Class: +2
Subject: Economics
Part: Indian Economic Development
Chapter-4
Industry: Features, Problems and Policies
Assignment No.: 16-24
Question: What is the importance of industries in the economic development of the country? Answer:
Industries are very important for the rapid economic development of the economy. Industrialization can
make better use of a country's natural and human resources. Industrial development helps in solving the
problems of the country such as poverty, insecurity, unemployment, overpopulation, backwardness,
dependence on agriculture, unfavourable balance of payment etc. Industrial development brings significant
changes in the structure of the national economy. Thus industries make a significant contribution to the
development of both the individual and society. The contribution of industrial development to the Indian
economy is evident from the following facts:-
1. Balanced Development: - The Indian economy is unbalanced because most of the country's population
and capital is engaged in agriculture. India's agriculture is backward and mainly dependent on rainfall. As a
result, an atmosphere of uncertainty persists in the country. Due to low or high rainfall or untimely rains,
the economy fluctuates drastically. Lack of industry is increasing the pressure on agriculture of population.
Rapid growth of industries is essential for the balance of the economy. Industries are more productive.
There are more employment opportunities in industries. The development of industries will result in the
development of agriculture and other sectors. In this way the development of industries will make the
economy balanced.
2. Increase in Productivity: - Industrialization is the right solution for lower levels of productivity in the
Indian economy. The agricultural sector cannot play this role. In agriculture, maximum production is
through natural resources, while in industry it is related to human endeavours. The division of labour, the
use of specialization of machines and large-scale production systems contribute more to the development
of industries. As a result, productivity per worker increases. As the rate of industrial growth increases.
There is an increase in scale savings and Internal and External Economies. Consequently it increased
productivity and productivity in agriculture, trade, services, transportation, and other sectors.
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3. Increase in National Income of Country:- Due to industrial development, more use of natural
resources of the country will be possible. In this way, there will be increased in production. Industires
increase the value of product. Industires are helpful for increase in the value of agriculture produce by the
food processing on it. Opportunities for innovation abound in the industry. This makes it possible to
produce goods with higher selling value. This increases the likelihood of production and value addition by
industries. This results in an increase in national income. The contribution of industry and services to the
national income in the year 2017-2018 was about 29% and 54% respectively.
4. Development of Agriculture:- From an industrial point of view, agricultural productivity of developed
countries is higher than that of under developed countries. In the United States, 2% of the agriculturally
dependent population not only meets the needs of that country, but also exports heavily abroad. In contrast,
India's dependence on agriculture can meet the agricultural needs of 50% of the population. The growth of
industries will increase the productivity of the agricultural sector. The agricultural sector needs advanced
farming machines, chemical fertilizers, electricity etc. to increase its productivity. Due to the development
of industries in India, agriculture will also be the major occupation of the country.
5. Increase in Employment :- The development of industries results in the establishment of new
industries. Due to this the demand for labour in the country increases and more people start getting
employment. India's agricultural sector is already experiencing high levels of unemployment due to
overwork and overpopulation. Unemployment is likely to rise further after the mechanization of
agriculture. More employment opportunities are being created in industries due to the implementation of
increasing return to scale. The disguised unemployed will be able to find employment in agriculture and
allied activities, trades, transportation professions. The development of cottage, small, medium and large
scale industries in India will provide employment to a large number of people.
6. Improvement in Standard of Living of People :- Industrial development has a significant contribution
to make in raising the living standards of the people. This is because, when people's food needs are
satisfied, they need a variety of industrial products such as fine clothes, home appliances, televisions, cars,
scooters, refrigerators, etc. to raise their living standards. . In addition, as industries grow, so does
employment and income also increase. This increases the purchasing power of industrial goods required for
higher living standards.
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7. Increase in Capital Formation:- Capital formation for India's economic growth depends on savings and
its investment. People's income increases as industries grow. Marginal propensity to save tends to increase
as income increases. People seem to be saving more income. The growth of industries also increases the
profitable investment opportunities and facilities. This is how people invest their savings easily. This
increases the rate of capital formation.
8. Role in National Defence:- Industrial development makes a significant contribution to the security of
the country. The modern country needs a variety of advanced weapons, tanks, airplanes, ships, helicopters,
etc. for the security of the country. Reliance on foreign sources for war materials would be detrimental to
the country's security. Prominent economist Adam Smith, a staunch supporter of free trade, also called for
the establishment of war materials industries in the country. Therefore, after India's independence, various
war materials manufacturing industries were set up in India.
