class-2
- De-reservation of Public sector:Sectors that were earlier exclusively reserved for public sector were reduced. However, pre-eminent place of public sector in 5 core areas like arms and ammunition, atomic energy, mineral oils, rail transport and mining was continued.
- Presently, only two sectors- Atomic Energy and Railway operations-are reserved exclusively for the public sector.
- De-licensing:Abolition of Industrial Licensing for all projects except for a short list of industries.
- There are only 4 industries at present related to security, strategic and environmental concerns, where an industrial license is currently required-
- Electronic aerospace and defence equipment
- Specified hazardous chemicals
- Industrial explosives
- Cigars and cigarettes of tobacco and manufactured tobacco substitutes
- Disinvestment of Public Sector:Government stakes in Public Sector Enterprises were reduced to enhance their efficiency and competitiveness.
- Liberalisation of Foreign Investment:This was the first Industrial policy in which foreign companies were allowed to have majority stake in India. In 47 high priority industries, upto 51% FDI was allowed. For export trading houses, FDI up to 74% was allowed.
- Today, there are numerous sectors in the economy where government allows 100% FDI. FINANCIAL SECTOR REFORMS:
- Reforms in commercial banks, investment banks, stock exchange operations and foreign exchange market.
- As financial sector regulated by RBI, now reduced the role of RBI from regulator to facilitator of financial sector (FS)
- FS allowed to take decisions on many matters without consulting the RBI.
- If fulfil certain conditions; new branches without RBI approval,
- generate resources from India and abroad.
- private sector banks (Indian+foreign) could be established, FDI in bank raised to 74%.
- Foreign Institutional Investors-FII (merchant bankers, mutual funds and pension funds) now allowed to invest in Indian financial markets.
- TAX REFORMS:
- Reforms in the fiscal (government’s taxation + public expenditure) policies.
- Many procedures have been simplified and the rates also substantially lowered.
- Direct taxes: corporation tax, Income tax.
- Indirect taxes: GST
- FOREIGN EXCHANGE REFORMS:
- to resolve the balance of payments crisis; rupee was devalued; increase in the inflow of foreign exchange.
- Flexible exchange rate system followed.
- TRADE AND INVESTMENT POLICY REFORMS:
- To increase international competitiveness of industrial production,
- To foreign investments and technology into the economy.
- to promote the efficiency of local industries and adoption of modern technologies.
- Before 1991; domestic industries protected through quantitative restrictions (tight control, high tariffs) on imports; IMPECT: reduced – efficiency and competitiveness; slow growth of manufacturing sector.
- After trade policy reforms;
- quantitative restrictions dismelted; From manufactured consumer goods & agricultural products.
- tariff rates reduced
- licensing procedures for imports-removed; except hazardous and environmentally sensitive industries.
- Export duties removed; So that Indian goods can compete in international markets.
- PRIVATISATION
- Converting the ownership/management of government enterprises into private companies (disinvestment) in two ways:
- By withdrawal from ownership and management.
- By sale
- Purpose;
- To improve financial discipline
- Facilitate modernization
- To improve the performance through private capital & managerial capabilities
- To increase inflow of FDI
- to improve the efficiency of PSUs; provided autonomy in managerial decisions; Special status for PSUs as maharatnas, navratnas and miniratnas.
- CLASSIFICATION OF PSU or CENTRAL PUBLIC SECTOR ENTERPRISES (CPSES)
- CPSEs (wholly/partly owned by Govt[state/central]) are classified into 3 categories- Maharatna, Navratna and Miniratna. Presently, there are 7 Maharatna, 16 Navratna and 71 Miniratna CPSEs
- Financial autonomy was initially awarded to nine PSUs as Navratnastatus in 1997.
- Maharatna Scheme; introduced for CPSEs, with effect from 19th May, 2010, in order to empower mega CPSEs to expand their operations and emerge as global giants.
- Term Navaratnameant a talisman composed of nine precious gems. Later, courts of Gupta emperor Vikramaditya and Akbar; for nine extraordinary courtiers.
- Presently 10 Maharatnas, 14 Navratnas and 74 Miniratnas, nearly 348CPSEs
- LIST OF MAHARATNAS
- National Thermal Power Corporation (NTPC)
- Oil and Natural Gas Corporation (ONGC)
- Steel Authority of India Limited (SAIL)
- Bharat Heavy Electricals Limited (BHEL)
- Indian Oil Corporation Limited (IOCL)
- Hindustan Petroleum Corporation Limited (HPCL)
- Coal India Limited (CIL)
- Gas Authority of India Limited (GAIL)
- Bharat Petroleum Corporation Limited (BPCL)
- Power Grid Corporation of India (POWERGRID)
- CRITERIA FOR GRANT OF MAHARATNA STATUS:
- Having Navratna status.
- Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.
