Roman Saini is teaching live on Unacademy Plus
Industrial Policy and Its effects on Industrial growth- Part 2 Lesson-2 Presented By : Roman Saini
In This Lesson Industrial Policy New Industrial Policy, 1991
Industrialization Foreign Investment .Foreign exchange were regulated under the Foreign Exchange Regulation Act (FERA), 1973, the violation of which was a criminal offence. .Having said that, the investment process plagued with unethical and lengthy bureaucratic procedures under this framework. Therefore, FERA was consolidated and finally replaced to introduce the Foreign Exchange Management Act (FEMA), 1999. . The new Act aimed at improving the management of foreign exchange markets and facilitates external trade and payments. Consequently it resulted in improved access to foreign exchange.
Industrialization Foreign Technology Agreement Access to advanced technology was enabled, by providing for automatic approval of technology agreement related to high priority industries within specified parameters Similar facilities will be available for other industries as well if such agreements do not require the expenditure of foreign exchange. Indian companies will be free to negotiate the terms of technology transfer with their foreign counterparts according to their own commercial judgment.
Industrialization Public Sector Policy . The Industrial Policy Resolution of 1956 gave the public sector a strategic role in the economy. After the initial exuberance of the public sector entering new areas of industrial and technical competence, a number of problems have begun to manifest themselves in many of the public enterprises. Serious problems are observed: Insufficient growth in productivity, poor project management, over-manning, lack of continuous technological upgradation, and inadequate attention to R&D and human resource development .Furthermore, public enterprises have shown a very low rate of return on the capital investment. This has inhibited their ability to regenerate themselves in terms of new investments as well as in technology development
Industrialization Government, therefore, decided to adopt a new approach for public enterprises, which inter-alia indicated priority areas for growth of public enterprises in: Essential infrastructure goods and services Exploration and expansion of oil and mineral resources Technology development and building of management capabilities in areas crucial for long term development of the economy where private sector investment is inadequate Manufacture products where strategic consideration predominates
Industrialization Government decided to strengthen the public enterprises, which fall in reserved areas of operation or are in high priority areas or generating reasonable profit. Such enterprises were given a much greater degree of management autonomy through the system of memoranda of understanding. . . Competition was induced in these areas by inviting private sector participation . In the case of selected enterprises, part of Government holding in equity share capital of these enterprises will be is invested in order to provide further market discipline to the performance of public enterprises The public sector will not be barred from entering areas not specifically reserved for it. .
Industrialization Monopolies And Restrictive Trade Practices Act (MRTP ACT) The MRTP Act became effective in June 1970. . With the emphasis placed on productivity in the Sixth Plan, major amendments to the MRTP Act were carried out in 1982 and 1984 in order to remove impediments to industrial growth and expansion. This process of change was given a new momentum in 1985 by an increase of threshold limit of assets. . With the growing complexity of industrial structure, the interference of the Government through the MRTP Act in investment decisions of large companies has become deleterious in its effects on Indian industrial growth. .
Industrialization It was decided that MRTP Act will be amended to remove threshold limits of assets in respect of MRTP companies and dominant undertakings. It also abolished the requirement of prior approval of the Central Government for establishing new undertakings. The principal objectives sought to be achieved through the MRTP Act are as follows:- .Prevention of concentration of economic power to the common detriment, control of monopolies, Prohibition of monopolistic and restrictive and unfair trade practices.
Industrialization .The provisions relating to merger, amalgamation, and takeover will also be repealed. .Similarly, the provisions regarding restrictions on acquisition of and transfer of shares will be appropriately incorporated in the Companies Act. Simultaneously, provisions of the MRTP Act will be strengthened in order to enable the MRTP Commission to take appropriate action in respect of the monopolistic, restrictive and unfair trade practices. appropae action in .The newly empowered MRTP Commission will be encouraged to require investigation suo moto or on complaints received from individual consumers or classes of consumers