The Indian Government had undertaken industrial policy reforms since 1980, but the most radical reforms have occurred since 1991, after the severe economic crisis in fiscal year 1990-91. These reforms mainly aim at enhancing the efficiency and international competitiveness in Indian industry. India’s industrial policy of 1991 towards liberalisation, deregulation, market orientation has been hailed as ushering in a new era of freedom from government controls, licence raj and red carpetism and one which promises greater prosperity for the Indian people.
Main 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.
Till 1970’s:-
• The Indian planners emphasized the role of heavy industry in economic development and sought to build up as rapidly as possible the capital goods sector.
• The plans envisaged a leading role for the public sector in this structural transformation of the economy.
• Major investments in the private sector were to be carried out, not by the test of private profitability, but according to the requirements of the overall national plan.
• The plans emphasized technological self-reliance, and for much of the period, an extreme inward orientation in the sense that if anything could be produced in the country, regardless of the cost, it should not be imported.
India’s industrial policy of 1991 towards liberalisation, deregulation, market orientation has been hailed as ushering in a new era of freedom from government controls, licence raj and red carpetism and one which promises greater prosperity for the Indian people. Industrial licensing was liberalized or abolished. Moreover, the Monopolies and Restricted Trade Practices (MRTP) Act deregulated. The numbers of activities reserved for the public sector enterprises (PSE) were also reduced.
Promotion of Foreign Direct Investment (FDI) forms an integral part of the Industrial Policy. FDI helps in accelerating economic growth by means of infusion of capital, technology and modern management practices. Government has put in place a liberal and transparent foreign investment regime, wherein FDI, upto 100%, is allowed, under the automatic route, in most sectors/activities. The FDI policy is announced through issue of Consolidated FDI Policy Circulars.
Merits of the New Industrial policy :
1.To raise the level of industrial efficiency, time consuming hurdles of regulations, licenses and restrictions would either be done away with or made industry friendly. Inflow of FDI and foreign technology transfers would be encouraged.
2.Additions to the supply of investible resources and technology would result in increased industrial production and productivity.
3.With the abolition of licensing system in most industries except 5, the wave of liberalization would boost the entrepreneurial skills in the economy.
4.Pruning/de reservatioin of Industries for the public sector would boost professionalism in this secotr. Increased autonomy would usher in dynamism for the betterment.
5.NIP-1991 made a special mention about the role and importance of small scale industries. The state would initiate measures to promote and strengthen small, tiny and village industries, which have large potential to deal with the problems like unemployment, regional disparities, income inequalities and inflation.
6.As the government of the country is obliged to protect the interest of workers, this policy would lay special emphasis to enhance the welfare and upgrade the economic and social status of the worker. To ensure long-lasting and cordial relations between the workers and the management, they (workers) would participate in the management decisions of the enterprises.
Privatization in generic terms refers to the process of transfer of ownership, can be of both permanent or long term lease in nature, of a once upon a time state-owned or public owned property to individuals or groups that intend to utilize it for private benefits and run the entity with the aim of profit maximization.
ADVANTAGES OF PRIVATIZATION
Privatization indeed is beneficial for the growth and sustainability of the state-owned enterprises.
• State owned enterprises usually are outdone by the private enterprises competitively. When compared the latter show better results in terms of revenues and efficiency and productivity. Hence, privatization can provide the necessary impetus to the underperforming PSUs .
• Privatization brings about radical structural changes providing momentum in the competitive sectors .
• Privatization leads to adoption of the global best practices along with management and motivation of the best human talent to foster sustainable competitive advantage and improvised management of resources.
• Privatization has a positive impact on the financial health of the sector which was previously state dominated by way of reducing the deficits and debts .
• The net transfer to the State owned Enterprises is lowered through privatization .
• Helps in escalating the performance benchmarks of the industry in general .
• Can initially have an undesirable impact on the employees but gradually in the long term, shall prove beneficial for the growth and prosperity of the employees .
