Legal & Business Environment

Unit – 5
Ms. Archana Vijay
Topics to be covered :
Industrial Policies and Structure: Planning- Problems in industrial development during the plan
Period, Classification of industries based on ownership, Industrial policies, Industrial strategy for
the Future, New Industrial policy 1991. Structure of Indian Industry: Public and Private Sector
Enterprises, Objectives of PSUs, Performance and shortcomings, Private Sector– growth, problems
and prospects. SSI – Role in Indian Economy. Startups and their current state in India. Privatisation-
Problems and prospects, Disinvestments in Indian public sector Units since 1991.

Planning – Problems in industrial development during the plan Period

The major industrial development took place during the planning period as :

First Five Year Plan(1951-56): The main objective of the first year plan was on agricultural
development. Therefore the Importance was given on existing Industries rather than the establishment
of new industries like cotton, woollen and jute textiles, cement, paper, medicines, paints, sugar etc.

Second Five Year Plan(1956-61): This plan was given Importance to an establishment of heavy
industries only, The main thrust of industrial development was on iron and steel, Heavy engineering and
fertilizer industries. Three new iron and steel plants were located in Bhilai, Durgapur, and Rourkela.

Third Five Year Plan(1961-66): There was an emphasis on the expansion of basic industries like iron
and steel, fossil-fuel and machine building. The Ranchi Machine Tool and three more HMT units were
established. Machine building, Locomotive and Railway coach making.

Annual Plans(1966-1969): The period between 1966 and1969 was the period of annual plans. The
Industrial period could not make much progress during the annual plans period.

Fourth Five Year Plan(1969-74): Industries like sugar, cotton, jute, vanaspathi, metal based and
chemical industries were given much importance and It was during this plan, Much progress was made
in alloys, tools aluminium, automobiles tyres, electronic goods, Machine Tools, Tractors and special
steel.

Fifth Five Year Plan(1974-79): The Main Importance was given to the rapid growth of steel plants
and exports.The Steel Plants at Salem, Vijayanagar and Visakhapatnam were proposed to create
additional capacity and Steel Authority of India Limited (SAIL) was constituted, moreover, Drug
manufacturing, oil refining, Chemical fertilizers and heavy engineering industries made steady
progress.

Sixth Five Year Plan(1980-85): The Main objective was on producing goods to exploit the domestic
and international marketers and priority was given to industries like aluminium, automobiles, electric
equipment and thermostats. Production Targets were achieved in industries like commercial vehicles,
drugs, T.V ,automobiles, cement, Coal, Jute industry, railway wagons, Sugar industry etc.

Seventh Five Year Plan(1985-90): Target mainly on electronic industries. Industrial dispersal, Self-
employment, exploitation of local resources and proper training were the preference areas of the plan.
Eighth Five Year Plan: The Period between 1990 and 1992 was the period of annual plans. There was
a major change in the industrial policy of the government of India which was initiated in 1991.The
policy of liberalization was adopted for the investment of foreign multinationals. Emphasis was given
on the removal of regional imbalances and encouraging the growth of employment in small and tiny
sectors.

Ninth Five Year Plan(1997-2002): The main emphasis during this plan was on cement ,coal, crude
oil, consumer goods, electricity, Infrastructure, refinery and quality steel products.

Tenth Five Year Plan(2007-12): During this plan, the main emphasis was on modernization,
technology, upgradation, reducing transaction costs and increasing exports and also to enhance exports
and to increase global competitiveness and to achieve balanced regional development.

Eleventh Five Year Plan (2007-12): This Plan gave priority to industry, infrastructure, and
employment. The plan recognized that there should be a rapid industrial development that brings a faster
reduction in poverty, generates employment and ensures essential services such as health and education
to all sections of the society.

Twelfth Five Year Plan (2012-2017): The planning commission focus on instilling” inclusive growth”
is making headway. The Plan is expected to create employment through developing India’s
manufacturing sector and move the nation higher up the value chain is a boon for Industry. The planning
commission indicated that it aims to have industry & manufacturing related activities grow by 11%
during this plan period, contrasted to 8% over the previous 11th five year plan.

