Industries

Industries – India has been successful in achieving autonomy in producing different basic and capital products since independence. Since independence to 1980 there was restrictive growth of private sector and government’s permission was required to set up any private enterprise in India. Other factors such as poverty and famine lowered India’s economic growth rate during this period. Post 1980s India saw liberalization and achieved further impetus in Mid-1991.

Industries

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The Industrial Policy Resolution of 1948 marked the beginning of the evolution of the Indian Industrial Policy. In the Industrial Policy of 1948, the importance of both public sector and private sector was accepted. However, the responsibility of development of basic industries was handed over to Public Sector.

The Industrial Policy Resolution of 1956 gave the public sector strategic role in the economy. It categorised industries which would be the exclusive responsibility of the State or would progressively come under state control and others. Earmarking the pre-eminent position of the public sector, it envisaged private sector co-existing with the state and thus attempted to give the policy framework flexibility.

The main objective of the Industrial Policy of 1956 was to develop public sector, co-operative sector and control on private monopoly. There were four categories of industries in the Industrial Policy of 1948 which was reduced to three in the Industrial Policy of 1956.

In 1973, Joint Sector was constituted on the recomendations of Dutta Committee. The Industrial Policy of 1980 was influenced by the concept of federalism and the policy of giving concession to agriculture based industries was implemented through in it. Various liberlised steps to be taken were declared at comprehensive level, in the Industrial Policy declared on 24th July, 1991.

New Economic Policy

New Economic Policy is related to economic reforms. Its aim is to bring about reforms in production pattern, to obtain new technology and to use full capacity expeditiously and in Toto.

The New Economic Policy was devised and implemented, for the first time in the year 1985 during the period of Prime Minister Rajiv Gandhi. The second wave of new economic reforms came in the year 1991 during the period of P.V. Narsimha Rao government.

The main reason to start new economic policy (1991) was Gulf-War and problem of balance of payment in India.

Three main objectives of new economic policy were — Privatisation, Liberalisation and Globalisation.

Main sectors of new economic reform policy, 1991 were — Fiscal Policy, Monetary Policy, Value Fixation Policy Foreign Policy, Industrial Policy, Foreign Investment Policy, Business Policy and Public Sector Policy.

The following four main steps were taken under the Fiscal Policy, 1991:

  • To control public expenditure strictly
  • To expand Tax Net
  • To observe discipline in management of funds of Central and State governments.
  • To curtail grants (subsidy)
  • Under the Monetary Policy, steps were taken to control inflation.
  • Measures implemented under the Industrial Reforms Policy, 1991 were:
  • Delicencing of industries except the list of 18 industries.
  • M.R.T.P. norms were relaxed for disinvestment.
  • The areas reserved for public sector were opened to private sector.
    The objectives fixed for reforms in the Foreign Investment Policy, 1991 were:
  • Direct foreign investment upto 50% was given automatic approval, in many industries.
  • Foreign companies, involved in export activities were allowed to invest upto 51% capital.
  • The government gave automatic approval for Technology Agreement in the industries of high priorities.
  • Under the Trade Policy 1991, steps were taken to abolish the excessive protection given to many industries, for the promotion of international integration of economy.
    The measures implemented to bring efficiency and market discipline under the Public Sector Policy 1991 were as under:
  • Number of reserved industries decreased to 8. Presently these are only four.
  • The work of rehabilitation of sick industries handed over to Board of Industrial Financial Reconstruction.
  • Industries were made powerful with the help of Memorandum of Understandings (MoU)
  • Voluntary Retirement Schemes started to cut down the size of work force.

Economic Reforms

Economic Reforms were introduced in 1991 in India. First Generation Reforms were aimed at stabilisation of Indian economy and were macro level in nature. It includes liberalisation & deregulation of industry, financial sector reforms, taxation reforms etc. Second Generation Reforms aimed at structural changes and are micro level in nature. It will include labour reforms, land reforms, capital market reforms, expenditure reforms and power sector reforms etc.

Since economic reform, poverty has been declining from 36% in 1993 to 26% by the end of 10th plan. But as far as inequality is concerned it has increased. A World Bank Report 1999-2000 confirms this rise in inequality. 100% foreign investment has been approved 100% export originated units. The limit of foreign investment in some industries and Industrial sectors were as under:

Industrial SectorLimit of foreign investmentIndustrial SectorLimit of foreign investment
Banking sector49%Private Sector Banking74%
Insurance Sector26%Building of harbour100%
Electricity and Energy100%Tourism100%
Telecommunication74%Small Industry Sector24%
Petroleum100%Gold Silver Jewellary50%
Medicine Industry51%Civil Aviation49%
Non Banking Financial51%

Disinvestment means to decrease the share of government in the industries. In 1996, Disinvestment Commission was constituted to review, give suggestions and make regulations on the issue of disinvestment.

