Corporate Finance Project Finance Assignment

BUSINESS ENVIRONMENT: THE LEGAL PERSPECTIVE
Dr. SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY, LUCKNOW
AN ASSIGNMENT
ON
UNDER THE SUPERVISION OF
Mrs. VIJETA DUA TANDON
SUBMITTED TO SUBMITTED BY
Mrs. VIJETA DUA TANDON DEVANAND PANDEY

ASSISTANT PROFESSOR B.COM.LLB (Hons.)
FACULTY OF LAW 9TH SEMESTER (2017-18)
D.S.M.N.R.U D.S.M.N.R.U
ACKNOWLEDGEMENT
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INDUSTRIAL POLICY: AN ANALYTICAL APPROACH
I would like to thank my Assistant Professor Mrs. Vijeta Dua Tandon for providing me this
great opportunity to learn from the topic “Industrial Policy: An Analytical Approach”.
I would also like to thank my friends and well-wishers for their kind support and help during
the making of this assignment.
TABLE OF CONTENTS
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1) INTRODUCTION…………………………………………………………………………...4-5
2) INDUSTRIAL DEVELOPMENTS STEPS TAKEN FROM 1947………………...……….6-9
3) EVOLUTION OF INDUSTRIAL POLICY IN INDIA…………………………………..10-13
4) INDUSTRIAL GROWTH BY SECTORS………………………………………………..14-15
5) INDUSTRIAL COMPETITIVENESS……………………………………………………16-20
6) CONCLUSION……………………………………………………………………………….21
7) BIBLIOGRAPHY…………………………………………….………………………………22
INTRODUCTION
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India has made considerable economic progress since its Independence. Most noticeable are
the expansion and diversification of production both in industry and agriculture. New
technologies were introduced in many industries. Industrial investment took place in a large
variety of new industries. Modern management techniques were introduced. An entirely new
class of entrepreneurs has come up with the support system from the Government, and a large
number of new industrial centres have developed in almost all parts of the country. Over the
years, the Government has built the infrastructure required by the industry and made massive
investments to provide the much-needed facilities of power, communications, roads etc. A
good number of institutions were promoted to help entrepreneurship development, provide
finance for industry and to facilitate development of a variety of skills required by the
industry as well as agriculture. The Government also followed a policy of encouraging
indigenous industries and provide them all facilities and encouragement. As a result, we have
now a widely diversified base of industry and an increased domestic production of a wide
range of goods and services. The index of industrial production has gone up from 7.9 in
1950-51 to 154.7 in 1999-2000. Electricity generation went up from 5.1 billion Kwh to 480.7
billion Kwh in the same period1.
Particularly significant achievement has taken place in the field of agriculture. We are now
having a problem of plenty, with Government godowns overflowing with wheat stocks. This
is not a mean achievement for a country that relied on imported food aid until the early
1960s. The credit for this green revolution goes to Indian scientists as well as to millions of
Indian farmers, who wholeheartedly cooperated with the Government, to make India self-
sufficient in the matter of its food requirements.
This economic expansion contributed to a steady and impressive growth in India’s GNP.
With the exception of 4 years, India experienced a positive rate of growth. As a result, India’s
per capita Net National Product (NNP) in 1999-2000 was 2.75 times higher than that of 1951.
The rate of growth before 1980 was 1.2% per capita. Thereafter, it grew at the rate of 2.4%,
and between 1950-90, by 3.2% on average every year. Between 1993-94 and 1999-2000, it
registered an average rate of growth of 4.8% per year2.
A variety of promotional policies were followed by the Government to achieve this success.
In the early years, Indian industry thrived within protective tariff walls. The policy was to
1
https://www.osha.gov/dte/grant_materials/fy07/sh-16615-07/train-the-trainer_manual2.pdf (Lat Accessed on
08 October, 2018).
2
https://www.investopedia.com/terms/n/net-national-product.asp (Last Accessed on 08 October, 2018)
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encourage Indian industries and though foreign technical collaborations were encouraged,
direct foreign investment in any corporate body was restricted to 40%. In 1991, this policy
was changed completely and foreign majority investment was encouraged in a variety of
industries, import restrictions were removed, customs tariff was brought down and the doors
of the Indian economy were opened for foreign competition.
INDUSTRIAL DEVELOPMENT STEPS TAKEN IN 1947
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After India became independent in 1947, the country embarked upon an ambitious plan of
industrial development and encouraged the setting up of new industries and the expansion of
existing industries.
Some of the steps that were taken to achieve these objectives:
Protection to Indian Industries
India is probably one of the few countries in the world which used its import policy for the
healthy development of local industries. Barring the first few years after Independence, the
country was facing a shortage of foreign exchange, and because of this shortage, imports had
to be restricted. Imports of consumer goods were, therefore, disallowed. A good number of