Problems in Industrial Development in India

1. Poor Capital Formation:

Poor rate of capital formation is considered as one of the major constraint which has been
responsible for slow rate of industrial growth in India.

2. Political Factors:

During the pre-independence period, industrial policy followed by the British rulers was not at
all favourable for the interest of the country. Thus, India remained a primary producing country
during 200 years of British rule which ultimately retarded the industrial development of the
country in its early period.

3. Lack of Infrastructural Facilities:

India is still backward in respect of its infrastructural facilities and it is an important

impediment towards the industrialization of the country. Thus in the absence of proper
transportation (rail and road) and communication facilities in many parts of the country,
industrial development could not be attained in those regions in-spite of having huge
development potentialities in those areas.

4. Poor Performance of the Agricultural Sector:

Industrial development in India is very dependent on the performance of the agricultural sector.
Thus, the poor performance of the agricultural sector resulting from natural factors is also
another important factor responsible for industrial stagnation in the country.
5. Gaps between Targets and Achievements:

In the entire period of planning excepting 1980s, industrial sector could not achieve its overall
targets. During the first Three Plans, against the target of 7, 10.5 and 10.7 per cent industrial
growth rate, the actual achievements were 6, 7.2, 9 per cent respectively.

6. Dearth of Skilled and Efficient Personnel:

The country has been facing the problem of dearth of technical and efficient personnel required
for the industrial development of the country. In the absence of properly trained and skilled
personnel, it has become very difficult to handle such highly sophisticated computerized
machineries necessary for industrial development of the country.

7. Elite Oriented Consumption:

In recent years, a strong tendency to produce rich men’s goods has been established among the
large industrial houses. Accordingly, the production of “white goods” like refrigerators,
washing machines, air conditioners etc. expanded substantially along with the other luxury
products.

But the production of commodities for mass consumption has recorded a slow growth rate.

8. Concentration of Wealth:

The pattern of industrialisation in the country has been resulting in concentration of economic
power in the hands of few large industrial houses and thus failed to achieve the objective of
planning in reducing concentration of wealth and economic power. As for example, Tatas with
38 companies substantially increased their assets from Rs. 375 crore in 1963- 64 to Rs. 14,676
crore in 1991-92.

9. Poor Performance of the Public Sector:

In-spite of attaining a substantial expansion during the planning period, the performance of
public sector enterprises remained all along very poor. Thus, the public sector investment failed
to generate required surpluses necessary for further investment in industrial sector of the
country.

10. Regional Imbalances:

Concentration of industrial development into some few states has raised another problem of
imbalances in industrial development of the country. Western region comprising Maharashtra
and Gujarat attained maximum industrial development whereas the plight, of the poor states
are continuously being neglected in the process of industrialisation of the country in-spite of

11. Industrial Sickness:

Another peculiar problem faced by the industrial sector of the country is its growing sickness
due to bad and inefficient management. As per the RBI estimate, a total number of sick
industrial units in India were 1,71,316 as on 31st March, 2003 and these sick industrial units
had involved an outstanding bank credit to the extent of Rs. 34,815 crore.
Classification of Industries based on ownership

On the basis of ownership, industries can be classified as:

• Public Sector: These industries are aimed and operated by the government agencies.
Eg. BHEL, BEL, SAIL, NTPC, HAL etc
• Private Sector: These industries are owned and operated by private entrepreneurs, e.g.,
TISCO, Bajaj Auto Ltd., Reliance Industries, Dabur Industries, etc.
• Joint Sector: These industries are jointly run by the state and individual or a group of
individuals. Oil India Ltd (OIL) is jointly owned by public and private sectors. Maruti
Udyog is jointly owned by government and private individuals.
• Cooperative Sector: These industries are owned and operated by the producers or
suppliers of raw materials, workers or both. They pool in the resources and share the
profits or losses proportionately such as the sugar industry in Maharashtra, Amul Dairy
Union in Gujarat, the coir industry in Kerala.