Shri G.V. Ramkrishna was the first Chairman of Disinvestment Commission.

In the year 1992, National Renewal Fund was constituted for rehabilitation of displaced labourers of sick industrial units affected due to industrial modernization, technological development etc.

“Navratna” is a company which is rising at world level. To encourage these companies, the government has given them complete autonomy. 11 such companies have been identified.

In the second phase of economic reforms programme, the main aim is to eradicate poverty from the country and development at the rate of 7 to 8%.
Some Important Terminology Relating to the New Economic Reforms Policy:

Privatisation — To increase participation of private sector in the public sector companies by capital investment or by management or both or to hand over a public sector unit to a private company is called Privatisation.

Liberalisation — Liberalisation is the process by which government control is relaxed or abolished. In this process privatisation is also included.

Globalisation — The process of amalgamation of an economy with world-economy is called Globalisation. It is signified by lower duties on import & export. By doing so, that sector will also get private capital and foreign technology.

Disinvestment — To reduce the govt. share in the public sector is called disinvestment.

Public Sector

In terms of ownership public sector enterprise (PSE) comprises all undertakings that are owned by the government, or the public, whereas private sector comprises enterprises that are owned by private persons.

In case of private sector the main objective is maximization of profits whereas PSE’s mainly aim for fulfillment of public, or social interest.

The main Objectives of Public Sector are:

  • To promote rapid economic development through creation and expansion of infrastructure;
  • To generate financial resources for development;
  • To promote redistribution of income and wealth;
  • To create employment opportunities;
  • To encourage the development of small scale and ancillary industries;
  • To promote exports on the new side and import substitution on the other; and
  • To promote balanced regional development.

Navratna Maharatna and Mini Ratna

Navratna was the title given originally to nine Public Sector Enterprises (PSEs), identified by the Government of India in 1997 as its most prestigious, which allowed them greater autonomy to compete in the global market. The number of PSEs having Navratna status has been raised to 16, the most recent addition being Oil India Limited.

PSU companies are divided into three categories:

  • Maharatna
  • Navratna
  • Miniratna CPSEs: Category I & Category II

In 2009, the government established the Maharatna status, which raises a company’s investment ceiling from Rs. 1,000 crores to Rs. 5,000 crores. The Maharatna firms would now be free to decide on investments up to 15 percent of their net worth in a project. Earlier, the Navaratna companies could invest up to Rs 1,000 crore without government approvals.

Criteria:

In order to qualify as a Maharatna, the process is bottoms up. This means the lowest employee should be proud of his/her company and contribute to the same according to the global standards. The 6 point criteria for eligibility as Maharatna are:

Having Navratna Status

  • Having Navaratna Status
  • Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.
  • An average annual turnover of more than Rs. 20,000 crores during the last 3 years. Earlier it was Rs. 25,000 Crores.
  • An average annual net worth of more than Rs. 10,000 crores during the last 3 years. Earlier it was Rs. 15,000 crore.
  • An average annual net profit after tax of more than Rs. 2500 crore during the last 3 years. Earlier it was Rs. 5000 crore.
  • Should have significant global presence/international operations.

List of Maharatna

  • Coal India Limited
  • Indian Oil Corporation Limited
  • National Thermal Power Corporation
  • Oil and Natural Gas Corporation Limited
  • Steel Authority of India Limited
  • Baharat Heavy Electricals Limited
  • Gas Authority of India Limited

Navratna Status

Navratna was the title given originally to nine Public Sector Enterprises (PSEs), identified by the Government of India in 1997 as its most prestigious, which allowed them greater autonomy to compete in the global market. The number of PSEs having Navratna status has been raised to 16, the most recent addition being Neyveli Lignite Ltd .