restrictions were put on the import of industrial goods, and the effort of the Government was
to encourage the production of these goods indigenously. Local industries were encouraged
to have foreign collaborations and to import the technical know-how needed to produce what
was being imported into the country.
Levying higher tariffs restricted imports, and there was also a total or partial physical ban on
the imports of such products. This gave a much needed sheltered market for Indian goods,
and many industries thrived within these protective walls. Initially, products produced by
Indian industries were not of good quality. But as years went by, industries acquired
experience in manufacturing and turned out quality products comparable with imported
products. There was a continuous effort to improve quality3.
During the Second and Third plans, the emphasis was on the development of capital goods
industries. India wanted to make machines that helped to produce other machines. Therefore,
greater emphasis was given to the development of machine tools, textile machinery, power
equipment and so on. We were importing these mother machines, and the new effort was to
produce them in India, to achieve self sufficiency.
Protection from imports encouraged Indian industry to undertake the manufacture of a variety
of products. There was a ready market for all these products. The Government also gave
encouragement to industries to import parts and components that were required for
indigenous production. The import policy was meant to serve two categories of importers -
actual users and established importers. Actual users of imported raw materials or products
were given preference over the category of established importers i.e. traders. Certain items
3
Report of II Law Commission.
6|Page
that were scarce and not available were channelized through the State Trading Corporation,
Mines & Minerals Trading Corporation and such other Government bodies. They arranged
for the import of such products and distributed them to indigenous industries according to
requirements. Thus, imports were strictly controlled by the import policy announced every
year by the Government of India.
High Customs Tariffs
Apart from strict control over imports and the physical ban on the imports of many products,
customs tariffs were raised. This gave protection to local industries. The price of local
products was comparatively cheaper than those of imported goods. The Government also
followed a policy of low tariffs on the import of raw materials, parts and components
compared to those on finished products. This encouraged Indian industries to import parts
and components, and to manufacture or assemble final products in India.
Financial Infrastructure
To provide the financial infrastructure necessary for industry, the Government set up a
number of development banks. The principal function of a development bank is to provide
medium and longterm investments. They have to also play a major role in promoting the
growth of enterprise. For financial assistance to small entrepreneurs, Finance Corporations
were established in all states on the basis of an Act that was passed by Parliament in 1951. In
addition to this, the National Small Industries Corporation was also established at the Centre
and a Small Industries Development Bank of India was established in 1989.
Control of Indian Business
As a consequence of the restrictions on imports, those who were importing products entered
into collaboration with their principals and entered the field of manufacturing. Thus, what
was once a trading community, gradually transformed into a community of industrialists.
Regulations under the Foreign Exchange and Regulation Act (FERA) restricted foreign
investment in a company to 40%. This ensured that much of the control in companies with
foreign collaboration remained in the hands of Indians. To succeed, Indian businessmen had
to learn and apply modern management and production techniques.
Encouragement to small industries
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Though some of the policies of the Government resulted in inhibiting the growth of large-
scale industries, they gave encouragement to small-scale industries by providing a number of
support measures for growth. Policy measures undertaken by the Central and State
Governments addressed the basic requirements of the SSI like credit, marketing, technology,
entrepreneurship development, and fiscal, financial and infrastructural support. These
promotional measures covered:
 Industrial extension services through small industries service institutes and other
organisations.
 Factory space in industrial estates through cooperative and other industrial estates,
ready built shades and developed industrial plots made available through State
Government agencies.
 Credit facilities at concessional rates of interest and credit guarantees through
commercial banks and State Finance Corporations.
 Special financial assistance schemes at concessional rates of interest and low margins
for technician entrepreneurs.
While most of the institutional support services and some incentives were provided by the
Central Government, the State Governments offered others in varying degrees to attract
investments and to promote small industries.
Investment in Infrastructure
Energy-Transport-Communications facilities are extremely essential for smooth and