9. Growth with Stability :- As a result of industrial development the objectives of stability in the economy
are established because there are no more fluctuations in the economy. The reason being that an agricultural
product is uncertain due to its dependence on nature. Due to which there is a high probability of
fluctuations. Production is sometimes too high and sometimes too low. As a result, uncertainty persists in
the economy. On the other hand, Industry production depends on human labour and appropriate
government policies. They are less likely to fluctuate. So economic growth can be built with considerable
stability. Due to this, the country's economy continues to grow.
10. Development of Human Capital: - Human capital means the efficiency, education, technical and
scientific knowledge, health, discipline, etc. of the people of a country. Progressive human capital is an
important element of economic development. The development of industries is essential for the
multifaceted development of the people and society of a country. This produces many important qualities in
people. They develop the qualities of discipline, scientific approach, punctuality, research, inventions,
technological advancement, etc. In an underdeveloped country like India where most people are unskilled,
illiterate, conservative, poor, sick, there is a lot of importance for the development of industries.
Question: What are the various problems of Industrial development in India? Answer: Prior to
independence, there was very little industrial development in India due to the colonial policy of the British.
But in the post-independence five-year plans, the industrial development of the country has been given
special importance as a result the base of industrial development has become very strong. Many important
and many new industries have been established in the public sector. As a result of
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public and private sector efforts, India is becoming the tenth largest industrialized country in the world.
Despite many successes towards industrial development, the rate of industrial development in India is very
low compared to many other countries. This is due to several problems in the industries of India, which are
described as follows: -
1. Problem of Power Resources: - It is necessary to obtain adequate and sufficient amount of power
resources for industrial development. The three major sources of electricity in India are electricity, coal and
oil. In India, both thermal and hydropower resources are less than necessary. Most of the coal in India is of
inferior quality. In India, the demand for petrol, diesel etc. is very high as compared to the supply, hence
they have to be imported in large quantities and due to which there is shortage of power resources for the
industries.
2. Capital Problem: - Capital is very important for the development of industries. In many countries, the
amount of capital depends on savings and investment. The amount of savings depends on the income.
People in India have very low income for which it is not possible for them to invest by saving. 3. Problems
of Economic Structure: - Developed economic structures such as transport and communication are very
important for industrial development. But in India, modes of transport such as road, motor transport,
railways, water transport, air transport have developed. But this is far less than the requirement.
4. Essential Machinery and Plant Problems: - There is a great need for latest and modern machinery for
the development of industries. The machine industry of India is not able to supply the latest machinery of
all types of industries.
5. The problem of Old Machines:- Many important industries of India like textile, sugar, cement, iron etc.
machines have become very old. The use of older machines increases production costs and produces
inferior quality. As a result, our industries cannot compete with foreigners.
6. Raw Material Problem:- Many industries in India do not get fair price, good quality raw material.
Many industries in India have to import raw materials. for example, industries like chemical industry,
engineering industry, car, computer etc. have to depend on foreign countries for their raw materials.
Foreign currency is required for raw materials imported from abroad. Due to lack of currency in the
country, good quality raw materials have to be imported in sufficient quantities.
7. Problem of Regional Inequality:- Regional inequality is a major problem of industrial development in
India. There is a huge imbalance in the industrial development of various parts of the country. Many
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states such as Maharashtra, Gujarat, Karnataka, Andhra Pradesh, Tamil Nadu, Uttar Pradesh, Madhya
Pradesh, West Bengal etc. are very developed in industrial terms. About ¾ of the country's industries are
located in these states. Many states have very few industries. As a result, there is the problem of regional
inequality.
8. Problem of utilization of production capacity: - One of the major problems of industrial development
in India is insufficient utilization of production capacity. This leads to lower production on the one hand
and higher production costs on the other.
9. Problems of industrial disputes: - A major problem of industrial development in India is related to
industrial disputes. In India, strikes and lockouts continue due to disputes between trade unions and
employers, leading to lower production and less industrial profits.
10. Low Growth of Small Scale Industries: - As a result of industrialization in India, large scale
industries have grown faster than small scale industries. As a result, small scale industries have developed
less.
Due to the above problems, the industrial growth rate in India is low and there is less growth of industries.
