INDUSTRIAL DEVELOPMENT IN INDIADr. Laxmi Narayan Assistant Professor EconomicsGovt. College Tigaon(Faridabad)E-mail: laxmi_narayan70@yahoo.comMob: 09990410910

LECTURE OUTLINERole of Industrial Development in Economic Development

Evolution of Industrial Policy in India: Transition from Socialist to Market Oriented EconomyHistorical Review of Industrial Development during Various Five Year Plans

IMPORTANCE OF INDUSTRIALISATIONProvide EmploymentTrickle Down EffectDevelopment of Social OverheadIncrease in Income and SavingIncreasing Economies of ScaleIncrease in Farm ProductivityBetter Utilisation of Raw Materials

INDUSTRIAL SECTOR ON THE EVE ON INDEPENDENCEWeak Industrial BaseLow Capital IntensityDe-industrialisation of the Country Limited Role of Public SectorDecline of Handicraft IndustryIron & Steel and Jute Industries

STRATEGIES FOR INDUSTRIALISATIONState Intervention In Industrial Development.Role of Public SectorRegulations for Control and Direction of Industrial Sector.Industrial Licensing to Regulate Private Sector (IDR act 1951)Industrial Policy

INDUSTRIAL POLICY

Industrial policy is combination of all government regulation aimed at regulation and control of industrial activities in a country.Need of Industrial Policy: Limited Capacity of Private SectorRegulation of Private SectorRegulation of Foreign Sector

EVOLUTION OF INDUSTRIAL POLICIY IN INDIA

Industrial Policy Resolution 1948Industrial (Dev. & Reg.) Policy 1956Industrial Policy 1977Industrial Policy 1980New Industrial Policy 1991

MAIN FEATURES OF IPR 1948Industries ClassificationPublic Sector 03Public cum Private Sector 06 Controlled Private Sector 18 Private and Co-operative SectorImportance of Foreign CapitalDomestic ProtectionIndustrial Relations

MAIN FEATURES OF INDUSTRIAL POLICY 1956

Industries Classification: - Public Sector: 17 - Public-cum-Private sector: 12- Private Sector Fair Treatment to Private Sector Balanced Regional Growth Proper Amenities to Labourers Efficient Management of PSUs

MAIN FEATURES OF INDUSTRIAL POLICY 1977More Emphasis on SSIsLabour Intensive TechnologiesBalanced Regional DevelopmentLimited Role of Large IndustriesNo Expansion of Big IndustriesEfficient Management of PSUs

MAIN FEATURES OF INDUSTRIAL POLICY 1980Balanced Regional Development with Large and Small IndustriesRegularisation of Excess Capacity InstalledDevelopment of Backward AreasEncouragement to EOUs

REVIEW OF PRE-1991 POLICIESUnder Utilisation of CapacityConcentration of Economic PowerLicensing Promoted Corruption, Rent-seeking and DiscriminationDelay in Processing of ApplicationsIncreased Regional Imbalances

GENESIS OF NEW INDUSTRIAL POLICY 1991Balance of Payment CrisisLicense-Permit- Quota RajTo Unshackle the Industrial Sector from Administrative and Legal Controls.To Make Industry Competitive by Increasing Efficiency

PUBLIC SECTOR POLICYDilution of Public Sector Role: only 08 industries As on Date Only 03 industries (i) Atomic Energy (ii) Rail Transport and (iii) Radio Active MineralsDivestment of PSUsGreater Autonomy to PSUsChronically Sick Enterprises to be Referred to BIFR.Facilities to Labourers

Abolition of Industrial Licensing: Only 18 Industries Related to Security and Strategic Concerns, Social Reasons, Hazardous Chemicals and Items of Elitist Consumption.As of Now Only 05 Industries (i) Alcohol (ii) Cigarettes (iii) Hazardous Chemicals (iv) Electronics, Aerospace and Defense Equipments, and (iv) Industrial Explosive Requires Industrial License.INDUSTRIAL LICENSING POLICY

