BG 2019 Ebook

2019
Business and Government
IISWBM_S.G
9/17/2018
Contents
Indian Economy: Growth, Development and Employment...................................................................2
How to generate growth? What are the issues in growth, development and employment?................3
NITI AAYOG: THE THINK TANK TO REPLACE THE PLANNING COMMISSION………………………………………..5
DIFFERENCE BETWEEN NITI AAYOG AND THE PLANNING COMMISSION…………………………………………10
7 Major Steps of Economic Reforms Taken by Government of India10……………………………………………11
Economic outcome from Digital India & Make in India.......................................................................19
Special Notes on Digital India..............................................................................................................23
Digital Locker
..................24
DIGITAL
INDIA A
PATHWAY
FOR
EFFICIENCY
AND
PRODUCTIVITY.....................................................................................................................................28
The Relationship of Environment with Business..................................................................................29
Banking & Financial services................................................................................................................30
Basic features of the macro business environment in India................................................................34
Meaning of privatisation.....................................................................................................................37
The issue of privatisation in the public sector.....................................................................................37
Back Ground of Indian economy.........................................................................................................39
SEBI………………………………………………………………………………………………………………………………………………….45
As a manager, explain the significance of the linkages between the business and government. Why
do you think it is necessary in the modern context of globalisation and open market?...................51
2
GST………………………………………………………………………………………………………………………………………………….54
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CENTRAL BANK………………………………………………………………………………………………………………………………56
IISWBM-MBA (PS) _S.G Page 2
MSME..................................................................................................................................................67
FDI.......................................................................................................................................................68
START UP INDIA...................................................................................................................................73
Stand up India......................................................................................................................................76
Indian Economy: Growth, Development and Employment
Growth and Development
When the national income increases (growth), ideally it should result in development (qualitative
aspect – like health, education, employment etc). There can also be cases when growth does not
percolate to the bottom of the pyramid – noninclusive growth – that will not result in the development
of weaker sections of the society. For a sustainable development, inclusive growth is a must.
Growth and Employment
Growth generates employment and employment generates further growth. In general,

employment corresponds to the qualitative aspect of growth. If a country is on the
growth trajectory, it will generate more employment opportunities and while the growth
declines ( periods of recession), people start losing jobs. Growth and Development
When the national income increases (growth), ideally it should result in
development (qualitative aspect – like health, education, employment etc).
There can also be cases when growth does not percolate to the bottom of
the pyramid – noninclusive growth – that will not result in the development
of weaker sections of the society. For a sustainable development, inclusive
growth is a must.
Growth and Employment

Growth generates employment and employment generates further growth.
In general, employment corresponds to the qualitative aspect of growth. If
a country is on the growth trajectory, it will generate more employment
opportunities and while the growth declines ( periods of recession), people
start losing jobs.
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How to generate growth? What are the issues in growth,
development and employment?
Issues in India’s growth, development and employment:
 India’s growth is declining. (currently at 5%).
 India’s growth is largely contributed by service sector. There is stagnation in the manufacturing
sector.
 Indian agriculture is still heavily dependent on monsoon. Nearly 50 % of population dependent