accelerated industrial growth. The Government made huge investments in providing such
infrastructure facilities to industries. The Central Government, as well as the State
Governments invested huge funds in power generation and distribution, and many new power
projects were undertaken and completed. Similarly, investments were made in road building,
communications, creation of port facilities etc. Apart from this, various State Governments
made developed plots of land or industrial estates with power, water, roads, and
communications available to entrepreneurs who wanted to set up industries. This helped
considerably in the growth of industries4.
Oil and natural gas emerged as significant sources of energy since the eighties.
4
http://dghrdcbec.gov.in/WriteReadData/_0_Infrastructure%20Manual.pdf (Last Accessed on 10 October,
2018)
8|Page
The pattern of sectoral consumption has also undergone noticeable changes over the years as
can be seen from the following table:
Power shortages caused by substantial shortfalls in achieving power targets have been a
recurring theme from plan to plan.
Oil and natural gas
The Oil and Petroleum industry must be considered a gift of the planning era. The indigenous
oil exploration programme gained credibility in the seventies. New sources of oil were
discovered, and considerable refining capacity was created. The Oil and Natural Gas
Commission was set up for oil exploration. Additional refining capacity was created through
the expansion of some of the existing plants, and the commissioning of new refineries.
EVOLUTION OF INDUSTRIAL POLICY IN INDIA
Before Independence, the policy of the British Government was against encouraging
industrial development in India. No incentives were offered to Indian industries for their
growth. There were many desired and undesired hurdles placed in the way of the growth of
Indian industry. Whatever industrial development took place in India was in spite of the
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negative and hostile attitude of the British Government. Credit must be given to pioneers like
Jamshedji Tata, Walchand Hirachand, Lala Sriram, G.D. Birla and others, who laid the
foundations of modern industry in India.
After independence
Immediately after Independence, the Government of India announced its industrial policy in
1948 and laid down the plan for future industrial growth in the country. It also declared its
policy on foreign capital in 1949, and invited foreign capital for investment in the country.
The Government was keen to dispel the apprehension that foreign enterprises may be taken
over.
Industrial policy resolution, 1948
The first Industrial Policy Resolution, announced in 1948, broadly laid down the objectives
of the Government’s policy in the industrial field and clarified industries and enterprises into
four categories, namely:
 Those exclusively owned by the Government, e.g. arms and ammunition, atomic
energy, railways, etc.; and in emergencies, any industry vital for national defence.
 Key or basic industries, e.g. coal, iron and steel, aircraft manufacture, ship building,
telephone, telegraphs and communications equipment except radio receivers, mineral
oils, etc. The undertakings already existing in this group were promised facilities for
efficient working and ‘reasonable’ expansion for a period of ten years, at the end of
which, the State could exercise the option to nationalise them.
 The third category of 18 specified industries were to be subject to the Government’s
control and regulation in consultation with the then provincial (now State)
Governments.
 The rest of the industrial field was, more or less, left open to the private sector.
Industrial (development & regulation) act, 1951
The Industrial Policy Resolution of 1948 was followed by a Government of India (GOI)
Resolution on 2nd September 1948, constituting a Central Advisory Council of Industries
under the chairmanship of the Minister for Industry.
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In 1951, the Industrial (Development and Regulation) Act was passed by the Parliament. The
main provisions of the Act were:
 All existing undertakings at the commencement of the Act, except those owned by the
Central Government were compulsorily required to register with the designated
authority.
 No one except the central Government would be permitted to set up any new
industrial undertaking “except under and in accordance with a licence issued in that
behalf by the Central Government.”
 Such a licence or permission prescribed a variety of conditions, such as, location,
minimum standards in respect of size and techniques to be used, which the Central
Government may approve.
 Such licenses and clearances were also required in cases of ‘substantial expansion’ of
an existing industrial undertaking.
Implementation of the industrial development and regulation act, 1951 (idr)
The IDR Act gave very wide powers to the Government. This resulted in more or less
complete control by the bureaucracy on the industrial development of the country. They had
full control over:
 approval of any proposal on capacity, location, expansion, manufacture of new