FOREIGN INVESTMENT POLICY

Automatic Approval for FDI up to 51 % Foreign Equity in High Priority Industries.This is Subsequently Increased to 74% in Some Industries and With the Replacement of FERA (1973) with FEMA (1999), 100% FDI is Permitted in Many Areas.Automatic Approval for Import of Capital Goods (Maximum Limit 2 Crore)

FOREIGN TECHNOLOGY AGREEMENTS (FTAs)Automatic Permission will be Given for FTAs in High Priority Industries up to a Lump-sum Payment of Rs. 1 Crore.5% Royalty for Domestic Sales and 8% for Exports, Subject to Total Payment of 8% of Sales for 10 Year PeriodNo Permission will be Necessary for Hiring of Foreign Technicians and Foreign Testing of Indigenously Developed Technologies.

In Cities with Less Than 1 Million population, No Requirement of Obtaining Location Clearance (Except for Industries Subject to Compulsory Licensing)In Cities with more than 1 Million Population, Industries will be Located Outside 25 kms (other than Non Polluting Industries such as Electronics, Computer Software and Printing) INDUSTRIAL LOCATION POLICY

Threshold Limit of Assets in MRTP Companies RemovedAbolition of Phased Manufacturing ProgrammeReservation for SSIsRemoval of Mandatory Convertibility ClauseEncouragement to Industries in Backward AreasOTHER IMPORTANT FEATURES

IMPLEMENTATION OF NIP 1991Contraction of Public SectorLiberalisation of Industrial Licensing Policy: Only Five Industries are under Compulsory LicensingIntroduction of Industrial Entrepreneurs' Memorandum (IEM) for industries not requiring compulsory licensingLiberalisation of the Location Policy.contd

Five Year Tax Holidays to Power Generation IndustriesIncrease in Lending Limit of BanksAmendments in SICA in 1993 and 2003Increase in Investment Limit of Small EnterprisesMicro Enterprises 25 Lakh (10 Lakh)Small Enterprises upto 5 Crore (5 Crore)Medium Enterprises upto 10 Crore (5 Crore)

.contd

MRTP act Replaced with Competition ActTax Holidays for Industries in Backward AreasEncouragement to Private Sector Participation in Infrastructure

Reimbursement Scheme for Technology Upgradation. Setting up of Foreign Investment Promotion Board (FIPB).contd

Permission to Raise Capital from Foreign MarketsEncouragement to Foreign InvestmentDisinvestment of PSUs

POSITIVE IMPACT OF NIP 1991Increase in ProductionRemoval of Bureaucratic HurdlesIncrease in CompetitionIncrease in Efficiency of Public SectorIncrease in Foreign InvestmentIncrease in ExportsBalanced Regional DevelopmentLess Economic Burden on Government

CRITICISM OF NIP 1991Concentration of Economic powerIncrease in UnemploymentNo Evidence of Positive Effect on ProductivityIgnore Social ObjectivesDistortion in Production Structure: Growth of Capital Goods Industries Declined

Adverse Effect of Small Scale IndustriesMisplaced Faith in Foreign InvestmentDanger of Business Colonisation.Personalized Relationship and Corrupt Practices still ContinueIncrease in Regional Imbalances

INDUSTRIAL DEVELOPMENT DURING PLAN PERIOD

Outlay(Rs. Crore)% of totalOutlayTgt Gwth RateAct. Gwth RateLargeSmall1ST55424.95-7.52ND93818724.0-6.63RD172624123.014.09.04TH286424319.78.04.55TH898959224.37.15.96TH20407178022.86.95.57TH25971324913.48.78.58TH40588633410.87.37.49TH 3358783848.28.25.010TH 5285660833.910.08.611TH 142100115004.210.58.6/2.8

IMPORTANT HIGHLIGHTS OF DIFFERENT PLANS

First Five Year Plan (1951-56): Many Basic and Heavy Industries, Set Up, Namely: Sindri Fertiliser, Chitranjan Locomotive, HMT, U.P. Cement Industry, Indian Telephones, Indian Cables, DDT and Penicillin Factories.Second Five Year Plan (1956-61): Based on IPR 1956 and Mahalanobis Model; Major Industries: Steel Plants at Bhilai, Durgapur and Rourkela.