on agriculture which contributes only 14% of GDP.
 For a country to grow, there should be investment in productive areas. There should also be
supporting infrastructure. Currently India has issues in both.
 Due to external and internal factors, there is decline in foreign investment.
 For providing welfare schemes, subsidies and defense expenditure, India is borrowing. The
Fiscal Deficit of India is enlarging.
 India’s export sector is not growing in accordance with the demands of import goods.
 Growth is not entirely inclusive. There are still a significant portion of people below poverty
line.
 There are issues with employment too. Though the unemployment rate is in single digit now,
most of the employment in India is disguised unemployment. (In agricultural sector). The
average salary and per-capita income of Indians are very low.
 The employment rate and Labour Participation rate contributes towards the rise and fall of
unemployment rate which further affects the growth and economy of India. In August 2019 the
LPR was higher than it was in August 2018.It has grown slowly and steadily to a scale nearly 90
base points to 43.5% in August 2019.
 Investment condition has been weak. New investments into large and modern enterprises are
important to absorb rising working age population into labour markets.
 The little growth that we have seen in recent months was entirely from rural India. Employment
in August 2019 was nearly 2% higher than it was in August 2018. But this comes entirely from
rural areas. Year -on-Year rise in employment rate in rural India ahs been 2.9% in August 2019.
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But the urban India saw a fall of 0.2% and it has a recorded a y-o-y fall in the last 13 months.
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 India’s trade policies needed to be reformed towards:- 1) enhancing growth of merchandise
trade through increase integration with GVCs, with special focus on regional chains in the
dynamic East and Southeast Asia and 2) avoiding protectionist tariff hikes/trade measures that
threaten loss of existing comparative advantages of its top exporting sectors.
NITI Aayog: The new ‘think-tank’ to replace Planning

Commission
What’s new with NITI Aayog?
The centre-to-state one-way flow of policy, that was the hallmark of the Planning Commission era, is
now sought to be replaced by a genuine and continuing partnership of states.
 NITI Aayog = more a “think tank” than a finance distributing agency.
 NITI Aayog will provide Governments at the central and state levels with relevant strategic and
technical advice across the spectrum of key elements of the policy.
 With NITI Aayog, there will be multi-directional flow of policy (from Center to States, from
States to Center, between ministries etc.)
 Better inter-ministry coordination.
 The NITI Aayog will develop mechanisms to formulate credible plans to the village level and
aggregate these progressively at higher levels of government.
 The NITI Aayog will create a knowledge, innovation and entrepreneurial support
system through a collaborative community of national and international experts.
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NITI Aayog: Know more
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 The National institution for Transforming India will act as a catalyst for the development by a
holistic approach.
 NITI Aaayog is based on the 7 pillars of effective governance – (1) Pro-People (2) Pro-Activity
(3) Participation (4) Empowering (5) Inclusion of all (6) Equality (7) Transparency.
 In NITI Aayog, the state governments has an equal role in nation’s development process and
NITI Aayog promises the principle of co-operative federalism.
 NITI Aayog is planned as a think tank institution which stands not only as a hub for knowledge
but also for good governance.
 It’s a platform for monitoring and implementation of all government policies by bringing
together various ministries at the center and state level.
 Priorities include upliftment of the poor, marginalized and downtrodden.
 Empower vulnerable and marginalized sections, redressing identity-based inequalities of all

kinds – gender, region, religion, caste or class.
NITI Aayog: Objectives and Opportunities
NITI Aayog will aim to accomplish the following objectives and opportunities:
 An administration paradigm in which the Government is an “enabler” rather than a “provider

of first and last resort.”
 Progress from “food security” to focus on a mix of agricultural production, as well as actual
returns that farmers get from their produce.
 Ensure that India is an active player in the debates and deliberations on the global commons.
 Ensure that the economically vibrant middle-class remains engaged, and its potential is fully
realized.
 Leverage India’s pool of entrepreneurial, scientific and intellectual human capital.
 Incorporate the significant geo-economic and geo-political strength of the Non-Resident
Indian Community.
 Use urbanization as an opportunity to create a wholesome and secure habitat through the use
of modern technology.
 Use technology to reduce opacity and potential for misadventures in governance.
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NITI Aayog: Aims
The NITI Aayog aims to enable India to better face complex challenges, through the following:
 Leveraging of India’s demographic dividend, and realization of the potential of youth, men and
women, through education, skill development, elimination of gender bias, and employment
 Elimination of poverty, and the chance for every Indian to live a life of dignity and self-respect
 Reddressal of inequalities based on gender bias, caste and economic disparities
 Integrate villages institutionally into the development process
 Policy support to more than 50 million small businesses, which are a major source of
employment creation
 Safeguarding of our environmental and ecological assets
Structure and Composition of NITI Aayog