products etc;
 approval of foreign exchange expenditure on the import of plant and machinery;
 approval for the terms of foreign collaboration.
Industrial policy resolution, 1956
The Industrial Policy Resolution - 1956 was shaped by the Mahalanobis Model of growth,
which suggested that emphasis on heavy industries would lead the economy towards a long
term higher growth path. The Resolution widened the scope of the public sector. The
objective was to accelerate Bombay Plan prepared by leading Indian industrialists in 1944-45
had recommended government support for industrialization, including a direct role in the
production of capital goods. economic growth and boost the process of industrialization as a
means to achieving a socialistic pattern of society. Given the scarce capital and inadequate
entrepreneurial base, the Resolution accorded a predominant role to the State to assume direct
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responsibility for industrial development. All industries of basic and strategic importance and
those in the nature of public utility services besides those requiring large scale investment
were reserved for the public sector.
The Industrial Policy Resolution - 1956 classified industries into three categories:
 First category comprised 17 industries (included in Schedule A of the Resolution)

exclusively under the domain of the Government. These included inter alia, railways,
air transport, arms and ammunition, iron and steel and atomic energy.
 Second category comprised 12 industries (included in Schedule B of the
Resolution), which were envisaged to be progressively State owned but private sector
was expected to supplement the efforts of the State.
 Third category contained all the remaining industries and it was expected that
private sector would initiate development of these industries but they would remain
open for the State as well. It was envisaged that the State would facilitate and
encourage development of these industries in the private sector, in accordance with
the programmes formulated under the Five Year Plans, by appropriate fiscal measures
and ensuring adequate infrastructure.
Another objective spelt out in the Industrial Policy Resolution – 1956 was the removal of
regional disparities through development of regions with low industrial base. Accordingly,
adequate infrastructure for industrial development of such regions was duly emphasized.
Given the potential to provide large-scale employment, the Resolution reiterated the
Government’s determination to provide all sorts of assistance to small and cottage industries
for wider dispersal of the industrial base and more equitable distribution of income. The
Resolution, in fact, reflected the prevalent value system of India in the early 1950s, which
was centered around self sufficiency in industrial production. The Industrial Policy
Resolution – 1956 was a landmark policy statement and it formed the basis of subsequent
policy announcements.
Industrial Policy Measures in the 1960s and 1970s
Monopolies Inquiry Commission (MIC) was set up in 1964 to review various aspects
pertaining to concentration of economic power and operations of industrial licensing under
the IDR Act, 1951. While emphasizing that the planned economy contributed to the growth
of industry, the Report by MIC concluded that the industrial licensing system enabled big
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business houses to obtain disproportionately large share of licenses which had led to pre-
emption and foreclosure of capacity. Subsequently, the Industrial Licensing Policy Inquiry
Committee (Dutt Committee), constituted in 1967, recommended that larger industrial houses
should be given licenses only for setting up industry in core and heavy investment sectors,
thereby necessitating reorientation of industrial licensing policy.
In 1969, the monopolies and restrictive Trade Practices (MRTP) Act was introduced to
enable the Government to effectively control concentration of economic power. The Dutt
Committee had defined large business houses as those with assets of more than Rs.350
million. The MRTP Act, 1969 defined large business houses as those with assets of Rs. 200
million and above. Large industries were designated as MRTP companies and were eligible
to participate in industries that were not reserved for the Government or the Small scale
sector.
The new Industrial Licensing Policy of 1970 classified industries into four categories. First
category, termed as ‘Core Sector’, consisted of basic, critical and strategic industries. Second
category termed as ‘Heavy Investment Sector’, comprised projects involving investment of
more than Rs.50 million.
The third category, the ‘Middle Sector’ consisted of projects with investment in the range of
Rs.10 million to Rs.50 million. The fourth category was ‘Delicensed Sector’, in which
investment was less than Rs.10 million and was exempted from licensing requirements. The
industrial licensing policy of 1970 confined the role of large business houses and foreign
companies to the core, heavy and export oriented sectors.
INDUSTRIAL GROWTH BY SECTORS
Textile-sector
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The textile sector has so far remained subdued during the current financial year. The total
cloth production has declined by 4.74 per cent during April-December 2011. The decline in
production has been due to two major segments, namely power loom (-2.54 per cent) and
hosiery (-14.89 per cent). Cloth production by the mill and handloom sectors increased by 1
per cent and 2 per cent respectively during the period. During April – December 2011, man-
made fibre production and filament yarn production recorded a decrease of about 2 per cent
and 7 per cent respectively. Production of cotton yarn decreased by 13 per cent during this
period. However, blended and 100 per cent non-cotton yarn production increased by 5 per
cent.
Telecommunication
India's telecom sector has been one of the major successes in the country. With more
than 270 million connections, India's telecommunication network is the third largest in
the world and the second largest among the emerging economies of Asia. The total
number of telephones has increased from 76.53 million on March 31, 2004 to 688.38
Million telephone (landlines and mobile) subscribers and 652.42 Million mobile phone
connections as of July 2010 it is projected that India will have 1.159 billion mobile
subscribers by 20135.
Chemicals
Major chemicals undergo several stages of processing to be converted into downstream