Third Five Year Plan (1961- 66): Focus on Expansion of Heavy Industries. Major Industries: Bokaro Steel Plant, Machine Tool Factory at Pinjore and HyderabadFourth Five Year Plan (1969-74): No Worth While Change in Industrial StructureFifth Five Year Plan (1974-79): Focus on Development of Core/Basic and Export Industries, Balanced Development, Modern Technology

Sixth Five Year Plan (1980-85): Main Objective - Optimum Utilisation of Existing Capacity and to Increase Productivity. Focus: Capital Goods Industries Specially Electronic Industry, Adoption of New Technologies.Seventh Five Year Plan (1985-90): Main Objective - Increasing Production of Consumer Goods and to Increase Productivity. Focus: Achievement of Self Sufficiency in Defense Production, Development of Sunrise Industries like Electronics.

Eighth Five Year Plan (1992-97): More Importance to Private Sector, Public Sector in Core and Basic Industries only; Top Priority to Capital Goods Industries.Ninth Five Year Plan (1997-2002): More Importance to Private Sector, Development of Backward Areas, Increasing Industrial Efficiency, MRTP Ceiling Removed.Tenth Five Year Plan (2002-07): Focus on Infrastructure Development, R&D, Technical Development and Modernization. Special Concessions to EOUs.

ELEVENTH FIVE YEAR PLAN(2007-12)Strengthening Manufacturing Sector, Making Indian Industries more Competitive, strengthening infrastructure, Focus On Pharmaceuticals, Auto-Components and TextilesSpecial Concessions for MSME and Labour Intensive IndustriesEmphasis on Technological ImprovementWider Role for Private SectorFlexible Labour Laws

ACHIEVEMENTS DURING PLANNING PERIODVast Network of Infrastructure DevelopedIncrease in the Share of Industrial Sector in National Income: 16% to 25.9%.National Defense and Self independenceDevelopment of Public SectorModeranisationIncrease in Foreign CollaborationIncrease in Government Income

DEVELOPMENT OF STRONG INDUSTRIAL BASE

INDUSTRIESUNITS1950-512007-08Finished SteelLakh Tonnes10552ElectricityBn. kwh5.1704Crude OilLakh Tonnes03341FertilisersThousand Tonnes1814738CementLakh Tonnes271683Passenger CarsThousands7.91545Clothbn. sq. Mtrs4.555

WEAKNESS OF INDUSTRIAL EVELOPMENT DURING PLANSUnder-utilisation of CapacityIrregular Increase in Industrial ProductionIncrease in Monopoly PowerPoor Performance of Public SectorIndustrial SicknessIndustrial DisputesPoor Quality ProductionRegional Imbalances

FDI Foreign Direct Investment SSIs Small Scale IndustriesEOUs Export Oriented UnitsPSUs Public Sector Units.MRTP - Monopolistic & Restrictive Trade Practices FERA - Foreign Exchange Regulation Act FEMA - Foreign Exchange Management Act SICA Sick Industries Companies ActBIFR Board for Industrial & Financial ReconstructionABBREVIATIONS USED

Excess Capacity Trickle Down EffectCompetition ActLabour RelationMemorandum of Understanding (MOU)License-Permit-Quota RajBalanced Regional GrowthPhased Manufacturing ProgrammeNEW/KEY TERMS

S.C. Kuchhal, Industrial Economy of India Chaitanya Publishing House. R.K. Misra AND V.K.Puri, Indian Economy Himalaya Publications. Ruddar Dutt and K.P.M. Sundaram, Indian Economy Sultan Chand. Uma Kapila, Understanding the Problems Of Indian Economy Academic Foundation.

REFERENCES

Evaluate Industrial Development during the Period of Planning in India. What Have been the Causes of Slow Industrial Growth during Planning Period? Explain the Industrial Policy Resolution of 1991. What New Changes have been Introduced in it? Evaluate it.Discuss the Main Features and Shortcomings of New Industrial Policy of India. FAQs