List of Navratna CPSEs

  • Bharat Electronics Limited
  • Bharat Heavy Electricals Limited
  • Bharat Petroleum Corporation Limited
  • GAIL (India) Limited
  • Hindustan Aeronautics Limited
  • Hindustan Petroleum Corporation Limited
  • Mahanagar Telephone Nigam Limited
  • National Aluminium Company Limited
  • National Mineral Development Corporation Limited
  • Neyveli Lignite Corporation Limited
  • Oil India Limited
  • Power Finance Corporation Limited
  • Power Grid Corporation of India Limited
  • Rashtriya Ispat Nigam Limited (Vizag Steel)
  • Rural Electrification Corporation Limited
  • Shipping Corporation of India Limited

Miniratna Status

In addition, the government created another category called Miniratna. Miniratnas can also enter into joint ventures, set subsidiary companies and overseas offices but with certain conditions. In 2002, there were 61 government enterprises that were awarded Miniratna status. However, at present, there are 63 government enterprises that were awarded Miniratna status.

Category I: This designation applies to PSEs that have made profits continuously for the last three years or earned a net profit of Rs. 30 crores or more in one of the three years. These miniratnas granted certain autonomy like incurring capital expenditure without government approval up to Rs. 500 crore or equal to their net worth, whichever is lower.

Category II: This category include those PSEs which have made profits for the last three years continuously and should have a positive net worth. Category II miniratnas have autonomy to incurring the capital expenditure without government approval up to Rs. 250 crore or up to 50% of their net worth whichever is lower.

Small Scale Industries: Small scale and cottage industries have an important role to play in a labour surplus developing economy like India. Their importance can be explained as:

  • Employment Generation — Large scale industries are generally capital intensive. Small-scale industries, on the other hand, are generally labour intensive and have a substantially higher employment potential.
  • Equitable Distribution — The ownership of SSIs is more wide spread inter of both individuals as well as areas. Thus, these ensure equitable distribution of income individually and regionally.
  • Mobilisation of Small Savings — S.S.Is can be run with the help of small capital. Thus, they facilitate mobilisation of small savings.
  • Export Contribution — The share of small industries in the total export has increased over the years. It contributes 35% of total exports.
  • Environment Friendly — As these are dispersed far away from urban centres they do not pollute urban environment.
    However, Small Scale Industries are suffering from a number of problems like (i) Lack of timely, adequate and easy finance,
    (ii) Lack of availability of raw material,
    (iii) Lack of sound marketing system,
    (iv) Competition with large scale sector.

Sick Industries — A sick unit is one which is in existence for at least five years and had found at the end of accounting year that it had fully eroded its net worth. 30,000 units fall sick every year. A weak unit is one which erode 15% or more of its net worth.

  • Cloth Industry is the largest industry in the country. The share of Cloth Industry in total industrial production is about 20%. It also contributes 38% in total exports of the country. This industry provide& employment to about 200 lath people in the country.
  • At present there are 112 cotton mills in Gujarat. In Ahmedabad alone, there are 66 mills. It is known as Bostan of East. In Maharastra there are 104 mills out of which 54 alone are in Mumbai. Mumbai is called cottonopolis. In Kanpur there are 10 cotton mills and this city is called Manchester of North India.
  • The first cycle making factory of India was established in Calcutta in 1932. India holds second place in the field of cycles production in the world. About 90 lath cycles are produced annually in India.
  • The share of small and cottage industries in total Industrial exports of India is 35%.
  • Small and Cottage Industries were given high priority in the Industrial Policy of 1977.
  • District Industry Centres were established in 1977. Presently there are 422 District Industry Centres in the country.
  • With the aim to provide finance, SIDBI i.e. Small Industries Development Bank of India was established in 1990.
  • Abid Husain Committee is related to reforms in small industries.
  • The industries in which maximum Rs.1 crore is invested are called Small Industries.
  • The maximum limit of investment in Cottage Industry is rupees 25 laths.
  • Industrial Financial Corporation of India (IFCI) was established on 1st July, 1948 by a special Act of Parliament.
  • The main aim of IFCI was to make available long-term and middle-term credit to the Industries of Private and Public Sectors.
  • Industrial Credit and Investment Corporation of India (ICICI) was established in 1955 under the Indian Companies Act.
  • The function of ICICI is to support the establishment, development and modernization of industries in the private sector.
  • Industrial Development Bank of India is an apex institution in the field of industrial finance.
  • Industrial Development Bank of India (IDBI) was established on 1st July, 1964.
  • Industrial Reconstruction Board of India (IRBI) was established in 1971 with the aim to reconstruct the sick industrial units.
  • Unit Trust of India was established in 1964.
  • Unit Trust of India (UTI) collects small savings of people through sale of units and invests them into sureties.
  • Life Insurance Company now Life Insurance Corporation of India or (LIC) was established in September 1956.
  • The head office of Life Insurance Corporation of India is in Mumbai. Presently, it has 7 zonal offices and 100 regional offices.
  • General Insurance Company of India (GIC) was established in 1972.
  • Indian Industrial Investment Bank Limited was established on 17th March, 1997 by the government, under Companies Act 1956. Presently, its authorized capital is 1000 crore rupees and its head office is in Kolkata.