Industrial Policies

Industrial policy is a document that sets the tone in implementing, promoting the regulatory roles of the
government.

With the introduction of new economic policies, the main aim of the government was to free the Indian
industry from the chains of licensing.

I. Industrial Policy of 1948

The first industrial policy after independence was announced on 6th April 1948. The main goal of this
policy was to accelerate the industrial development by introducing a mixed economy where the private
and public sector was accepted as important in the development of the economy. The large industries
were classified into four categories:

• Industries with exclusive State Monopoly/Strategic industries: It included industries

engaged in the activity of atomic energy, railways and arms and ammunition.
• Industries with Government control: This category included industries of national
importance. 18 such categories were mentioned in this category such as fertilizers, heavy
machinery, defence equipment, heavy chemicals, etc.
• Industries with Mixed sector: This category included industries that were allowed to operate
independently in private or public sector. The government was allowed to review the situation
to acquire any existing private undertaking.
• Industry in the Private sector: Industries which were not mentioned in the above categories
fall into this category. High importance was granted to small businesses and small industries,
leading to the utilization of local resources and creating employment.

II. Industrial Policy Resolution, 1956

This second industrial policy was announced on April 20, 1956, which replaced the policy of 1948. The
features of this policy were:

• A new classification of Industries.

• Non-discriminatory and fair treatment for the private sector.
Promotion of village and small-scale industries.
• To achieve development by removing regional disparity.
 • Labour welfare.

The IRDA divided industries into three categories:

• Schedule A industries: The industries that were under the monopoly of the state or
government. It included 7 industries. The private sector was also introduced in this industries
if national interest required.
• Schedule B industries: In this category of industries, the state was allowed to establish new
units but the private sector was not denied to set up or expand existing units e.g. chemical
industries, fertilizer, synthetic, rubber, aluminium etc.
• Schedule C industries: So the industries that were not a part of the above-mentioned industries
then it formed a part of Schedule C industries.

III. Indian Policy Statement, 1973

Indian Policy Statement of 1973 identified high priority industries with investment from large industrial
houses and foreign companies were permitted. And so the basic features of Indian Policy Statement
were:

• The policy was directed towards removing the distortions, it provided for closer interaction
between agriculture and industrial sector.
• Priority was given towards generation and transmission of power.
• The list of industries reserved for the small-scale sector was expanded.
• Special legislation was made to protect cottage and household industries were introduced.

III. Indian Policy Statement 1977

Indian Policy Statement was announced by George Fernandes then union industry minister of the
parliament. The highlights of this policy are:

A] Target on the development of small-scale and cottage industries.

• Household and cottage industries for self-employment.

• Tiny sector investment up to 1 lakhs.
• Smallscale industries for investment up to 1-15 lakhs.

B] Large-scale sector

• Basic industries: infrastructure and development of small-scale and village industries.

• Capital goods industries: meeting the requirement of cottage industries.
• High technological industries: development of agriculture and smallscale industries such as
petrochemicals, fertilizers and pesticides.

C] Restrict the control of big business houses.

D] Role of the public sector:

• Development of ancillary industries.

• To make available expertise in technology and management in small and cottage industries.

E] Revival and rehabilitation of sick units.

V. Industrial Policy, 1980

The Congress government announced this policy on July 23rd, 1980. The features of this policy are:

• Promotion of balanced growth.

• Extension and simplification of automatic expansion.
• Taking over industrial sick units.
• Regulation and control of unauthorized excess production capabilities installed for industrial
houses.
• Redefining the role of small-scale units.
• Improving the performance of the public sector.

New Industrial Policy 1991

The 1991 industrial policy contained the root of the liberalization, privatization and
globalization drive made in the country in the later period. The policy has brought changes in
the following aspects of industrial regulation:

1. Industrial delicensing

2. Deregulation of the industrial sector

3. Public sector policy (dereservation and reform of PSEs)

4. Abolition of MRTP Act

5. Foreign investment policy and foreign technology policy.

1. Industrial delicensing policy or the end of red tapism: The most important part of the
new industrial policy of 1991 was the end of the industrial licensing or the license raj or red
tapism. Under the industrial licensing policies, private sector firms have to secure licenses to
start an industry. This has created long delays in the start up of industries. The industrial policy
of 1991 has almost abandoned the industrial licensing system. It has reduced industrial
licensing to fifteen sectors. Now only 13 sector need license for starting an industrial operation.