- Average annual turnover of more than Rs. 25,000 crore, during the last 3 years.
- Average annual net worth of more than Rs. 15,000 crore, during the last 3 years.
- Average annual net profit after tax of more than Rs. 5,000 crore, during the last 3 years.
- Should have significant global presence/international operations.
- LIST OF NAVRATNAS
- Bharat Electronics Limited (BEL)
- Container Corporation of India (CONCOR)
- Engineers India Limited (EIL)
- Hindustan Aeronautics Limited (HAL)
- Bharat Sanchar Nigam Limited (BSNL)
- National Aluminium Company (NALCO)
- National Buildings Construction Corporation (NBCC)
- National Mineral Development Corporation (NMDC)
- NLC India Limited (NLCIL)
- Oil India Limited (OIL)
- Power Finance Corporation (PFC)
- Rashtriya Ispat Nigam Limited (RINL)
- Rural Electrification Corporation (REC)
- Shipping Corporation of India (SCI)
- CRITERIA FOR GRANT OF NAVRATNA STATUS
- Having Miniratna Category – I and Schedule ‘A’ CPSEs; obtained ‘excellent’ or ‘very good’ rating in three of the last five years + composite score of 60+ with 6 performance parameters:
- Limitations of Industrial Policies in India
- Stagnation of Manufacturing Sector:Industrial policies in India have failed to push manufacturing sector whose contribution to GDP is stagnated at about 16% since 1991.
- Distortions in industrial pattern owing to selective inflow of investments:In the current phase of investment following liberalisation, while substantial investments have been flowing into a few industries, there is concern over the slow pace of investments in many basic and strategic industries such as engineering, power, machine tools, etc.
- Displacement of labour:Restructuring and modernisation of industries as a sequel to the new industrial policy led to displacement of labour.
- Absence of incentives for raising efficiency:Focussing attention on internal liberalisation without adequate emphasis on trade policy reforms resulted in ‘consumption-led growth’ rather than ‘investment’ or ‘export-led growth’.
- Vaguely defined industrial location policy:The New Industrial Policy, while emphasised the detrimental effects of damage to the environment, failed to define a proper industrial location policy, which could ensure a pollution free development of industrial climate.
- WORLD TRADE ORGANISATION (WTO):
- GATT established in 1948 with 23 countries.
- Headquarter: Geneva
- Purpose:
- To Administer all multilateral trade agreements.
- To Provide equal opportunities for all countries in the international market for trading purposes.
- 1995: WTO
- Purpose:
- to establish a rule-based trading regime
- to enlarge production/trade of services with optimum utilisation of resources & protect the environment.
- WTO agreements cover trade in goods & services in bilateral and multilateral forms.
- To removal of tariff/non-tariff barriers & to provide greater market access to all member countries.
- India And WTO:
- Important member of WTO, advocates the interests of the developing world.
- Lives in forefront of framing fair global rules, regulations and safeguards.
- Has kept its commitments towards liberalisation of trade by removing quantitative restrictions on imports & tariff rates (-).
- usefulness of India being a member of the WTO ?
- Because; major volume of international trade occurs among the developed nations.
- Developed countries demands for free agricultural trade in developed countries but not provide fare access in their own.
- INDIAN ECONOMY DURING REFORMS: AN ASSESSMENT:
- After 3 decades, performance/growth of the Indian economy through GDP.
- CRITICS OF REFORM PROCESS: Under areas of:
- EMPLOYMENT: Reform-led growth has not generated sufficient employment opportunities
- AGRICULTURE: Growth rate in agriculture decreased.
- After 1991, Public investment decreased in irrigation, power, roads, market linkages, research, extension.
- partial removal of fertiliser subsidy; Production cost +, affects on small and marginal farmers.
- policy changes; reduction in import duties & quantitative restrictions, Low MSP.
- Farmers faced increased international competition.
- Export oriented policy strategies; shift from food grains to cash crops; Food grains price +
- Reforms in Industry: Industrial growth has also recorded a slowdown during the reform period because of decreasing demand of industrial products due to various reasons such as:
- Domestic manufacturers are facing competition from cheaper imports, which have replaced the demand for domestic goods.
- The infrastructure facilities, including power supply, have remained inadequate due to lack of investment.
- A developing country like India still does not have access to developed countries’ markets because of non- tariff barriers. (For e.g. Although all quota restrictions on exports of textiles and clothing have been removed in India, USA has not removed their quota restrictions on import of textiles from India and China.)
- Effect of disinvestment: The assets of PSEs have been undervalued and sold. This means that there has been a substantial loss to the government. Moreover, the proceeds from disinvestment were used to offset the shortage of government revenues not for the development of PSEs and building social infrastructure in the country.
- There are only 4 industries at present related to security, strategic and environmental concerns, where an industrial license is currently required-