Question: What suggestions can be given for the development of industrial sector in India? Answer:
Following suggestions can be given for industrial development:
1. Development of private sector: - Government should provide more facilities to private sector. As a
result, entrepreneurs will be encouraged to establish new industries. They will be able to develop old
industries.
2. Promotion of capital formation: - More capital facilities can be provided for industrialization, such as
tax exemption. Therefore, more exemptions should be given to households.
3. Enhancing the efficiency of the public sector: - The efficiency of the public sector should be
increased. Basic industries like iron and steel, heavy machinery etc. should be developed more efficiently
in this area. India will have a strong infrastructure for industrialization.
4. Promotion of foreign capital: - The country is in dire need of capital and modern technology. Thus,
foreign investment should be encouraged on favorable terms in the country. As a result, industrial
development will be possible.
5.Import of modern machines: - Import of modern machines, spare parts and raw materials should be
allowed from abroad. Necessary foreign exchange should also be allowed for this. Banks and other
financial institutions should provide long-term loans to purchase machines at low interest rates.
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6. Proper development of natural resources: - Proper development of natural resources of the country
will prove beneficial for the industrialization of the country. Natural suns are available in large quantities in
India. But they have not been fully utilized. New industries may be established as a result of the
development of natural resources.
7. Development of export industries: - Special arrangements should be made for the development of
those industries in the country. As a result of which the country will be industrialized and another will be
able to earn foreign exchange.
8. Industrial Peace: - Industrial peace is very much needed for the industrial development of the country.
The relationship between employer and workers should be good. Workers should get the full reward for
their hard work. Strikes and lockouts would be avoided as a result of industrial peace, which would provide
impetus for setting up new industries.
9. Dissemination of administrative and technical education: - For industrial development in India, it is
necessary to spread administrative and technical education in the country. Qualified managers and
engineers will contribute significantly to industrial development.
10. Infrastructure Development: - To increase the rate of industrial development in India, infrastructure
like transportation and means of communication should be developed. Current Power Resources Current
power resources should be developed so that industries can get adequate power resources. Foreign capital
can be invited for this. Along with this, industries can be run continuously.
Question: What are the various government measures for the development of industrial sector in
India?
Answer: The Government of India has taken the following steps for the development of industries: - 1.
Encouragement of Foreign Investment: - The government has reduced the tax rate on foreign companies'
profits to 30% to boost foreign investment. As a result, there has been a significant increase in foreign
investment. The new industrial policy of 1991 has given considerable impetus to the investment of foreign
capital. The government has set up a Foreign Investment Board to allow foreign capital investment.
Foreign direct investment (FDI), which was only 9.7 million $, has increased to 37 billion $ in 2009-2010.
2. Special Facilities to Export Oriented Units: - In order to increase the export of goods in the country, it
is necessary to overcome the difficulties of the exporter. In this regard, the government has established the
Development Commission, for 100% export-oriented units, which were earlier with the Ministry of
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Finance. This has reduced the problems of such units. The Trade Promotion Organization has been set up
to promote export-oriented industries. 7 Export Processing Zones have been set up in different parts of the
country for the development of export-oriented industries. These zones are in Kandla, Santacruz, Falta,
Noida,Chennai Cochin and Vizag.
3. Facility of Electricity: - The government has made great efforts to increase power generation for the
development of industries. Therefore, many multi-pronged schemes like Bhakra Nangal, Damodar Valley,
Mahanadi Valley Scheme, etc. have been initiated. Many nuclear power and thermal power plants have
been set up. The increase in power generation has led to a significant increase in the rate of industrial
development.
4. Establishment of Financial Institutions: - The government has set up several financial institutions to
provide credit facilities to the industries. The Government of India has set up financial institutions such as
the Industrial Development Bank of India, Industrial Financial Corporation of India, State
Industrial Development Corporation. These institutions provide short-term, medium-term and long-term
loans to industries at low interest rates.
5. Establishment of New Industries: - The Government of India has set up many new industries in the
public sector, joint venture such as pharmaceuticals, televisions, cars, locomotives, etc. The establishment
of new industries in the private sector has been given a lot of impetus. Industries have been set up in the
country for the production of engineering equipment, computers and electronics.
