Monday, October 15, 2012

Business Environment - Nov '2011 (Solved)

 Features of New Industrial Policy, 1991
In order to solve economic problems of our country, the government took several steps including control by the State of certain industries, central planning and reduced importance of the private sector. The main objectives of India’s development plans were:
a)   Initiate rapid economic growth to raise the standard of living, reduce unemployment and poverty;
b)   Become self-reliant and set up a strong industrial base with emphasis on heavy and basic industries;
c)    Reduce inequalities of income and wealth;
d)   Adopt a socialist pattern of development based on equality and prevent exploitation of man by man.
As a part of economic reforms, the Government of India announced a new industrial policy in July 1991. The broad features of this policy were as follows:
a)      The Government reduced the number of industries under compulsory licensing to six.
b)      Policy towards foreign capital was liberalized. The share of foreign equity participation was increased to 51% and in many activities 100 per cent Foreign Direct Investment (FDI) was permitted.
c)       Government will encourage foreign trad­ing companies to assist Indian exporters in export activities.
d)      Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India.
e)      Automatic permission was now granted for technology agreements with foreign companies.
f)       Relaxation of MRTP Act (Monopolies and Restrictive Practices Act) which has almost been rendered non-functional.
g)      Dilution of foreign exchange regulation act (FERA) making rupee fully convertible on trade account.
h)      Disinvestment was carried out in case of many public sector industrial enterprises incurring heavy losses.
i)        Abolition of wealth tax on shares.
j)        General reduction in customs duties.
k)      Provide strength to those public sector enterprises which fall in reserved areas of operation or in high priority areas.
l)        Constitution of special boards to negoti­ate with foreign firms for large investments in the development of industries and import of technol­ogy.

Liberalization, Privatisation and Globalization
The economic reforms that were introduced were aimed at liberalizing the Indian business and industry from all unnecessary controls and restrictions. They indicate the end of the license-permit-quota raj. Liberalization of the Indian industry has taken place with respect to:
a)      Abolishing licensing requirement in most of the industries except a short list,
b)      Freedom in deciding the scale of business activities i.e., no restrictions on expansion or contraction of business activities,
c)       Removal of restrictions on the movement of goods and services,
d)      Freedom in fixing the prices of goods services,
e)      Reduction in tax rates and lifting of unnecessary controls over the economy,
f)       Simplifying procedures for imports and experts, and
g)      Making it easier to attract foreign capital and technology to India.
The new set of economic reforms aimed at giving greater role to the private sector in the nation building process and a reduced role to the public sector. To achieve this, the government redefined the role of the public sector in the New Industrial Policy of 1991. The purpose of the sale, according to the government, was mainly to improve financial discipline and facilitate modernization. It was also observe that private capital and managerial capabilities could be effectively utilized to improve the performance of the PSUs. The government has also made attempts to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions.
Globalizations are the outcome of the policies of liberalisation and privatisation. Globalisation is generally understood to mean integration of the economy of the country with the world economy, it is a complex phenomenon. It is an outcome of the set of various policies that are aimed at transforming the world towards greater interdependence and integration. It involves creation of networks and activities transcending economic, social and geographical boundaries.
Globalisation involves an increased level of interaction and interdependence among the various nations of the global economy.  Physical geographical gap or political boundaries no longer remain barriers for a business enterprise to serve a customer in a distant geographical market.
India’s Industrial Policy for North Eastern Region
In view of the continuing backwardness of North East Region, the need for a new and synergetic incentive package was widely felt to stimulate development of industries. In 1997 a separate Industrial Policy was announced for the industrial development of the North Eastern Region for which Expert groups / committees were constituted by the Ministry of Industry and Planning Commission. Based on the recommendations and proposals finalized by these expert groups / committee the Government of India approved the new Industrial Policy and other concessions for the North Eastern Region.

Features of the policy:
a)      Development of Industrial infrastructure growth centre: Currently the funding pattern of the growth centers envisages a Central assistance of Rs. 10 crores for each Centre and the balance amount to be raised by the State Government. Government has approved that entire expenditure on the growth centers would be provided as Central assistance, subject to a ceiling of Rs. 15 crores.

b)      Integrated Infrastructure Development Centre: In respect of the IID centres, the funding pattern would be changed from 2:3 between Government of India and SIDBI to 4:1, and the Government of India funds would be a grant.

c)       Transport subsidy scheme: The transport subsidy scheme will be extended further in so far as NE States are concerned, for a period of another 7 years i.e. up to 31st March, 2007 being coterminous with the Tenth Five Year Plan on same terms and conditions as per applicable now.

d)      Fiscal incentives to new industrial units
1)      Total Tax Free Zone: Government has approved for converting the growth centres and IID centres into a Total Tax Free Zone for the next 10 years. State Government would be requested to grant exemptions in respect of Sales Tax and Municipal Tax.
2)      Capital Investment Subsidy: Industries located in the growth centres would also be given Capital Investment Subsidy at the rate of 15% of their investment in plant and machinery, subject to a maximum ceiling of Rs. 30 lakh. The commercial banks and the North East Development Financial Corporation (NEDFi) will have dedicated branches/ counters to process applications to term loans and working capital in these centres.
3)      Interest subsidy on Working Capital Loan: An interest subsidy of 3% of working capital loan would be provided of 10 years after the commercial production. The working capital requirements would be worked out as per the Nayak Committee.
4)      Excise Benefits: Government of India has given sweeping concessions on excise duty. All excisable goods produced in the factory located in the growth centres, IIDs etc. in the state have been exempted from payment of excise duty. Goods produced in specified industries located in areas outside the growth centres/IIDs etc. have also been exempted from payment of excise duty.

e)      Relaxation of PMRY Norms:  The PMRY would be expanded in scope to cover areas of horticulture, piggery, poultry, fishing, small tea gardens etc. so as to cover all economically viable activities. PMRY would have a family income ceiling of Rs. 40,000.00 per annum for each beneficiary along with his/her spouse and upper age limit will be relaxed to 40 years. Projects costing up to Rs. 2 lakh in other than business sector will be eligible for assistance. No collateral will be insisted for project costing up to Rs. 1 lakh.

f)       Other Incentives Proposed: A comprehensive insurance scheme for industrial units in the North East will be designed in consultation with General Insurance Corporation of India Ltd. and 100% premium for a period of 10 years would be subsidized by Central Government.  One time grant of Rs. 20 crores will be provided to the North East Development Financial Corporation (NEDFi) by the Central Government through NEC to fund Techno-Economic studies for industries and infrastructure best suited to this region.
The Government may consider setting u a "Debt Purchase Window" by the NEDFi which buys the debt of the manufacturing units particularly in respect of the supplies made to the Government Departments so as to reduce the problem of blocking of funds for these units.
For development of markets in North East, possibilities of Export of products of North East to the neighboring countries particularly, Bangladesh, Myanmar and Bhutan would be explored.


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