Industrial Policy - New Lg

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LOGO

INDUSTRIALPOLICY

- INDIA


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1. Prachi Gharat 618

2. Lavin Gurnani 6193. Mayuri Harwani 620

4. Reema Inamdar 621

5. Prashant Jagtap 622

6. Dhruv Joshi 623


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Industrial Policy MainFeatures

Objectives of the Industrial Policy of the Government are

to maintain a sustained growth in productivity;

to enhance gainful employment;

to achieve optimal utilisation of human resources;

to attain international competitiveness and

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 Indianindustry.


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and procedural simplificationsundertaken to pursue the above

objectives are as under - Liberalisation of Industrial Licensing Policy

Introduction of Industrial Entrepreneurs'

Memorandum(IEM) Liberalisation of the Location Policy

Policy for Small Scale

Non-Resident Indians Scheme Policy for Foreign Direct Investment (FDI)


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Chronological Process

Industrial Policy Resolution 1948







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Industrial PolicyResolution1948

This policy contemplated Indian economy a mixed economy(reserving a sphere for the private sector and another for publicsector) .

Outlined the approach to industrial growth and development.

Emphasized the importance of securing a continuous increase inproduction and ensuring its equitable distribution.

Rest of the industrial field open to private enterprise though theState would also progressively participate in this field.

The restrictive attitude towards foreign capital - that as a rule, the

major interest in ownership and effective control should always be inIndian hands. In all cases, however, the training of suitable Indianpersonnel for the purpose of eventually replacing foreign experts willbe insisted upon


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n us r a o cy eso u on1956

Main Objectives To accelerate the rate of growth and speed upindustrialization

To develop heavy industries and machine making units

To expand public sector

To reduce disparities in income and wealth

To build up a large growing cooperative sector

To prevent monopolies and concentration of the wealth andincome in a few hands


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IPR 1956 Salient Features New classification of industries

I. -Monopoly of the StateII. -Mixed sector of public and private enterpriseIII. -Industries left for private sector

Mutual dependence of public and private sectors

Assistant and control of private sector

Encouragement of Small scale and Cottage industries

Reduction of Regional disparities

Development of technical and managerial personal

Industrial Peace

Restrictive Attitude towards foreign capital


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New Classification ofIndustries

Schedule A: Those industries which wereexclusive responsibility of State (17 Industries)

E.g. - Arms and ammunition , atomic energy, iron and steel heavycasting and forgings of iron and steel, heavy machinery required foriron an steel production, for mining etc .

Schedule B: Those industries which were to beprogressively State owned and in which the Statewould generally set up new enterprises, but in which

private enterprises would be expected only tosupplement the efforts of Sate: (12 Industries)

E.g. - ferro-alloys and tools steel, the chemical industry, antibiotics andother essential drugs, fertilizers, synthetic rubber


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New Classification ofIndustries Schedule C

All the remaining industries and their futuredevelopment would, in general be left to theinitiate and enterprise of the private sector


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With a view to prevent excessive concentration ofindustrial activity in the large industrial houses, thisStatement gave preference to small and mediumentrepreneurs over the large houses and foreigncompanies in setting up of new capacity particularly in

the production of mass consumption goods

New undertakings of up to Rs.10 million by way of fixedassets were exempted from licensing requirements for

substantial expansion of assets. This exemption was notallowed to MRTP companies, foreign companies andexisting licensed or registered undertakings having fixedassets of Rs.50 million and above.


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IPR -1977 emphasized on Producing inputs needed by a large number of smaller units and

making adequate marketing arrangements.

Upgrading the technology of small units.

Promoting the development of a system of linkages betweennucleus large plants and the satellite ancillaries.


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IPR -1977 emphasized on The development of small scale industries, the investment limit in

the case of tiny units was enhanced to Rs.2 lakh, of a small scaleunits to Rs.20 lakh and of ancillaries to Rs.25 lakh.

Building buffer stocks of essential raw materials for the Small ScaleIndustries for operation through the Small Industries DevelopmentCorporations in the States and the National Small IndustriesCorporation in the Centre.


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The Industrial Policy Statement

1980Formulated wrt the Industrial Policy Resolution of 1956 toprovide for :

1- Optimum utilization of installed capacity;

2 - Maximum production and achieving higher productivity;

3 - Higher employment generation;

4 - Correction of regional imbalances;

5 - Strengthening of the agricultural base through agro based industries and

promotion of optimum inter-sectoral relationship;

6 - Promotion of economic federalism through equitable spread of investment

and dispersal of returns;

7 - Promotion of export-oriented industries;


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Industrial Policy Resolution1991

IPR 1991 Objectives Government will continue to visualize new horizons.

To build on the gains already made,

To Correct the distortions or weaknesses that may have crept

in To Maintain a sustained growth in productivity and gainful

employment; and

To Attain international competitiveness.

The pursuit of these objectives will be tempered by the needto preserve the environment and ensure the efficient use ofavailable resources.