6. Facilities of Transport and Communications: - The Government of India has substantially developed
the means of transportation and communication to accelerate industrial development. The development of
means of transportation such as railways, roads, boats, ships, airplanes help in transporting raw materials or
finished goods to markets and ports. This has led to increased opportunities for decentralization in
industries. The development of means of communication such as telephone, telegraph, courier services,
mobile facilities has increased the efficiency of industries.
7. Facilities of Inventions and Technical Development: - Great efforts are being made by the
Government of India to facilitate research and technological development for industrial development. The
government announced the Technology Policy Statement in 1983 for technological development. The aim
is to develop indigenous technology and make proper use of imported technology. Government of India
facilitates to The Department of Scientific and Industrial Research, for technological development and
innovation in industries.
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8. Facilities to Rehabilitate Sick Industrial Units: - The Government of India has made significant
efforts to rehabilitate ailing industrial units. Industrial Reconstruction Bank of India was established for
this purpose. The government has set up a National Textile Corporation for the Rehabilitation of 124 Sick
Textile Mills. In 1987 the Board for Industrial and Financial Reconstruction was set up for this
purpose.
9. Facilities for industrialization of Backward States: - The government has provided special facilities
for industrialization of industrially backward areas and villages. More Central Government industries have
been set up in backward areas like Bihar, Madhya Pradesh, Odisha etc. Industrial settlements, focal points
etc. have been set up in backward areas. Financial assistance is given to industries established in these
states.
10. Facility for Standardization of Industrial Goods: - The government set up the Bureau of Indian
Standards in 1947 to improve and standardize the production quality of industries. This Bureau sets
standards for industrial goods on a national and international basis. Industries that produce according to the
standards set by this bureau are allowed to be branded as ISI.
Question: What do you mean by Industrial Policy?
Answer: Industrial policy may be referred to as a set of specific rules, regulations, procedures and
principles which are designed and followed to attain certain specific objectives concerning industrialization
of the country. Generally, the objectives of industry policies are rapid industrialization, employment
generation, economic development, balanced growth, regulation of private sector and foreign capital, self
reliance etc.
In other words, industrial policy means, a pre-determined course of action which is followed to
industrialise a nation.
• Industrial policy studies all aspects related with industry e.g., taxation system, foreign investment and
protection policy
• Industrial policy involves those principles and activities which are pursued and performed to develop a
country industrially.
Question: What is the need of an Industrial licensing policy?
Answer: A license is a written permission granted by the government to a productive enterprise to carry
out productive and commercial activities as per the rules, regulations and provisions of the law of the land.
The following points explain the need of licensing:
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1. Existing Industrial Unit: Under this system, all those industrial units which were already existing at
the time of enforcement of the industrial (Development and Regulation), Act 1951; and which were
covered under industrial licensing, had to get registered.
2. New Industrial Unit: In order to set-up industrial unit concerning industries covered under licensing,
it was mandatory to obtain licence.
3. For Producing New Articles: If an industrial unit has already obtained license for producing some
products and now if wants to produce new product which is not covered under the existing license then
it will have to take prior approval under Industrial Licensing Policy to start production of this new
article.
4. Substantial Expansion: If a licensed industrial unit wanted to expand its capacity beyond 25 % of its
existing licensed capacity, then it is also needed government permission for that. 5. License for
Location: If an industrial unit wanted to change its location, prior approval had also to be obtained from
government. Only after obtaining approval the location can be changed.
In above mentioned circumstances, if an entrepreneur wants to obtain license, then it must file an
application with the government. After receiving application government makes necessary investigation and
if government find that the industrial unit is not against public interest, then it will grant license to
industrial unit. If later on government finds that industrial unit is not compiling with provisions of
industrial Licensing Policy then it can cancel the license.
Question: Write a note on the Industrial Policy of 1948.
Answer: The first industrial policy of independent India was signed on April 6, 1948 by the then Minister
of Industry, Dr. Shyama Prasad announced Mukherjee. In this policy, the system of mixed economy was
adopted for the industrial development of the country. The main objectives of this policy are as follows. 1.
To build a social structure of equality and justice.
2. To raise the living standard of general public.
3. To increase the production to meet the needs of increasing population.
4. To create the opportunity of employment.
Category A: It includes industries which were very important from the point of view of national security.
The establishment and development of such industries was the sole responsibility of the public sector.
These industries were arms and ammunition, nuclear power, etc.
