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economy in GENERAL
Definition
Industrial sickness is defined in India as "an industrial company (being a company registered for not less than seven years) which has, at the end of any financial year, accumulated losses equal to, or exceeding, its entire net worth and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year".
Causes Of Sickness
Power cuts
Internal Causes
Government policy
Internal Causes
1.
2.
1. 2. 3. 1. 2. 3. 4. 1. 2. 3.
Power Cuts: Lack of Power electricity support Shortage in electricity Erratic Supply of Inputs Shortage of Raw Material Lack of transportation facility High Price Demand and Credit restraints No equal balance of demand and supply Lack of credit facility Storage expenses Chance of out of fashion Government Policy Change in government policy Lack of Government support High authority to large unit
Labour problems
External Causes
Management problems
Financial Problems
Entrepreneurial incompetence
External Causes
1.
2.
3. 1. 2. 1. 2. 3. 4. 1. 2. 3.
Fault at the planning & construction stage Wrong location Area Absence of Market Analysis Unbalance Capital Structure Financial Problem Unable to repay Lack of financial support from banks and other financial institutions Defective plant and machinery Lack of technical & professional skills Lack of technology Lack of efficient machinery High maintenance Entrepreneurial Incompetence Lack of market knowledge Lack of efficient professional skills Lack of innovation
1.
2.
1. 2. 3.
Management problem Inefficiency of management Lack of expertise Labour problems Lack of inefficient labour Lack of coordination in work Unsatisfied Labour
In a planned and underdeveloped labour surplus economy like India , industrial sickness can have serious consequences
Consequences
Remedial Measures
Concessions by Government
Measures
1. 2. 3. 4.
1. 2. 1.
2. 3.
Steps taken by banks Giving adequate working capital when there is a shortage Recovery of interest reduced rate Defining the special cell in the RBI Arrange the special committee of state level in the local branch for link between the financial institution & govt agency Policy framework of the Government SWOT analysis of industry Liberalization of sick industries Concessions by the Government Giving high facilities to large industries to take over the small sector for revival High liberalization in terms of financial rather than intervention Introduce the scheme for sick industry
1.
1.
2.
3.
Steps for detecting sickness early Corrective actions taken by RBI The industrial investment bank of India Set up the IRCI(Industrial Reconstruction Corporation of India) Convert IRCI into IRBI in March 20,1985 Convert IRBI into IIBI in March 27,1997