replace Faulty meters
Private Players have a Unique Consumer Numbers even if it
Was a hut.
Whereas in SEBs the consumer record is inevitably
incomplete
Getting meters read is a major effort in the State of Orissa
40% meters were not read.
There are flat charges, charged from many consumers
Using non-hookable insulated wires.

261. Electricity Theft in Rural Areas
A Case Study from Rajasthan.
Conducted by Prayas, an NGO

262. • Study was conducted in a primarily agricultural
electricity distribution Sub-division in South Rajasthan.
• Thrust was mainly on identifying a different approach to
Institutional reforms in the Power Sector
• Large scale Privatisation Model that has been pushed
by World Bank.
• The Study focuses on distribution losses in Rural areas.

263. Measures of Rajasthan State Electricity Board
To check distribution losses.
• Installation of Meters;
• Release of connections to all applicants in agriculture
Category;
• Strengthening Vigilance;

264. Findings of the Study:
• Non-Tribal agriculturally developed area accounts for
most of the electricity consumption.
• Urgent need for maintenance of distribution system.
• Commercial losses constitute the major portion of
distribution losses.
• Unaccounted energy can be categorised in
• defective meters
• wrong meter reading
• illegal hooking

265. • Illegal hooking is rampant in agricultural categories.
• General mass of consumers expressed support and
willingness to undertake social vigilance.
• Politically powerful lobby of rich farmers opposed the
project.
• Illegal connections out-numbered legal connections.

266. Reasons Identified by Prayas for high level of
Electricity Theft
• Backlog of Electricity Connections; giving a moral
Justification.
• Poor and Interrupted Power Supply;
• Corruption;
• High Entry Cost; Rs. 25000 for small farmers.
• High Tariff; Rs. 200 per month, whereas use of
kerosene is Rs. 20-25 per month.

267. Recommendations
• Pure Technical approach is not sufficient to control
Theft;
• Release of Temporary connections;
• Conversion of flat rate into meter;
• Region specific commercial policy.

268. Railway Turn Around
• Shift towards Market Orientation and Customer Focus.
• Focus on Revenue Generation rather than cost control.
• Leasing out of the catering and parcel service businesses.
• IR attracted private investments under the wagon investment schemes.
• This freed up resources for utilisation in more remunerative activities.
• Bringing down working expenses was achieved through measures
such as the freeze on filling up vacancies and improving technical
efficiency.

269. • Increased use of technology resulted in improving technical
efficiency in services.
• IR also focused on the sub-strategy capacity enhancement and
ensured better capacity utilisation. Through enhanced axle-load and
reduction in turnaround time of wagons by 14%, IR increased
wagon capacity available per day by 36%.
• The number of employees, which peaked at 1.652 million in 1991,
was brought down progressively to 1.472 million by 2003, and to
1.412 million by 2006.
•One of the elements of retrenchment is to trim excess staff. The
approach that IR adopted was not to fill up vacancies created by
retirement or other reasons.

270. Dedicated Freight Corridor
• A dedicated freight corridor exclusively for running freight trains at
a maximum permissible speed of 100 Kmph.
• DFC will not add to the capacity of the Indian Railways, but will
improve transit.
• DFC will reduce transit time between Delhi and Mumbai from 60
hours to 36 hours.
• It
will also reduce the cost of operation.
• The
total length of the route for DFC is 2,700 km.
• Currently the trains handling containers are single stack containers,
but DFC will have double stack containers of 25 tonne axle load,
which will increase the cargo handling capacity to 25 per cent.

271. • The length of a conventional goods train is 650 m and runs at 75
km per hour, whereas for DFC the length of the train will be 1.5
km and will run on the speed of 100 km per hour.
• The Railways will spend Rs 2,000 crore on signalling, and will
procure fixed signalling equipment.
• Advanced Signaling System facilitating better and efficient
operation of trains.
• Transfer trains from the existing corridor to the DFC and vice
versa through predetermined Junction arrangement, equipped with
grade separators to facilitate smooth transfer of trains between the
two networks.

272. Dedicated Freight Corridor
The salient features of the project are:
· Primarily Double Line corridor (except where Single Line is
justified on traffic considerations) running parallel to the existing
corridors, so as to maximize the usage of available railway land;
· The track sub structure like formation, bridges etc are to be fit for
32.5-ton axle load but the track super structure like track,
sleepers, ballast etc are to be fit for 25-ton axle load.
· The loop length on the proposed corridor to be 1500 meters long
to facilitate running of long haul trains.

273. • Western Corridor will start from the Jawaharlal Nehru Port to Dadri
connecting Baroda, Ahmedabad, Palanpur, Jaipur and Rewari to
Tughlakabad and Dadri.
• The western corridor comprising mainly of container traffic has
envisaged about four logistic parks, one each near cities like Delhi,
Jaipur, Ahemdabad and Boroda.
• Eastern Corridor will start from Ludhiana to Sonnagar via Ambala,
Saharanpur, Khurja and Allahabad.
• Both the corridors would be joined by a link between Dadri and
Khurja, the feeder routes of this corridor connecting ports of Gujarat.

274. Roads -Progress & Issues
Status of NHDP and other NHAI projects
(kms)
Total
Completed
Under Implementation
To be awarded
GQ
5846
3121
2725
NS-EW
7274
653
410
6211
Port Connectivity
356
69
229
58
Issues
 Road Networks have fallen way
behind growth in traffic
 Budgets for expansion and
maintenance are inadequate
Others
777
194
121
462
Total
14253
4037
3485
6731
Source - NHAI
website
Need to move
away from
road
construction to
road service

275. Roads
Issues
 Focus on asset creation not management
 NHAI is managing through short term tolling/
maintenance contracts
 Long term contracts
 Future toll revenues can be securitised
 Maintenance responsibility with private
sector

276. Indian Aviation
CURRENT SCENARIO
Number of Aircraft (Scheduled Operation)
321
Passengers – Domestic ( Millions)
– International( Millions)
69
Number of airports / airstrips
– AAI
– International Airports
Number of Airlines 14
26
454
97
16

278. Airport Infrastructure Development Policy Framework
􀂃 Airport development in India- traditionally in public
sector.
􀂃 AAI Act and Aircraft Rules amended ( 2004) to
enable private participation.
􀂃 Public Private Participation (PPP) Model now the
cornerstone of airport development.
􀂃 100% FDI permitted in Greenfield Airports( Feb
2006)- Development of new airports permissible
entirely in Private Sector as well.

279. Airport Development- Focus Areas
•Existing airports
• Capacity Constraints
• AIRSIDE
• TERMINALS
• Spread of Growth at other airports
• Development of Regional Airports

280. Initiatives On Airports
Metro airports
Delhi & mumbai, the two major international
Airports restructured through jv route (2006)
Greenfield Airports
New greenfield airports under construction at Hyderabad and
Bangalore.
Non Metro Airports
State owned AAI taking up select 35 non-metro airports for
modernisation.
CITY SIDE DEVELOPMENT OF NON-METRO AIRPORTS
THROUGH PPP