chemicals. These processed chemicals are used in agriculture and industry as auxiliary
materials such as adhesives, unprocessed plastics, dyes, and fertilizers. Chemicals are also
directly used by consumers in the form of pharmaceuticals, cosmetics, household products,
paints, etc. Alkali chemicals, inorganic chemicals, and organic chemicals constitute the major
segments of the chemicals industry. Production of major chemicals during April-November
2011 has been comparatively higher except for pesticides and insecticides and dyes and
dyestuff. Total output for the sector is higher by 1.77 per cent
Petrochemicals
5
As Provided by Govt. of India on Its Official Webpage.
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Petrochemicals include synthetic fibres, polymers, elastomers, synthetic detergents, and
performance plastics, apart from their intermediates such as synthetic fibre intermediates,
synthetic detergent intermediates, olefins, and aromatics. The main sources of feedstock and
fuel for petrochemicals are natural gas and naphtha. Petrochemical products cover the entire
spectrum of daily-use items ranging from clothing, housing, construction, furniture,
automobiles, household items, toys, agriculture, horticulture, irrigation, and packaging to
medical appliances. The production of major petrochemicals in primary form from 2008-9
onwards is given in Table 9.16. During April-November 2011-12 major petrochemicals have
increased by 2.95 per cent. The production of synthetic fibers, which is the second largest
segment of the petrochemicals sector, has declined during the current year.
Fertilizers
India is meeting 80 per cent of its urea requirement through indigenous production but is
largely import dependent for its requirements of phosphatic and potassic (P & K) fertilizers
either as finished fertilizers or raw materials. Its entire potash requirement, about 90 per cent
of phosphatic requirement, and 20 per cent urea requirement is met through imports. In
addition to urea, 25 grades of P & K fertilizers namely di ammonium phosphate DAP),
muriate of potash (MOP), mono-ammonium phosphate (MAP), triple super phosphate (TSP),
ammonium sulphate (AS), single super phosphate (SSP) and 18 grades of NPKS complex
fertilizers are provided to farmers at subsidized prices under the Nutrient Based Subsidy
(NBS) Policy. Farmers pay only 50 per cent of delivered cost of P & K fertilizers, the rest is
borne by the Government of India in the form of subsidy. The Government has also included
seven new grades of NPKS complex fertilizers under the NBS Policy. At present 25 grades of
P & K fertilizers are under the NBS Policy6.
INDUSTRIAL COMPETITIVENESS
6
http://www.fao.org/3/a-i6895e.pdf (Last Accessed on 13 October 2018)
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India lags behind 40 other countries in industrial competitiveness, faring poorer than
Thailand, Malta and Malaysia, a United Nations Industrial Development Organisation report
said.
In an industrial development scoreboard prepared by the UNIDO, India ranks 41 out of 100
different economies in terms of competitiveness of its industry in a liberalising world.
Singapore tops the UNIDO list and is followed by Ireland, Switzerland, Japan, Belgium,
Sweden, Finland, Germany, Korea, Taiwan Province of China, France, the US, Hong Kong,
Austria, Slovenia in the top 15.
However, India fared better than its neighbours with Pakistan ranking at 55, Bangladesh at 67
and Sri Lanka occupying the 75th position. Others in the ranking are UK (16), the
Netherlands (17), Malaysia (18), Canada (22), Malta (23), China (26), Mexico (30), Brazil
(39) and Russia (66).
“The scoreboard is based on two sets of components, namely industrial development