2. Dereservation of the industrial sector– Previously, the public sector has given reservation
especially in the capital goods and key industries. Under industrial deregulation, most of the
industrial sectors was opened to the private sector as well. Previously, most of the industrial
sectors were reserved to the public sector. Under the new industrial policy, only three sectors-
atomic energy, mining and railways will continue as reserved for public sector. All other
sectors have been opened for private sector participation.

3. Reforms related to the Public sector enterprises: reforms in the public sector were aimed
at enhancing efficiency and competitiveness of the sector. The government identified strategic
and priority areas for the public sector to concentrate. Similarly, loss making PSUs were sold
to the private sector. The government has adopted disinvestment policy for the restructuring of
the public sector in the country. at the same time autonomy has been given to PSU boards for
efficient functioning.
4. Foreign investment policy: another major feature of the economic reform measure was it
has given welcome to foreign investment and foreign technology. This measure has enhanced
the industrial competition and improved business environment in the country. Foreign
investment including FDI and FPI were allowed. Similarly, loan capital has also introduced in
the country to attract foreign capital.

5. Abolition of MRTP Act: The New Industrial Policy of 1991 has abolished the Monopoly
and Restricted Trade Practice Act. In 2010, the Competition Commission has emerged as the
watchdog in monitoring competitive practices in the economy.

The industrial policy of 1991 is the big reform introduced in Indian economy since
independence. The policy caused big changes including emergence of a strong and competitive
private sector and a sizable number of foreign companies in India.

Public & Private sector Enterprises

The private sector is the part of the economy that is run by individuals and companies for profit and is
not state controlled. Therefore, it encompasses all for-profit businesses that are not owned or operated
by the government. Companies and corporations that are government run are part of what is known as
the public sector, while charities and other non profit organizations are part of the voluntary sector.

The private sector employs workers through individual business owners, corporations or other non-
government agencies. Jobs include those in financial services, law firms, newspapers, aviation,
hospitality or other non-government positions. Workers are paid with part of the company’s profits.
Private sector workers tend to have more pay increases, more career choices, greater opportunities for
promotions, less job security and less comprehensive benefit plans than public sector workers. Working
in a more competitive marketplace often means longer hours in a more demanding environment than
working for the government.

The public sector employs workers through the central, state or local government. Typical civil service
jobs are in healthcare, teaching, emergency services, armed forces and city council. Workers are paid
through a portion of the government’s tax dollars. Public sector workers tend to have more
comprehensive benefit plans and more job security than private sector workers; once a probationary
period concludes, many government positions become permanent appointments. Moving among public
sector positions while retaining the same benefits, holiday entitlements and sick pay is relatively easy
while receiving pay increases and promotions is difficult. Working with a public agency provides a
more stable work environment free of market pressures, unlike working in the private sector.

Objectives of PSU’s, Performance and Challenges

In India, a public sector company is that company in which the Union Government or State Government
or any Territorial Government owns a share of 51 % or more. Currently there are just three sectors left
reserved only for the government i.e. Railways, Atomic energy and explosive material.

Objectives: The public sector aims at achieving the following objectives:

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 promote balanced regional growth

• To encourage the development of small-scale and ancillary industries, and

• To accelerate export promotion and import substitution

Role of public sectors in the development of the country is explained below:

• Public Sector and Capital Formation: The role of public sector in collecting saving and investing
them during the planning ear has been very important. During the first and second five year plan it was
54% of the total investment, which declined to 24.6 % in the 2010-11.