 Chairperson: Prime Minister of India
 Governing Council: Comprising the Chief Ministers of all States and Lt. Governors of Union
Territories.
 Regional Councils: Will be formed to address specific issues and contingencies impacting more
than one state or region.
Strategy and Planning in the NITI Aayog will be anchored from State-level. Regional Councils will
be convened by the Prime Minister for identified priority domains, put under the joint leadership of
related sub-groups of States (grouped around commonalities which could be geographic, economic,
social or otherwise) and Central Ministries.
Regional Councils
 Have specified tenures, with the mandate to evolve a strategy and oversee implementation.
 Be jointly headed by one of the groups Chief Ministers (on a rotational basis or otherwise) and a
corresponding Central Minister.
 Include the sectoral Central Ministers and Secretaries concerned, as well as State Ministers and
Secretaries. It will be linked to corresponding domain experts and academic institutions.
 Have a dedicated support cell in the NITI Aayog Secretariat.
 States would thus be empowered to drive the national agenda. As a consequence, deliberation
would be more grass-roots informed, and recommendations would have more ownership, given
their joint formulation.
 Special Invitees: experts, specialists and practitioners with relevant domain knowledge as special
invitees nominated by the Prime Minister.
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Full-time Organisational Framework:
Will comprise of, in addition to the Prime Minister as the Chairperson:
1. Vice-Chairperson: to be appointed by the Prime Minister.

2. Members: full-time: specialists with international exposure.
3. Part-time Members: maximum of 2, from leading universities, research organizations and other
relevant institutions in an ex-officio capacity. Part-time members will be on a rotational basis.
4. Ex-Officio Members: maximum of 4 members of the Union Council of Ministers to be nominated
by the Prime Minister.
5. Chief Executive Officer: to be appointed by the Prime Minister for a fixed tenure, in the rank of
Secretary to the Government of India.
6. Secretariat: as deemed necessary.
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NITI Aayog specialized Wings
 Research Wing – that will develop in-house sectoral expertise as a dedicated think tank of top
domain experts, specialists and scholars.
 Consultancy Wing – that will provide a marketplace of whetted panels of expertise and
funding for Central and State Governments to tap into; matching their requirements with solution
providers, public and private, national and international. By playing matchmaker instead of
providing the entire service itself, NITI Aayog will be able to focus its resources on priority
matters, providing guidance and an overall quality check to the rest.
 Team India Wing – comprising representatives from every State and Ministry, will serve as a
permanent platform for national collaboration.
Difference between NITI Aayog and Planning Commission

Organization:
 Planning Commission – Had deputy chairperson, a member secretary, and full-time members.
Secretaries or member secretaries appointed by the usual process.
 NITI Aayog – New posts of CEO of secretary rank, and Vice-Chairperson. Will also have five
full-time members and two part-time members. Four cabinet ministers will serve as ex-officio
members. CEO is appointed directly by Prime Minister.
Planning:
 Planning commission goes for top-down planning for government with public sector resources.
 NITI ayog formulate national development strategy in a market economy integrated with the
globalized world.
Relation with states

 The planning commission was a central government institution and no representation of state
government. There was no structural mechanism for interaction with states.
 NITI ayog provides a partnership with state governments to promote co-operative federalism. It
provides a platform for structured and regular interaction with states.
Finance
 The role of Finance Commission was greatly reduced with the formation of Planning
Commission. Allocation of funds were decided by the Planning Commission.
 NITI ayog don’t any role in fund allocation. Finance ministry to decide the share of taxes to
states, fund allocation to CSS and Union assistance to the state plan.
Constitution and Reporting

 Planning Commission- The commission reported to National Development Council that had State
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Chief Ministers and Lieutenant governors.

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 Niti Aayog – Governing Council has State Chief Ministers and Lieutenant Governors.