indicators and competitive industrial performance index, the latter benchmarking competitive
industrial activity of countries against the backdrop of liberalisation and globalisation,”
UNIDO said.
The index measures the competitive performance of countries in terms of their ability to
produce goods competitively, keeping abreast with changing technologies as well as the
intensity of industrialisation, which is the share of manufacturing value added in GDP.
It also takes into account export quality, reflecting the role of manufacturing in a country''s
export activity as well as the ability to make more advanced products, thereby moving into
more dynamic areas of export growth, UNIDO said7.
Economic Development Of India
The economic development in India followed a socialist-inspired policies for most of its
independent history, including state-ownership of many sectors; extensive regulation and red
tape known as "Licence Raj"; and isolation from the world economy. India's per capita
income increased at only around 1% annualized rate in the three decades after Independence.
Since the mid-1980s, India has slowly opened up its markets through economic liberalization.
7
https://www.unido.org/sites/default/files/files/2017-11/IDR2018_FULL%20REPORT.pdf (Last Accessed on
14 October 2018)
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After more fundamental reforms since 1991 and their renewal in the 2000s, India has
progressed towards a free market economy.
In the late 2000s, India's growth has reached 7.5%, which will double the average income in a
decade. Analysts say that if India pushed more fundamental market reforms, it could sustain
the rate and even reach the government's 2011 target of 10%. States have large
responsibilities over their economies.Maharashtra has proved all time hit contributor to boost
up the economic rise since independence. The annualized 1999–2008 growth rates for
Gujarat (9.6%), Haryana (9.1%), or Delhi (8.9%) were significantly higher than for Bihar
(5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (6.5%). India is the fourth-largest economy
in the world and the third largest by purchasing power parity adjusted exchange rates (PPP).
On per capita basis, it ranks 128th in the world or 118th by PPP.
The economic growth has been driven by the expansion of services that have been growing
consistently faster than other sectors. It is argued that the pattern of Indian development has
been a specific one and that the country may be able to skip the intermediate
industrialization-led phase in the transformation of its economic structure. Serious concerns
have been raised about the jobless nature of the economic growth.
Favourable macroeconomic performance has been a necessary but not sufficient condition for
the significant reduction of poverty among the Indian population. The rate of poverty decline
has not been higher in the post-reform period (since 1991). The improvements in some other
non-economic dimensions of social development have been even less favourable. The most
pronounced example is an exceptionally high and persistent level of child malnutrition (46%
in 2005–6).
The progress of economic reforms in India is followed closely. The World Bank suggests that
the most important priorities are public sector reform, infrastructure, agricultural and rural
development, removal of labor regulations, reforms in lagging states, and HIV/AIDS. For
2010, India ranked 133rd in Ease of Doing Business Index, which is setback as compared
with China 89th and Brazil 129th. According to Index of Economic Freedom World Ranking
an annual survey on economic freedom of the nations, India ranks 124th as compared with
China and Russia which ranks 140th and 143rd respectively in 2010.
Industrial Output
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India is fourteenth in the world in factory output. Manufacturing sector in addition to mining,
quarrying, electricity and gas together account for 27.6% of the GDP and employ 17% of the
total workforce. Economic reforms introduced after 1991 brought foreign competition, led to
privatisation of certain public sector industries, opened up sectors hitherto reserved for the
public sector and led to an expansion in the production of fast-moving consumer goods. In
recent years, Indian cities have continued to liberalize, but excessive and burdensome
business regulations remain a problem in some cities, like Kochi and Kolkata.
Post-liberalisation, the Indian private sector, which was usually run by oligopolies of old
family firms and required political connections to prosper was faced with foreign