• Employment Generation: Public sector has created millions of jobs to tackle the unemployment
problem in the country. The number of persons employed in the PSU’s as on march 2011 was 150 lakh.
Public sector has also contributed a lot towards the improvement of working and living conditions of
workers by serving as a model employer.

• Balanced Regional Development: Public sector undertakings have located their plants in backward
parts of the county. These areas lacked basic industrial and civic facilities like electricity, water supply,
township and manpower. Public enterprises have developed these facilities thereby bringing about
complete transformation in the socio-economic life of the people in these regions. Steel plants of Bhilai,
Rourkela and Durgapur; fertilizer factory at Sindri, are few examples of the development of backward
regions by the public sector.

• Contribution to Public Exchequer: Apart from generation of internal resources and payment of
dividend, public enterprises have been making substantial contribution to the Government exchequer
through payment of corporate taxes, excise duty, custom duty etc. gross internal resource generation in
1990- 2000 was 36000 cr which rose to 1, 11,000 cr in 2008-09, while net profit was 92,077 cr in 2010-
11.
• Export Promotion and Foreign Exchange Earnings: Some public enterprises have done much to
promote India’s export. The State Trading Corporation (STC), the Minerals and Metals Trading
Corporation (MMTC), Hindustan Steel Ltd., the Bharat Electronics Ltd., the Hindustan Machine Tools,
etc., have done very well in export promotion.

• Import Substitution: Some public sector enterprises were started specifically to produce goods which
were formerly imported and thus to save foreign exchange. The Hindustan Antibiotics Ltd., the Indian
Drugs and Pharmaceuticals Ltd. (IDPL), the Oil and Natural Gas Commission (ONGC), the Indian Oil
Corporation Ltd., the Bharat Electronics Ltd., etc., have saved foreign exchange by way of import
substitution.

• Promotion of Research and Development: As most of the public enterprises are engaged in high
technology and heavy industries, they have undertaken research and development programmes in a big
way.

Performance of Central Public Sector Undertakings

There were altogether 248 CPSEs under the administrative control of various ministries/departments as
on 31 March 2011. Out of these, 220 were in operation and 28 were under construction. The share of
cumulative investment (paid-up capital plus long-term loans) in all the CPSEs stood at Rs. 6,66,848
crore as on 31 March 2011 ,showing an increase of 14.8 per cent over 2009-10. The share of
manufacturing in gross block, during 2010-11, was 27.8 per cent. The share of mining, electricity, and
services in total investment, in terms of gross block, was 23.0 per cent, 25.2 per cent, and 23.2 per cent
respectively. The net profit of (158) profit-making CPSEs stood at Rs. 1,13,770 crore in 2010-11. The
net loss of (62) loss-making enterprises, on the other hand, stood at Rs. 21,693 crore during the same
period. The year also witnessed severe financial 'under-recoveries' by public-sector oil marketing
companies (OMCs) as they had to keep the prices of petroleum products low in the domestic market
despite high input prices of crude oil.

Problems of Public Sectors:

• Poor policy making and its execution

• Over staffing

• Wastage of resources or under utilization of resources

• Higher operating cost

• Lack of motivation for self improvement

• Lack of proper price policy

List of Navratna companies in India:

Private Sector : Growth, Problems and Prospects
Problems in Private Sector

1. Regulatory Procedure and Related Delays:

Too many regulatory measures imposed by the Government on the private sector has resulted
in lengthy procedure and delays in getting final clearance of a new industrial project. On the
Government level, decision making system is so poor that it normally takes 7 to 8 years for
large investment project to complete its gestation period.

Delegation of decision making in the Government bureaucracy is so poor that even the simple
decisions are rolled back to the top level leading avoidable procedural delays, huge cost
escalation, increasing interest burden and higher burden on consumers.

2. Unnecessary Control:

From the beginning, the private sector of the country is subjected to unnecessary Government
control. Price controls imposed by the Government on certain goods has resulted in
disincentive to increase production. Rather competition among the rival producers can enlarge
the production base and thereby can reduce the prices automatically.

3. Inadequate Diversification:

The private sector has been suffering from inadequate diversification as the Government did
not allow them to participate in those basic, heavy and infrastructural sectors which were earlier
reserved for the public sector.