All sector of industry whether small, medium or large,belonging to the public, private or cooperative sector will be

encouraged to grow and improve on their past performance.


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IPR 1991 Major Initiatives

In pursuit of the above objectives, Governmentdecided to take a series of initiatives in respect of thepolicies relating to the following areas:

Industrial Licensing.

Foreign Investment

Foreign Technology Agreements.

Public Sector Policy

MRTP Act.


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Industrial Licensing PolicyIndustrial Licensing is governed by the Industriesdevelopment & Regulation Act, 1951. The IndustrialPolicy Resolution of 1956 identified the following threecategories of industries:

those that would be reserved for development in the public sector;

those that would be permitted for development through privateenterprise with or without State participation; and

those in which investment initiatives would ordinarily emanate fromprivate entrepreneurs.

Industrial licensing was abolished for all projects except for a short listof industries related to security and strategic concerns, socialreasons, hazardous chemicals and overriding environmentalreasons, and items of elitist consumption (list attached as Annex II).Industries reserved for the small scale sector will continue to be so

reserved.


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ILP

Zoning and Land Use Regulation and EnvironmentalLegislation will continue to regulate industriallocations.

Appropriate incentives and the design of investments ininfrastructure development will be used to promote the

dispersal of industry particularly to rural and backward areasand to reduce congestion in cities.

Existing units will be provided a new broad banding facility toenable them to produce any article without additionalinvestment.

The exemption from licensing will apply to all substantialexpansions of existing units.

The mandatory convertibility clause will no longer beapplicable for term loans from the financial institutions for newprojects.


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Foreign Investment: Approval will be given for direct foreign investment upto 51

percent foreign equity in high priority industries (Annex III).There shall be no bottlenecks of any kind in this process.Such clearance will be available if foreign equity covers theforeign exchange requirement for imported capital goods.Consequential amendments to the Foreign ExchangeRegulation Act (1973) shall be carried out.

While the import of components, raw materials andintermediate goods, and payment of knowhow fees androyalties will be governed by the general policy applicable toother domestic units, the payment of dividends would be

monitored through the Reserve Bank of India so as to ensurethat outflows on account of dividend payments are balancedby export earnings over a period of time.

To provide access to international markets, majority foreignequity holding upto 51% equity will be allowed for tradingcompanies primarily engaged in export activities

ore gn ec no og


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ore gn ec no ogyAgreements:

Towards technological dynamism, automatic approval fortechnological agreements related to high priority industries;eased procedures for hiring foreign technical expertise.

Automatic permission will be given for foreign technologyagreements in high priority industries (Annex III) upto alumpsum payment of Rs. 1 crore, 5% royalty for domesticsales and 8% for exports, subject to total payment of 8% of

sales over a 10 year period from date of agreement or 7years from commencement of production.


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Current Scenario:

Substantial changes:

Only six industries require compulsory licensing

Only three industries reserved for the public sector

Relation of restriction on FDI: FDI up to 100 % under automatic

route for most manufacturing activities in Special Economic Zones;FDI ceiling in pvt banking sector up to 74%; oil exploration (100%);

natural gas and LNG pipelines (100%); telecom (74%)

Small Scale industries sector: reduced # of items reserved

from 821 (1991) to 506 (2005)


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Public Sector Policy In order to raise resources and encourage wider public

participation, a part of the government's shareholding in thepublic sector would be offered to mutual funds, financialinstitutions, general public and workers.

Boards of public sector companies would be made moreprofessional and given greater powers.

There will be a greater thrust on performance improvementthrough the Memoranda of understanding (MOU) systemsthrough which managements would be granted greaterautonomy and will be held accountable. Technical expertise on

the part of the Government would be upgraded to make theMOU negotiations and implementation more effective.

To facilitate a fuller discussion on performance, the MOUsigned between Government and the public enterprise wouldbe placed in Parliament.


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MRTP Act

The MRTP Act will be amended to remove the thresholdlimits of assets in respect of MRTP companies anddominant undertakings. This eliminates the requirementof prior approval of Central Government for

establishment of new undertakings, expansion ofundertakings, merger, amalgamation and takeover andappointment of Directors under certain circumstances.

Emphasis will be placed on controlling and regulatingmonopolistic, restrictive and unfair trade practices.


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The objectives of the industrial policy as far as this sectoris concerned are :

To enhance the opportunities of the employment and

income in the traditional economic activities of cottageindustry.

To strengthen the marketing infrastructure in this sectorto ensure adequate return to artisans engaged in the

production and manufacture of large range of articles.To preserve the traditional skill and cultural heritage

associated with production in this sector.

Cottage Industry Sector


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Lessons from India:

Industrial Policy should not be about:

Controlling Prices

Controlling Quantity

Specifying Geographical Location of Activity

Preemption by Public Sector

Policy Body, Regulatory Body and Service Provider being

Government Agencies


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Thank You .

Documents

Industrial Policy - New Lg