Niti Aayog: Criticism
 Like planning commission, it’s also a non-constitutional body which is not responsible to
parliament.
 Dismantled planning commission without consulting the states.
 UTs are represented by Lieutenant Governors, not by chief ministers. This is against the
principles of federalism.
 Fund allocation to welfare schemes may get affected. For example, there is a 20 % reduction in
gender budgeting.
Conclusion
NITI Aayog will function in close cooperation, consultation and coordination with the Ministries of
the Central Government and State governments. While it will make recommendations to the Central
and State Governments, the responsibility for taking and implementing decisions will rest with them.
NITI Aayog will seek to facilitate and empower the critical requirement of good governance – which
is people-centric, participative, collaborative, transparent and policy-driven. It will provide critical
directional and strategic input to the development process, focussing on deliverables and outcomes.
This, along with being as incubator and disseminator of fresh thought and ideas for development, will
be the core mission of NITI Aayog.
7 Major Steps of Economic Reforms Taken by Government of

India
For the attainment of the above-mentioned objectives, the government of India has taken the
following major steps:
(1) New Industrial Policy
Under Industrial Policy, keeping in view the priorities of the country and its economic development,
the roles of the public and private sectors are clearly decided. Under the New Industrial Policy, the
industries have been freed to a large extent from the licenses and other controls. In order to encourage
modernisation, stress has been laid upon the use of latest technology. A great reduction has been
effected in the role of the public sector efforts have been made to encourage foreign investment.
Investment decision by companies has been facilitated by ending restrictions imposed by the MRTP
Act. Similarly, Foreign Exchange Regulation Act (FERA) has been replaced with Foreign Exchange
Management Act (FEMA).
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Some important points of the New Industrial Policy have been highlighted here
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(i) Abolition of Licensing:

Before the advent of the New Industrial Policy, the Indian industries were operating under strict
licensing system. Now, most industries have been freed from licensing and other restrictions.
(ii) Freedom to Import Technology:
The use of latest technology has been given prominence in the New Industrial Policy. Therefore,
foreign technological collaboration has been allowed.
(iii) Contraction of Public Sector:
A policy of not expanding unprofitable industrial units in the public sector has been adopted. Apart
from this, the government is following the course of disinvestment in such public sector undertaking.
(Selling some shares of public sector enterprises to private sector entrepreneurs is called
disinvestment. This is a medium of privatisation.)
(iv) Free Entry of Foreign Investment:
Many steps have been taken to attract foreign investment. Some of these are as follows
(a) In 1991, 51% of foreign investment in 34 high priority industries was allowed without seeking
government permission.
(b) Non-Resident Indians (NRIs) were allowed to invest 100% in the export houses, hospitals, hotels,
etc.
(c) Foreign Investment Promotion Board (FIPB) was established with a view to speedily clear foreign
investment proposals.
(d) Restrictions which were previously in operation to regulate dividends repatriation by the foreign
investors have been removed. They can now take dividends to their native countries.
(v) MRTP Restrictions Removed:
Monopolies and Restrictive Trade Practices Act has been done away with. Now the companies do not
need to seek government permission to issue shares, extend their area of operation and establish a new
unit.
(vi) FERA Restrictions Removed:

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Foreign Exchange Regulation Act (FERA) has been replaced by Foreign Exchange Management Act
(FEMA). It regulates the foreign transactions. These transactions have now become simpler.
(vii) Increase in the Importance of Small Industries:
Efforts have been made to give importance to the small industries in the economic development of the
country.
(2) New Trade Policy
Trade policy means the policy through which the foreign trade is controlled and regulated. As a result
of liberalisation, trade policy has undergone tremendous changes. Especially the foreign trade has
been freed from the unnecessary controls.
The age-old restrictions have been eliminated at one go. Some of the chief characteristics of the New
Trade Policy are as follows:
(i) Reduction in Restrictions of Export-Import:
Restrictions on the exports-imports have almost disappeared leaving only a few items.
(ii) Reduction in Export-Import Tax:
Export-import tax on some items has been completely abolished and on some other items it has been
reduced to the minimum level.
(iii) Easy Procedure of Export-Import:
Import-export procedure has been simplified.
(iv) Establishment of Foreign Capital Market:
Foreign capital market has been established for sale and purchase of foreign exchange in the open
market.
(v) Full Convertibility on Current Account:
In 1994-95, full convertibility became applicable on current account.

