Industry

Industry

• India started her quest for industrial development after independence in 1947.
• 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.
• 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 recomen-dations 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 it.
• Various liberalised steps to be taken were declared at comprehensive level, in the Industrial Policy declared on 24^thJuly, 1991.
• Privatisation and liberalisation are the main thrust areas in the New Industrial Policy.

Annual Survery of Industries

The annual survey od Industries (ASI), conducted by the MOSPI, covers the organised manufacturing sector. Its coverage extends to the entire Factory Sector comprising industrial units (called factories) registered under the Sections 2(m)(i) and 2(m)(ii) of the Factories Act, 1948, with ten or more workers with electricity or twnty or more worers without electricity.

The Annal Survey of Industries results for the years 2020-21 and 2021-22 showcased the Indian manufacturing sector's resilience, given its turn - around after a marginal fall in employment in the pandemic year of 2020-21.

As per ASI 2021-22, employment in the organised manufacturing sector recovered to above pre-pandemic level, with the imployment per factory continuing its pre-pandemic rise. The growth in wages per worker was reinstated after a brief hiatus.

Over 40%of India's factory jobs are concentrated in Tamil Nadu, Gujarat and Maharashtra. The fastest employment growth between FY18 and FY22 wa seen in states with the upside of demographic trnasition, such as Chattisgarh (31%) Haryana (29%) and Uttar Pradesh (22%). 

As per the latest ASI FY22, employment in the organised manufacturing sector, measured by the number of workers and total persons engaged, has returned to its upward trend after the pandemic induced fall with the employment per factroy aslo rising:

Workers are directly involoved in the manufacturing process or in activites incidental to manufacturing process, such as cleaning and repair. They can be employed directly or through an agency.

Total Peresons Engaged include the employees (which include workers and clerical/ administrative staff) and al working proprietors and their family memebers who are avtively engaged in the work of the factory even without any pay, and the unpaid memebers of the co-operative societies who worked in or for the factory in any direct and productive capacity. [Source: DoRA, Monthly Report, Feb, 2024]

New Industrial Policy, 1991

This new policy deregulates the industrial economy in a substantial manner. The Major Features of NIP, 1991 are:

Abolition of industrial licensing:

In a major move to liberalise the economy, the new industrial policy abolished all industrial licensing, irrespective of the level of investment, except for certain industries related to security and strategic concerns, social reasons, concerns related to safety and over-riding environmental issues, manufacture of products of hazardous nature and articles of elitist consumption.

Entry of foreign investment and technology made easier:

For the promotion of exports of Indian products in world markets, the government would encourage foreign trading companies to assist Indian exporters in export activities. Approval would be given for direct foreign investment up to 51% foreign equity in high priority industries.

Public sector's role diluted:

The new industrial policy has removed all these (the number of industries reserved for the public sector since 1956 was 17) industries from the Reserved List. Industries that continue to be reserved for the public sector are in areas where security and strategic concerns predominate. These areas are 1. arms and ammunition and allied items of defence equipment, defence aircraft and warships, 2. atomic energy, 3. mineral oils and minerals specified in the schedule to the atomic energy, (control of production and use) order, 1953,4. railways.

MRTP Act:

Under the MRTP Act, all firms with assets above a certain size (Rs. 100 crore since 1985) were classified as MRTP firms. Such firms were permitted to enter selected industries only and this also on a case-by-case approval basis. The new industrial policy scrapped the threshold limit of assets in respect of 'MRTP' and dominant undertakings.

• In 2002, a competition Act was passed, which has replaced the MRTP Act. In place of the MRTP Commission, the Competition Commission has started functioning.

Liberalisation of Industrial location policy:

The new Industrial policy provides that in locations other than cities of more than one million populations, there will be no requirement of obtaining industrial approvals from the centre, except for industries subject to compulsory licensing. In cities with a population of more than one million, industries other them those of a non-polluting nature will be located outside 25 kms. of the periphery.

Abolition of Phased Manufacturing Programmes for new projects:

To force the pace of indigenisation in manufacturing, Phased Manufacturing Programmes have been in force in a number of engineering and electronic industries.

Mandatory convertibility clause removed:

A large part of industrial investment in India is financed by loans from banks and financial institutions. These institutions have followed a mandatory practice of including a convertibility clause in their lending operations for new projects. This has provided them an option of converting part of their loans into equity, if felt necessary by their management. This has often been interpreted as an unwarranted threat to private firms of takeover by financial institutions. This mandatory convertibility clause put forward by the financial institutions has been abolished by the new industrial policy.

• In the Union Budget of 1997-98, nine public sector undertakings, which performed very well were given the name of 'Navratna' and were made autonomous. These 'Navratnas' included SAIL, IOC, BPCL, HPCL, BEL, HAL, ONGC and NTPC.