4. Reservation for the Small Sector:

From the initial stage of development, the Government is providing necessary support to the
small industrial sector in the form of reservation of certain products exclusively for the small
sector so as to save it from unfair competition of large units and also by providing excise
exemption or lower excise duties on the goods produced by the small sector.

5. Lack of Finance and Credit:

Although the large scale industrial corporate units of the private sector are mobilizing their
fund from banks, development financial institutions and from the market through sale of their
equities or debentures but the small scale units are facing acute problem in raising fund for
their expansion.

6. Low Ratio of Profit:

Another important problem of the private sector enterprises is the declining trend in its net
profit ratio. Accordingly, the net profit to turnover ratio of these total Indian private sector
enterprises has been declining from 6.1 per cent in 1994-95 to 3.2 per cent in 1996-97 and then
to 2.3 per cent in 1997-98.

Prospects of the Private Sector:

Since independence, the private sector was assigned with a secondary role to participate in the
industrial activity of the country by the Government. It was only since the Sixth Plan, the
Government started to assign much responsibility to the private sector by allocating about 47
per cent of the total planned investment in the private sector.

Side by side, the private sector has also improved its condition, showing sufficient buoyancy
and registering higher rate of growth by raising higher volume of funds from the capital market
and also by setting up many joint ventures in some other countries. Inspite of that, the private
sector of India was about 20 years behind the schedule as compared to that of other developing
countries.

In order to overcome such gap, a series of measures has been taken by the Government so as
to improve the conditions of the private sector. These measures include permitting automatic
expansion of capacity to a good number of industries, providing special incentive to export
oriented units, exemption from MRTP restrictions on industrial units producing export goods,
granting licenses easily to industrial units located in “zero industry” districts, fastening the
licensing procedures, liberalization of import and pricing policies etc. All these measures which
were introduced during the Sixth Plan, were further liberalized and strengthened during the
Seventh Plan.

Moreover, the Government has announced the New Industrial Policy, 1991, which has
liberalized the private sector considerably. The main changes brought by this new policy
include abolishing the system of industrial licensing for all industrial undertaking except for a
short list of 18 industries, reducing the list of industries under public sector to 8 as against the
17 industries reserved earlier, inviting private sector participation in PSUs earning higher
profit, abolishing, the system of pre-entry scrutiny of investment decisions of the MRTP
companies, removing the asset limit of the MRTP companies, providing automatic permission
for foreign technology agreement, removal of mandatory convertibility clause etc.

Thus, the new policy has assigned a greater role on the private sector by removing restrictions
and controls and introduced a liberalized regime for the private sector of the country. Thus, the
prospects of the private sector in the future development programme of the country is quite
bright under the new liberalized regime.

Growth of Private Sector in India:

At the dawn of independence, almost the entire productive activities and trade were owned and
managed by the private sector. At that time, the role of public sector was insignificant, and its
activity was very much confined to irrigation, power, railways, ports, ordinance, posts and
telegraphs etc. But the activity of the public sector was gradually expanded in different new
fields by both the Centre and the States.

Accordingly, the public sector started to play a significant role in different areas; in terms of
investment, turnover, capital formation, import substitution, contribution to export etc. Even
after the huge expansion of the public sector, the private sector still continued to play a
dominant role in all spheres and thereby accounting nearly 80 per cent of the gross domestic
product and about 90 per cent of the total employment. In a narrow sense, private corporate
sector provides a picture about the private sector. Thus, it is quite important to study the growth
of private corporate sector in comparison to that of public sector.

Table 4.10 reveals the growth of both the public sector and private corporate sector over the
last three and a half decades. In respect of number of companies, the rate of growth of public
sector companies was much faster than that of private sector companies. During the period
from 1957 to 2000, total number of government companies had increased from 74 to 1,279,
i.e., by nearly 16.9 times. Again, the non-government companies has increased their number
from 29,283 to 5,41,051 during the same period and thus the same increased by only 7.5 times.