competition, including the threat of cheaper Chinese imports. It has since handled the change
by squeezing costs, revamping management, focusing on designing new products and relying
on low labour costs and technology.
Services
India is fifteenth in services output. Service industry employ English-speaking workers on the
supply side and on the demand side, has increased demand from foreign consumers interested
in India's service exports or those looking to outsource their operations. India's IT industry,
despite contributing significantly to its balance of payments, accounts for only about 1% of
the total GDP or 1/50th of the total services.
The ITES-BPO sector has become a big employment generator especially amongst young
college graduates. The number of professionals employed by IT and ITES sectors is
estimated at around 1.3 million as on March 2006. Also, Indian IT-ITES is estimated to have
helped create an additional 3 million job opportunities through indirect and induced
employment.
CHALLENGES & OUTLOOK
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Industrial-sector growth during the current financial year is expected to be between 4 and 5
per cent. At this rate, the annual growth would be less than the annual growth rates achieved
in the recent past and far below the potential growth rate. The challenge in the short term
would, therefore, be to shore up business sentiment, spur investment in productive activities,
and identify bottlenecks that can be removed in a reasonably short period of time. The
government has already made some quick moves to clear bottlenecks in some critical sectors
such as coal and power and is also pushing forward project implementation in some key
infrastructure sectors. With the easing of headline inflation, moderation in commodities
prices in the international market, and revival of manufacturing performance in recent months
in the major economies, India’s industrial sector is expected to rebound during the next
financial year. In the medium to long term several challenges remain. In its approach paper to
the Twelfth Five Year Plan, the Planning Commission has projected growth rates of 9.8 per
cent and 11.5 per cent in the manufacturing sector required to achieve 9 per cent and 9.5 per
cent economic growth respectively. The NMP, as discussed in earlier sections, has envisaged
even higher growth of 14 per cent per annum so as to take the share of manufacturing in GDP
to 25 per cent and increase the absorption of labor in this sector from around 50 million as of
today to more than 150 million by 2022.
For the NMP to successfully meet the objective of 25 per cent share for the manufacturing
sector in GDP certain specific measures are required, some of which form part of India’s
overall development priorities and strategies. There are several policy measures, briefly
discussed here, that would have to be pursued simultaneously.
 First, there is need to resolve the issue of availability of land for industrial and
infrastructure use. NIMZs are a key tool for facilitating the growth of manufacturing sector,
which cannot take off in the absence of a well-thought-out and standardized approach to land
acquisition. Allocation of agricultural land for manufacturing is crucially linked with the
issue of agricultural productivity and food security. The situation could turn into a win-win
one for both manufacturing and agriculture if agriculture productivity increases to levels
where both less land and labour were required in this sector for food security.
 Second, both forward and backward linkages of the manufacturing sector will need to be
strengthened for making progress on the objectives laid out in the NMP. Thegrowth of the
services sector (as distinct from the real sectors) depends considerably on the growth of
manufacturing. Likewise, the growth of the services sector with quality benchmarking could
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contribute to productivity improvements in the manufacturing sector. Banking, insurance,
trade, transport, communication, and skill development are some of the sectors where growth
will be driven by a competitive and vibrant manufacturing sector. Unlike this strong forward
linkage with the services sector, the backward linkage is of the weak nature with the
agriculture sector due to the inadequate pace of development of agrobased industries. And as
a result, the employment-generation potential of the manufacturing sector has not been fully
harnessed in India.
 Third, within manufacturing, there is a need to shift structurally in favour of high