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Here it is important to clarify the meaning of current account and full convertibility. Therefore, this
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has been done as follows:

Current Account:
Transactions with the foreign countries are placed in two categories: (i) transaction with current
account, for example, import-export, (ii) Capital account transactions, like investment.
Full Convertibility:
In short, full convertibility means unrestricted sale and purchase of foreign exchange in the foreign
exchange market for the purpose of payments and receipts on the items connected with current
account. It means that there is no government restriction on the sale and purchase of foreign exchange
connected with current account.
On the other hand, sale and purchase of foreign exchange connected with capital account can be
carried on under the rates determined by the Reserve Bank of India (RBI),
(vi) Providing Incentive for Export:
Many incentives have been allowed to Export- oriented Units (EOU) and Export Processing Zones
(EPZ) for increasing export trade.
(3) Fiscal Reforms
The policy of the government connected with the income and expenditure is called fiscal policy. The
greatest problem confronting the Indian government is excessive fiscal deficit. In 1990-91, the fiscal
deficit was 8% of the GDP. (It is important to understand the meaning of fiscal deficit and GDP.)
(i) Fiscal Deficit:
A fiscal deficit means that the country is spending more than its income,
(ii) Gross Domestic Product (GDP):
The GDP is the sum total of the financial value of all the produced goods and services during a year in
a country. Generally, the financial deficit is calculated in the form of GDP’s percentage. Presently, the
government of India is making efforts to take it to 4%.
Solutions of Fiscal Deficit

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In order to handle the problem of fiscal deficit, basic changes were made in the tax system. The
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following are the major steps taken in this direction:

(i) The rate of the individual and corporate tax has been reduced in order to bring more people in the
tax net.
(ii) Tax procedure has been simplified.
(iii) Heavy reduction in the import duties has been implemented.
(4) Monetary Reforms
Monetary policy is a sort of control policy through which the central bank controls the supply of
money with a view to achieving the objectives of the general economic policy. Reforms in this policy
are called monetary reforms. The major points with regard to the monetary reforms are given below:
(i) Statutory Liquidity Ratio (SLR) has been lowered. (A commercial bank has to maintain a definite
percentage of liquid funds in relation to its net demand and time liabilities. This is called SLR. In
liquid funds, cash investment in permitted securities and balance in current account with nationalised
banks are included.)
(ii) The banks have been allowed freedom to decide the rate of interest on the amount deposited.
(iii) New standards have been laid down for the income recognition for the banks. (By recognition of
income, we mean what is to be considered as the income of the bank. For example, should the interest
on the bad debt be considered as the income of the bank directions have been issued in this context.
(iv) Permission to collect money by issuing shares in the capital market has been granted to
nationalised banks.
(v) Permission to open banks in the private sector has also been granted.
(5) Capital Market Reforms
The market in which securities are sold and bought is known as the capital market. The reforms
connected with it are known as capital market reforms. This market is the pivot of the economy of a
country. The government has taken the following steps for the development of this market:
(i) Under the Portfolio Investment Scheme, the limit for investment by the NRIs and foreign
companies in the shares and debentures of the Indian companies has been raised. (Portfolio
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Investment Scheme means investing in securities.)