• Privatized enterprises provide better and prompt services to the customers and help in improving the overall infrastructure of the country.
DISADVANTAGES OF PRIVATIZATION
Privatization in spite of the numerous benefits it provides to the state owned enterprises, there is the other side to it as well. Here are the prominent disadvantages of privatization:
• Private sector focuses more on profit maximization and less on social objectives unlike public sector that initiates socially viable adjustments in case of emergencies and criticalities .
• There is lack of transparency in private sector and stakeholders do not get the complete information about the functionality of the enterprise .
• Privatization has provided the unnecessary support to the corruption and illegitimate ways of accomplishments of licenses and business deals
ADVANTAGES AND DISADVANTAGES OF PRIVATISATION IN INDIA
- Privatization loses the mission with which the enterprise was established and profit maximization agenda encourages malpractices like production of lower quality products, elevating the hidden indirect costs, price escalation etc..
• Privatization results in high employee turnover and a lot of investment is required to train the lesser-qualified staff and even making the existing manpower of PSU abreast with the latest business practices .
• There can be a conflict of interest amongst stakeholders and the management of the buyer private company and initial resistance to change can hamper the performance of the enterprise .
• Privatization escalates price inflation in general as privatized enterprises do not enjoy government subsidies after the deal and the burden of this inflation effects common man
Impacts of Globalisation:-
Definition of Globalization :- Its a process(not an outcome) characterized by increasing global Interconnections by gradual removal of barriers to trade and investment between nation and higher economic efficiency through competitiveness.
Various economic, political, social and cultural effects of globalization are as follows:-
Economic:-
- Breaking down of national economic barriers
- International spread of Trade, Financial and productive activities
- Growing power of transnational cooperation and International financial Institutions(WTO, IMF)Through the process of:-
1- Liberalization- relaxation of restrictions, reduction in role of state in economic activities,decline in role of govt in key industries, social and infrastructural sector.
2- Privatization- Public offering of shares and private sale of shares, entry of private sector in public sector and sale of govt enterprises.
3- FDI
4- International regulatory bodies(WTO,IMF)
5- MNC’s
6- Infrastructural development
7- Expansion of information and communication technology and birth of information age.
8- Outsourcing of services- ie BPO and Call Centres.
9- Trade related intellectual property rights(TRIPS)- product based patent rather than process based.
Social effects:-
- Withdrawal of National govt from social sectors ie declining share of govt in public spending, reducing social benefits for worker(social dumping,pension cuts,subsidies reduction)
- Labor reforms and deteriorating Labor welfare:-
- Labour Market deregulation:-
- Minimum wage fixing
- Employment security
- Modifying tax regulation
- Relaxed standards of security
- Increased Mechanization demands skilled labour and thus loss of job for unskilled labour
- Loss of jobs for traditional workers for example bihar silk workers due to imported Chinese- Korean silk
- Labour Market deregulation:-
- Feminism of Labour ie increased women participation specially in soft industries
- Trickle down theory of poverty reduction has limited success and in agricultural nations poverty has infect increased.
- Unsustainable development practices such as:- excessive use of fertilizers, irrigation, fish trawling by mnc’s(Protein flight ),Exploitation of natural resources by MNC’s.
- Migration and urbanization have lead to problem of slums
- Commercialization of indigenous knowledge:- patenting
- Rising inequality in wealth concentration
Cultural:-
- Increased pace of cultural penetration
- Globalization of culture
- Development of hybrid culture
- Resurgence of cultural nationalism ie shivsena opposing valentine day
Political:-
- Globalization of National Policies- Influenced by International agencies
- Reducing economic role of govt
- Political lobbying
Positive effects of Globalization
- Increased competition
- Employment generation
- Investment and capital flow
- Foreign trade
- Spread of technical know how
- Spread of education
- Legal and ethical effects
- Improved status of women in the society
- Urbanization
- Agriculture:- greater efficiency,productivity, use of HYV seeds, Future contracts and cooperative farming
- Higher standard of living
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