Moreover, the paid up capital of government companies jumped up from only Rs. 73 crore in
1957 to Rs. 95,842 crore in 2000. Again, the paid-up capital of the private sector companies
increased from Rs. 1,005 crore in 1957 to Rs. 1,72,056 crore in 2000.

SSI : Role in Indian Economy

Small scale industries are important because it helps in increasing employment and economic
development of India. It improves the growth of the country by increasing urban and rural growth. Role
of Small and medium scale enterprises are to help the government in increasing infrastructures and
manufacturing industries, reducing issues like pollution, slums, poverty, and many development acts.
Small scale manufacturing industries and cottage industries play a very important role in the economic
development of India. If any amount of capital is invested in small scale industries it will help in
reducing unemployment in India and increasing self-employment.
Small Scale Industries Definition

A small enterprise in which investment in plant & machinery ranges between Rs. 25 lakhs to
Rs. 5 crores is a small-scale industry.

Similarly, for industries that provide services, the investment requirement is between Rs. 10
lakhs and Rs. 2 crores.

Role and Importance of Small Scale Industries

• Increases production
• Increases total exports
• Improves the employment rate
• Opens new opportunities
• Advances welfare

Every small-scale industry plays a big role in the Indian economy. Apart from providing employment
to crores of people, it has the added benefit of minimum capital requirements. The government also
offers several tax benefits to SSI for this purpose.

Furthermore, they can exist in urban as well as rural areas. Small Scale Industries have been able to
compete with large-scale industries and multinational corporations because of this. Due to reasons like
these, they are of great importance.

The following are some specific roles that SSIs play in the Indian economy:

1. SSI Increases Production

India is one of the world’s fastest growing economies in the world. Consequently, its production output
is massive. It is pertinent to note that SSIs contribute almost 40% of India’s gross industrial value.

These industries produce goods and services worth over Rs. 40 lakhs for every investment of Rs. 10
lakhs. Furthermore, the value addition in this output increases by over 10%.

2. SSI Increases Export

Apart from producing more goods and services, SSIs have been able to export them in large numbers
as well.

Almost half of India’s total exports these days come from small-scale businesses.

35% of the total exports account for direct exports by SSIs, while indirect exports amount to 15%.

Even trading houses and merchants help SSIs export their goods and services to foreign countries.

3. SSI Improves Employment Rate

It is important to note firstly that Small Scale Industries employs more people than all industries after
agriculture.
Almost four persons can get full employment if Rs. 10 lakhs are invested in fixed assets of small-scale
sectors.

Furthermore, SSIs employ people in urban as well as rural areas.

Consequently, this distributes employment patterns in all parts of the country and prevents
unemployment crisis.

4. SSI Open New Opportunities

Small-scale industries offer several advantages and opportunities for investments.

For example, they receive many tax benefits and rebates from the government. The opportunity to earn
profits from SSIs are big due to many reasons.

Firstly, SSIs are less capital intensive. They even receive financial support and funding easily.

Secondly, procuring manpower and raw materials is also relatively easier for them. Even the
government’s export policies favor them heavily.

5. SSI Advances Welfare

Apart from providing profitable opportunities, Small Scale Industries play a large role in advancing
welfare measures in the Indian economy as well.

A large number of poor and marginalized sections of the population depend on them for their
sustenance.

These industries not only reduce poverty and income inequality but they also raise standards of living
of poor people. Furthermore, they enable people to make a living with dignity.

Startups and their current state in India

In the last several years, the tech industry has seen a growing number of Indian startups. In one city,
Bangalore, 1,700 startups began in one year. Industry leaders consider India the third largest technology
start up in the world with more than 4,200 new-age companies. In 2015 alone, three to four startups on
average began every day, and India saw almost five billion dollars in funding come into the country.