Small Enterprises Sector

  • The employment provided by the sector is estimated to be over 280 lakh persons at present.
  • In recognition of this role, the SE sector has been assigned targets of 12% annual growth in production and creation of 44 lakh additional employment opportunities in the Tenth Five-Year Plan.
  • Micro, Small and Medium Enterprise Development Act, 2006
  • Small and Medium Enterprised Development Bill 2005 (which was introduced in the Parliament on May 12, 2005) has been approved by the President and thus became an Act.
  • This new Act, named as ‘Small and Medium Enterprise Development Act, 2006’ has become effective from October 2, 2006.
  • This Act makes a different category for medium level enterprises.
  • This Act provides the first-ever legal frame work for recognition of the concept of ‘enterprise’ (comprising both manufacturing and services) and integrating the three tiers of these enterprises, viz., micro, small and medium.

Brief Introduction of Indian Industry

First time in India, the textile industries came into being. First Factory of Cotton Textile in India was established in 1818 at Ghughari near Kolkata, which failed. The second Factory of Cotton Textile was established by a businessman Kawas Ji Nana Bhai in Mumbai in 1853.

In 1855, first Jute Factory was established in Rishara (West Bengal).

In 1853, after the establishment of railway in India industrial development got momentum here. Rapid expansion of Indian industries started due to development of the means of communication.

Jamshedji Tata established first Steel Factory in Jamshedpur in 1907.

Steel

  • Iron and steel Industry took birth in India in the year 1870 when Bengal Iron Woks Company established its plant at Kulti, West Bengal.
  • Large scale iron and steel production was started in 1907 by TISCO, established at Jamshedpur (Jharkhand).
  • As per the data from International Iron and Steel Institute (TISI) India is the 7th largest producer of steel in the world.
  • At present India is the 9th largest Crude Steel producing country in the world.
  • Today, India is the largest producer of sponge iron in the world.

Automobile Industry

  • Automobile Industry was delicensed in July 1991 with the announcement of the New Industrial Policy.
  • The passenger car was however delicensed in 1993.
  • At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including the passenger car segment.
  • The industry also offers the substantial scope of employment with 4.5 lakh direct employment and about one crore indirect employment.

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Important Questions on Industries

Questions 1
Which country/countries started privatisation of state-owned enterprises as a major State policy? [SSC Grad. 2003]
(a) U.K. under Mrs. Margret Thatcher
(b) Russia in the C.I.S.
(c) Mexico / Argentina / Brazil
(d) Italy / France / Malaysia

Questions 2
One of the objectives of Industrial Licensing Policy in India was to ensure: [SSC Grad. 2004]
(a) Creation of adequate employment opportunities
(b) Free flow of foreign capital in Indian industries
(c) Use of modern technology
(d) Balanced industrial development across regions

Questions 3
Why did the Supreme Court, in their judgment of September, 2003, hold that privatisation of HPCL and BPCL was not permissible? [SSC Grad. 2004]
(a) Due process of law for disinvestment had not been followed
(b) It is against the interest of the capital asset in the form of their employees
(c) It had not been recommended by the Disinvestment Commission
(d) It is in conflict with the statutes that created HPCL and BPCL

Questions 4
Which of the following is NOT an immediate indicator of industrial sickness? [SSC Grad. 2006]
(a) Drop in profitability
(b) Labour unrest
(c) Shrinking of market credit
(d) Decline in market share

Questions 5
Which of the following is the classification of industries on the basis of raw materials? [SSC Sec. Off. (Aud.) 2006]
(a) Small Scale and Large Scale
(b) Primary and Secondary
(c) Basic and Consumer
(d) Agro-based and Mineral

FAQs on Industries

___ is a Navaratna PSE?

Mahanagar Telephone Nigama Ltd is a Navaratna PSE.

What are the ‘Core Industries’ in India?

Electricity, Coal and Petroleum Products are the ‘Core Industries’ in India.

Which is the biggest enterprise of the Government of India?

The biggest enterprise of the Government of India is Railway.

Which car company has launched the cheap car ‘Nano’?

Tata Motors Ltd has launched the cheap car ‘Nano’.

Since when disinvestment started in public enterprises?

Since 1991-92 disinvestment started in public enterprises.

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