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Category B: It had 6 basic industries in which both public and private sector can invest. But at the same
time, it was stipulated that after 10 years these private sector industries would be nationalized. These
industries were coal, iron and steel, aircraft manufacturing, shipbuilding, etc.
Category C: This category includes 18 important industries which were operating in the private sector but
whose development and management should be under the control of the government and in accordance
with the rules of the government. These industries were chemical, sugar, cotton and warm textile industries,
cement, paper etc.
Category D: The rest of the industry may be private or private enterprises reserved for private
entrepreneurs. The government will be able to participate in these industries from time to time.
Recommendations: The main recommendations of the Industrial Policy of 1948 are as Follows:
1. Recognizing the importance of small and cottage industries, they were to be developed in accordance
with the rules of co-operation.
2. Laws were enacted to improve the relationship between labor and management so that they could
contribute to industrial production.
3. Foreign capital was taken as a support. But the policy made it clear that most of the ownership and
control in any venture would be in Indian hands.
4. In this policy special attention was given to the development of infrastructure for industrialization of
the country.
5. Strict foreign trade policy adopted under 1948's Industrialization Policy to provide security to Indian
industries.
Question: Write a note on the Industrial Policy of 1956.
Answer: Industrial policy of 1956 was a major milestone in the industrial development of India. It was
initiated in the year 1956 because of the following reasons:
i. First Five-Year Plan had successfully been completed and much experience gained thereby. ii.
Socialistic Pattern of Society was made the main objective of social and economic policy of the country.
Need was felt to accelerate the development of basic and heavy industries for industrial progress.
iii. It was felt necessary to promote further public sector and create a vast and extensive joint sector.
Keeping in view these changes, in 1956 government announced a New Industrial Policy.
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Objectives of the Policy
Main objectives of the New Industrial Policy were as follows:
i. Acceleration of the rate of industrial and economic development to
ii. Development of heavy and machine-building industries
iii. Creation of a large and growing sector
iv. Checking of concentration of monopoly and economic power.
v. It was said that if these objectives were achieved there would be more employment and the standard of
living of the people would rise.
Main Features of the Policy: Main Features of 1956 Policy Salient features of this industrial policy are as
under:
1. Classification of Industries: Large - scale industries have been divided into three categories: i. Public
Sector: Under Schedule Al of the policy, 17 industries were enlisted. These industries will mainly be
under state monopoly. These industries were arms and ammunition, atomic energy, iron and steel, heavy
machinery, heavy electrical parts, mineral oil, coal, air transport, railway transport, shipping, telephones,
wireless apparatuses, copper, lead and zinc mines, generation of electricity, etc.
ii. Public - cum - Private Sector: Under Schedule ' B ', 12 industries were included. These industries were
to be progressively state owned and in the setting up of new undertakings normally government was
to take the initiative. However, private enterprises were also be given opportunities to develop these
industries. It was hoped that the private enterprises would serve as supplementary to state
enterprises. In this schedule were included industries such as aluminium, machine tools, drugs,
chemical fertilisers, road and sea transport, minerals, etc.
iii. Private Sector: Under Schedule ' C ' were included all the remaining industries not included in the
above two categories. Their establishment and development were both left to the care of private
enterprise, but it was to be operated in conformity with the economic and social policies of the
state.
2. Fair Treatment to Public Sector: Provision was made under this policy to promote private sector
industries by giving them facilities of power, transport and finance. Government did not adopt any
discriminating policy against private sector. They will be provided equal opportunities are independence.
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3. Cottage and Small - Scale Industries: An important role was assigned to cottage and small - scale
industries as these industries had potentials to generate more and quick employment, remove the
inequalities in the distribution of wealth and make proper use of the local capital. Government was to make
all - out efforts to promote the development of these industries. To develop them, industrial cooperative
societies and industrial estates were to be established.
4. Balanced Regional Growth: In order to check unbalanced growth of industries in different parts of
the country, special provisions were made in this policy. Those regions which were industrially backward
were to receive priority in the establishment of new industries. More and more facilities were provided for
the development of industries in these regions.
5. Technical and Managerial Personnel: Arrangements were made to impart technical and managerial
training to the personnel of both private and public sectors. Besides special training institutions, business
management courses were started in universities to meet the requirement of managerial personnel.