valueaddition industries. Specific policy thrust is required in high precision machinery,
pharmaceuticals, biotechnology, shipbuilding, defence production, and the aero-space
industry, which are some of the areas that provide scope for diversification. Considerable and
growing domestic demand in many of these sectors has to be leveraged for locating
production facilities in the country by bringing in suitable foreign collaborators. It can
provide depth to Indian manufacturing while increasing value addition from this sector.
Acquiring depth in manufacturing is important not only for improving the competitiveness of
manufacturing but for diversifying the industrial base.
 Fourth, investment requirements in India will continue to exceed the availability of

resources from domestic savings. The investment-savings gap during 2005-11 was 1.7 per
cent of GDP. The best way of covering this gap is through FDI. Though our FDI policy
regime is now more open and transparent and has an institutional review mechanism, there
are several sectoral issues that need to be addressed and continuously fine tuned.
CONCLUSION
20 | P a g e
New technologies were introduced in many industries. Industrial investment took place in a
large variety of new industries. Modern management techniques were introduced. An entirely
new class of entrepreneurs has come up with the support system from the Government, and a
large number of new industrial centres have developed in almost all parts of the country.
Over the years, the Government has built the infrastructure required by the industry and made
massive investments to provide the much-needed facilities of power, communications, roads
etc. A good number of institutions were promoted to help entrepreneurship development,
provide finance for industry and to facilitate development of a variety of skills required by
the industry as well as agriculture. The Government also followed a policy of encouraging
indigenous industries and provide them all facilities and encouragement. As a result, we have
now a widely diversified base of industry and an increased domestic production of a wide
range of goods and services.
It can provide depth to Indian manufacturing while increasing value addition from this sector.
Acquiring depth in manufacturing is important not only for improving the competitiveness of
manufacturing but for diversifying the industrial base. Unlike this strong forward linkage
with the services sector, the backward linkage is of the weak nature with the agriculture
sector due to the inadequate pace of development of agrobased industries. And as a result, the
employment-generation potential of the manufacturing sector has not been fully harnessed in
India.
BIBLIOGRAPHY
21 | P a g e
PRIMARY SOURCES
1. Constitution of India
SECONDARY SOURCES
Websites
1. www.unidp.com
2. www.investopedia.com
22 | P a g e

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BUSINESS ENVIRONMENT: THE LEGAL PERSPECTIVE

Dr. SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY, LUCKNOW

BUSINESS ENVIRONMENT: THE LEGAL PERSPECTIVE

UNDER THE SUPERVISION OF

Mrs. VIJETA DUA TANDON

Mrs. VIJETA DUA TANDON DEVANAND PANDEY

INDUSTRIAL DEVELOPMENT STEPS TAKEN IN 1947

Some of the steps that were taken to achieve these objectives:

Protection to Indian Industries

High Customs Tariffs

Control of Indian Business

Encouragement to small industries

Energy-Transport-Communications facilities are extremely essential for smooth and

Oil and natural gas

EVOLUTION OF INDUSTRIAL POLICY IN INDIA

Industrial policy resolution, 1948

Industrial (development & regulation) act, 1951

Implementation of the industrial development and regulation act, 1951 (idr)

 approval of any proposal on capacity, location, expansion, manufacture of new

Industrial policy resolution, 1956

 First category comprised 17 industries (included in Schedule A of the Resolution)

Industrial Policy Measures in the 1960s and 1970s

INDUSTRIAL GROWTH BY SECTORS

Major chemicals undergo several stages of processing to be converted into downstream

“The scoreboard is based on two sets of components, namely industrial development

Economic Development Of India

CHALLENGES & OUTLOOK

 Third, within manufacturing, there is a need to shift structurally in favour of high

 Fourth, investment requirements in India will continue to exceed the availability of

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