Reasons for growth in startups

• More and more people have access to the Internet and mobile technology. In fact, India is
experiencing the fastest growth in number of Internet users of any country. Online and mobile
categories dominate when it comes to the type of new startups. This is due mostly to the rise in
the Internet population to over 350 million people.
• In addition, the middle class is growing. So, this all translates to the consumers, who are driving
the growth.
• Additionally, the government began a program called “Startup India.” With this interest in
supporting the ecosystem of startups, the government has created an atmosphere that
encourages the formation of new companies.
• Two especially important initiatives are called “Make in India” and “Digital India.”
Case Study: The Rise of Ola Cabs

In addition to the rise of tech startups, India has focused on startups that contribute to health and well-
being such as delivery firms, transportation, wellness apps, and anything consumers can use to improve
their lives.

One such startup is Ola Cabs. This company is one of India’s well known unicorns, which is defined as
a startup whose valuation has exceeded the value of $1 billion.

The success of this startup was created by India’s strong sense of community and unity as well as the
burgeoning middle class. While a high percentage of people in the West own cars, only 5% of India’s
population can say the same, giving rise to Ola Cabs.

The younger citizens in India, which account for the majority of its population, can look to successes
such as OlaCabs. With such examples growing in number, self-employment is seen as being
increasingly attractive to the younger generations.

Problems Facing Startups in India

While the atmosphere is ripe for success when it comes to startups in India, there are some problems
that can emerge.

• It can be geographically difficult for startups operating in India because the country is so vast.
Startups also struggle to meet the challenge of offering products/services that are accepted
across India’s wide range of cultures and demographics.
• Another challenge for startups is finding global recognition. Many startups want to be “noticed”
by top technological companies. The challenge arises when it gets to the discussion of mergers
and acquisitions and working in other nations.
• Tech startups in Bangalore or Hyderabad have a much easier time than startups in other areas
of the country. While the technological capabilities may be strong, it can be difficult to reach
out of those areas for support.
• Taxation and government regulations are two other areas where startups might meet with a
challenge in India. Although, the government is working to relax some of the rules through
their initiatives.

To Conclude

All in all, the current state of startups in India is looking increasingly good, and the nation is poised to
continue growing and increasing its number of startups this year.

In January, the Indian launched a number of initiatives to support startups to the tune of $1.5 billion.
He also introduced tax breaks for companies and investors. The goal of these and other such initiatives
is to increase the growth of cutting-edge technology startups and other new businesses to jump start
India’s economy and create millions of jobs for the ever-expanding population.

Disinvestment in Indian Public Sector Undertakings since 1991

Disinvestment in Public sector units in India, is process of public asset sales by President of India on
behalf of Government of India, directly (offer for sale to public) or indirectly (bidding process) in
capitalized market. The Public Enterprises Survey (2015-16), brought out by the Department of Public
Enterprises, Ministry of Heavy Industries & Public Enterprises, Government of India on the
performance of Central Public Sector Enterprises was placed in both the Houses of Parliament on 21 st
March, 2017. There were 331 CPSEs in 2017-18, out of which 257 were in operation. Rest (74) of the
CPSEs were under construction.

As in need of Economic Liberalism and Infrastructure development, in Union Budget of India Total
Expenditure of Government of India increased from ₹ 1,13,422 crore (1991-92) to ₹ 21,46,735
Crore(2017-18). To raise the funds partially for these Expenditures and also to minimize fiscal deficits
in union budgets, Indian Government started divestment in public sector undertakings. Conceding to
demands of privatization and with tough resistance from labour unions, government of India is slowly
divesting from PSUs.

Major divestment steps were taken in past (1999-2004), and made four strategic disinvestment's :

• Bharat Aluminium Company (BALCO)

• Hindustan Zinc (both to Sterlite Industries),
• Indian Petrochemicals Corporation Limited (to Reliance Industries) and
• VSNL (to the Tata group),

While track record and future of these companies were good. BJP led NDA Government (1999-2004)
has also been criticized for divestment of IPCL, in which Reliance Industries bid very high as compared
to other competitors.

The Finance Minister noted that the government initiated strategic disinvestment in 24 PSUs,
including Air India, this fiscal. This would be the first year when the government is on course
to hit the divestment target.

THANK YOU