6. Proper Amenities for Labour: Under this policy, arrangements were to be made to provide proper
amenities for laborers. Emphasis was to be laid on industrial peace which was so essential for industrial
production. Special efforts were to be made to raise the standard of living of laborers and improve their
working conditions. It was resolved to give opportunities to the laborers to participate in management.
7. Proper Management of Public Enterprises: In this policy, emphasis was placed on the importance
of need for decentralization of the management of the public sector. Provision was to be made for the
proper management of public enterprises. It was hoped that these public enterprises would be a source of
adequate revenue to the state and make proper use of the country's resources.
8. Foreign Capital: Several modifications were introduced in the policy concerning foreign capital. To
make use of foreign capital on a large - scale, many concessions were offered. 9. Sectoral
Interdependence: Under the policy, the government was empowered to go in for any kind of industrial
production. The division of the industries into three categories, under this policy, was not rigid and
inflexible. It was flexible and could be changed by the government, if so needed. Industries of one sector
might be allowed to be developed by the other sector.
Question: Write a note on the Industrial Policy of 1991.
Answer: Govt. of India declared its New Industrial Policy on 24 July, 1991. Its basic concept is ‘continuity
with change’. Its main objective is to make Indian Industry free from undue administrative and legal
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controls, improve industrial efficiency, quality and quantity of Indian Industry products to make the
products capable of competition in international market.
Main aspects of New Industrial Policy are as under: -
1. Industrial Licensing Policy
2. Foreign Investment
3. Foreign Technology Agreements
4. Public Sector Policy
5. MRTP Act
Main features of New Industrial Policy: -
1. De-licensing: - According to New Industrial Policy there is no need of licensing except five
industries. These are 1. Alcohol Product 2. Tobacco Product 3. Defense Products (Explosives) 4.
Harmful Chemicals 5. Atomic Products.
2. Abolition of Registration: - According to New Industrial Policy all registration will be abolished.
Entrepreneurs have to inform only about their new and expansion plans.
3. Contraction of Public Sector: - According to this policy the no. of industries secured for public
sector is reduced from 17 to 8. Slowly and slowly, it remained only 2 i.e. Railway and Atomic
energy. All other industries will be opened for private sector now.
4. Foreign Direct Investment and Foreign Capital: - Govt. adopted a liberal and investment oriented
monetary policy to increase FDI. 100% FDI is allowed in domestic airlines, Telecom and FM Radio
Broadcasting during last years. In 1999 Foreign Exchange Regulation act (FERA) is replaced with
Foreign Exchange Management Act (FEMA). FEMA is aimed to facilitate foreign trade and
payments. A high-power board is made that will talk to multinational companies and allow FDI in
some selected sectors.
5. Small Scales Industries: To achieve Balanced Regional Development and Industrial diversification
small scale industry are given top priority. To increase flow of capital, improve management
efficiency and Technology big corporates are allowed to invest up to 24% capital of small
industries. Now small-scale industries are those in which investment in plants and machinery is Rs.
5 Crores.
6. Public Enterprises Incurring Loses: - According to this Policy ‘Board of Industrial and Financial
Reconstruction’ will be constituted for the public Enterprises incurring losses continuously.
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Separate plan will be prepared for such public enterprises. Govt. will try to secure the interests of
the employees so effected.
7. Location of Industries: - Any non-polluting industry (except those for which license is compulsory)
can be established in a city with population less than 10 lakhs and no govt. permission is required.
That means non-polluting industries like electricity, computer and printing etc. can be established
within the cities having population less than 10 lakhs where the population of city is above 10 lakhs
the industrial units can be established 25 Km away from municipal limits of the city.
8. Freedom from Administrative Controls: - Production Process of new industries is free from any
undue Administrative controls. Present industries are free to produce the goods anywhere and in
any quantity for which they have got license from the govt.
9. Concession from monopolies Acts: - The capital investment limits to implement monopolies act are
abolished. Due to which there are no controls on corporates to establish new industrial units, to
expand the capacity of already established units, to buy any industrial unit or set-up monopoly. In
2002 MRTP act has been abolished by the govt.
10. Facilities for Imports: - According to this policy machines having cost of Rs. 2 Crores can be
imported without the permission of the govt.
Implementation of New Industrial Policy:
After the implementation of this policy following changes/amendments are made during last few years. 1.
Contraction of Public Sector: - No. of industries secured for public sector reduced to 2 i.e. Military
products and Railway. All other sectors are opened for private sector.