Some more PSUs viz. GAIL (Aug., 1984), MTNL, NMDC, PFC, PGCIL, REC, NALCO, SCI and CIL were included in this list later.

• Navratna Public sector enterprises have been given enhanced autonomy and delegation of powers to incur capital expenditure (without any monetary ceiling), to enter into technology joint ventures, to raise capital from domestic and international market, to establish financial joint ventures and to wholly own subsidiary.
• PSUs were further categorised as 'Maharatna', 'Navratna' and 'Miniratna' CPSEs.

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.

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.

Disinvestment and Privatisation

• There is a difference between privatisation and disinvestment. Privatisation implies a change in ownership resulting in a change in management. Disinvestment is a wider term extending from dilution for the stake of the government to the transfer of ownership (when govt, stake reduced beyond 51 %).
• The Government of India constituted the Disinvestment Commission with Mr. G.V. Ramakrishna as the chairman in August, 1996 to advise it on disinvestment programme of public sector enterprises. It has suggested classification of PSE in to core and non core. In core sector maximum of 49% disinvestment would be allowed while in non core disinvestment would be upto 74%. PSEs shares will be given to small investors and employees to ensure wide dispersal of shares thus introduce mass ownership and workers shareholding. It has also suggested greater autonomy to PSEs.

• To minimize the financial burden on the Public Sector Enterprises the Government has started Voluntary Retirement Scheme (VRS) for the employees by giving full compensation to employees. This is called ‘Golden Hand Shake Scheme'.
• Privatisation refers to a general process of involving the private sector in the ownership, or operation of a state owned enterprise. Thus it refers to private purchase of all or part of a company.

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—

1. 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.

2. 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.

3. Mobilisation of Small Savings:

SSIs can be run with the help of small capital. Thus, they facilitate mobilisation of small savings.

4. Contribution in GVA:

The share of MSME (Micro Small and Medium Enterprises) sector in the country's Gross Value Added (GVA) is approximately 32%.  [Source ES 2017-18]

5. 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

(a) Lack of timely, adequate and easy finance,

(b) Lack of availability of raw material

(c) Lack of sound marketing system,

(d) Competition with large scale sector.

Micro Small Medium Enterprise

• Micro, Small & Medium Enterprises (MSMEs) contribute significantly to the economic and social development of the country by fostering entrepreneurship and by generating employment opportunities. The relative importance of MSMEs can be gauged from the fact that the share of MSME GVA in total GVA (current price for 2019-20 was 33.08 %.
• The government has taken several initiatives to nature and promotes the MSMEs. The revision in the definition of MSMEs brought in w.e.f. 1st July, 2020 as part of the AtmaNirbhar Bharat package introduced a composite-criteria of investment and annual turnover and identical limits for manufacturing and services sector.

No. of MSMEs

As per the national Sample Survy (NSS) 73rd round, conducted by NSSO in 2015-16, there were 633.88 lakh unincorporated non-agriculture MSMEs, in the country engaged in differetn economic activities excluding the MSMEs registered under (a) sections 2m (i0 and 2m (ii) of Factories Act, 1948, (b) Companies Act, 1956 and (c) Section F of National Industrial classification (NIC) 2008. [Source: INDIA 204]

The government included Retail and wholesale trades as MSMEs from july, 2021. Benefits to retail and to be restricted to prionty sector lending only.

The Ministy of MSME also launched Udyan Assist Platform in january, 2023 to bring Informal Micro Enterprises under the formal ambit of msmeS. [Soource: INDIA 2024]

Contribution of MSMEs to The Country's GDP

As per the latest information received fro Ministry of Statistic s and Programme Implementation the share of MSME gross value added GVA is all india manufacturing GVA in all india manufacturing GVA are as follows:

Share of Micro, Small and Medium Enterprises' GVA 

Definition of MSMEs – Old and New

• Sick Industries: Sick Industrial unit is defined as a unit or a company (inexistence for at least five years) which is found at the end of any financial year to have incurred accumulated losses equal to or exceeding its entire net worth or at the end of any financial year, it has accumulated losses equal to or exceeding 50% of its average net worth in the immediately preceeding four financial years and has failed to repay debts to its creditor(s) in three consecutive quarters on demand made in writing for such repayment.

• With the aim to provide finance, Small Industries Development Bank of India (SIDBI) was established in 1990.
• Abid Husain Committee is related to reforms in small industries.
• Industrial Finance Corporation of India (IFCI) was established on 1^stJuly, 1948 by a special Act of Parliament.
• The main aim of IFCI was to make available long term and mid 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 (IDBI), established on 1st July, 1964, is an apex institution in the field of industrial finance.
• Industrial Reconstruction Board of India (IRBI) was established in 1971 with the aim to reconstruct the sick industrial units.
• Unit Trust of India (UTI), established in 1964, collects small savings of people through sale of units and invests them into sureties.