2. Reduction of no. of Compulsory Licensing: - No. of industries for which license is compulsory
reduced to 5 only.
3. Expansion of large Industries: - Ready made garments that were secured for small scale industries
are now opened for big industries but they have to export 50% of their production and their capital
investment should not increase from Rs. 1 Crore.
4. Promotion of Exports: - In case of the industries exporting 100% production special powers are
delegated to ‘development commissions’ that were vested with finance ministry before. It resulted
in reducing the problems of Export Industries.
5. Reduction in Duties: - Taxes on capital goods production are reduced. To decrease capital costs and
encourage investments import duties are also reduced.
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6. Encouragement to Foreign Investment: - To encourage FDI in Indian capital market taxes on
capital gains are reduced to 30%. Due to which FDI increased to a large extent. In 1991 FDI was 97
Million U.S. Dollar it increased to 37,763 U.S. Dollar in 2009-10
Increase in Lending Limits: - Lending limits for industries increased to Rs 500 Crores. States also have
taken important steps to implement New Industrial Policy.
Question: Write a note on Industrial Licensing Policy.
Answer: Industrial policy had been implemented in 1951 to complete control on industrial sector. Actually,
licence is just a written document which gives the permission to produce a specific type of good. Details
exist in this document such as place permitted where the plant will be situated, detail regarding goods
production, Limit and capacity of goods production.
Basically, the main theme of industrial licensing policy is to be developing the production area and reduce
the negative externalities as much as possible. The main objectives of policy's are as: 1. To attain all
objectives which could be fixed in five-year plans.
2. To develop all small-scale industries.
3. Make balance between different regions of country.
4. To fix the place where industry will be settled.
5. Improvements in techniques which will be used during production.
6. For the Encouragement of the entrepreneurs to establish new industries.
Compulsions of Licensing: As we know there are lot of problems exist during the implications of new
policy such as:
1. License was also necessary to all those units which were already doing production.
2. License will be required for all new industries.
3. If any industry already doing production of any goods and they wants to produce another product then
license will be necessary.
4. If an industry wants to produce more units of same product, then license was needed. 5.
If industry wants to change the place of production unit, then license will be compulsory.
Question: Write a note on ‘Make in India’ Project.
Answer: In India there were very less opportunities of employment generation form 1947 to till 2014.
Agriculture, manufacturing and service sectors are the major source of employment generation in Indian
economy. Out of these three sectors manufacturing sector had introduced only 16% of employment in 2014
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which was very low. Due to this, our fifteenth Prime Minister Shri Narender Modi had launched new
project ‘Make in India’ in manufacturing sector in September, 2014. Basically, the main theme of this
project is to create new employment opportunities to the rural and urban skilled workers. In this project,
first time India has increased FDI limit in 25 sub-sectors of manufacturing so that it would be create
opportunities for investment to the international industrialists. Especially in environment purpose ‘Make in
India’ project ensures sustainability of growth. In international market goods produced by this project is
more demanded due to improvement in quality of production. There are 25 sectors which exist in ‘Make in
India’ are Automobiles, Automobile components, Aviation, Biotechnology, Chemicals, Défense
manufacturing, Electrical machinery, Food processing, IT and BPM, Leather, Media and entertainment,
Mining, Oil and gases, Pharmaceuticals, Ports, Railways, Renewable energy, Roads and highways, Space,
Textiles and garments, Thermal power, Tourism and hospitality, wellness.
Aims of ‘Make in India’ project:
1. To make growth rate of manufacturing sector 12-14% per annum.
2. Create 100 million jobs to the Indians in 2022.
3. To create skills for urban poor and rural migrants.
4. Make sure to sustainable growth for the country.
Merits of ‘Make in India’ project:
1. Make in India project creates job opportunities to the young generation of India.
2. It surely improves the growth of GDP with new employment opportunities.
3. If the demand of goods increased in international market it will improves the sustainability of rupee.
4. It also increases the internal brand value with the improvement of goods quality. 5. Placement of
industries enhances the vicinity demand and it creates new employment opportunities. Demerits of
‘Make in India’ Project:
1. Major part of our population depends on agriculture, this project has totally neglected the agriculture
sector.
2. Industrialization always depletes the natural resources.
3. This project will also increase the pollution level.
4. In India 60% of soil is arable, industries deforest land permanently.
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