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(ii) In order to control the capital market, the Securities and Exchange Board of India (SEBI) has been
established.
(iii) The restriction in respect of interest on debentures has been lifted. Now, it is decided on the basis
of demand and supply.
(iv) The office of the Controller of Capital Issue which used to determine the price of shares to be
issued has been dispensed with. Now, the companies are free to determine the price of the shares.
(v) Private sector has been permitted to establish Mutual Fund.
(vi) The registration of the sub broker has been made mandatory.
(6) Phasing out Subsidies
Cash Compensatory Support (CCS) which was earlier given as export subsidy has been stopped. CCS
can be understood with the help of an example.
If an exporter wants to import some raw material which is available abroad for 100, but the same
material is available in India for 120 and the governments wants the raw material to be purchased by
the exporter from India itself for the protection of indigenous industries, the government is ready to
pay the difference of 20 to the exporter in the form of subsidy.
The payment of 20 will be considered as CCS. In addition to this, the CCS has been reduced in case
of fertilizers and petro products.
(7) Dismantling Price Control
The government has taken steps to remove price control in case of many products. (Price Control
means that the companies will sell goods at the prices determined by the government.) The efforts to
remove price control were mostly in respect of fertilizers, steel and iron and petro products.
Restrictions on the import of these products have also been removed.
 AGRICULTURAL REFORM: - Agricultural sector contributes less than 18% to the GDP
and where more than half of the population is dependent. The Union Govt. has set a
regulation to reform agricultural grievances and failures by doubling farmer’s income by
2022. The idea of providing food security of nation in the 20th century is modified by the idea
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of delivering livelihood security to the farmers in the 21 st century.

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 INFRASTRUCTURE REFORM: - First, the government does not have the resources to
build a 21st century infrastructure for India. And second, private sector money is
willing to make good the shortfall. What is needed is to rethink infrastructure
policymaking that takes these two sectors into account. This means, designing policies
that leave room for a changing dynamic of financing patterns or technological
disruptions, for instance, and allowing contractual renegotiations where necessary.
There should be transparency in policy making decision by putting every rule and
regulation up for public debate before enforcing it, for instance for stable consensus.
There should be knowledgeable person for expertizaton for capacity building. There
must be an end of the deterioration of regulatory bodies into sinecures for retired
bureaucrats. Merit and expertise must be the dominating consideration, a cadre
should be its currency of execution, youth the face of delivery. On the policy side,
every rule must have a reason for existence, a logic that supports that reason, and
which rests on the foundations of a cost-benefit analysis (benefits must outweigh
costs).
 LAND REFORM: - Creation of infrastructure and manufacturing can lay down its
foundation only on land. Poorly-conceived and shabbily-executed snatching of
properties of the poor has killed the credibility of land acquisition. Between 1947 and
2004, about 25 million hectares of land (more than the area of United Kingdom) has
been acquired for various purposes — building dams or special economic zones. This
has displaced 60 million people (about the population of Italy), a third of whom are
yet to see any resettlement.
Land reforms, therefore, need to keep a 21st century India in mind. They
need to be driven by the need to build infrastructure and smart manufacturing that create
jobs and bring prosperity to the people.
 LABOUR REFORMS :- A Left-dominated economic discourse has created a maze of

laws that capital must negotiate in order to build factories. Nobody is arguing for the
absolute supremacy of capital as a factor of production over labour. But it is
ridiculous for a $3 trillion economy going on $10 trillion to have 37 Central laws and
six amendments — there are six laws that relate to wages alone, separate laws for
disparate sectors (beedi and cigar workers, newspaper employees, working
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journalists, cine workers and cinema theatre workers, to list just four). This shows
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two things. First, our lawmakers don’t know how to draft laws based on firm

principles. And second, there is an element of political grandstanding and entitlement
disbursement to serve slivers of workers, lending an impression that a particular
constituency is being helped rather than the entire labour force. We need a deeper
study of these laws and compress them into two parts — one for physical aspects such
as safety, the other for financial aspects such as wages and social security.
Such is the scale and complexity of laws that the Inspector Raj combined with litigation has
become par for the course. A simple concept of wages, for instance, has as many as eleven
definitions in the corpus of Indian labour legislation. Each piece of labour legislation that
needs to be enforced requires the maintenance of a separate register and submission of
annual returns to the authority designated in the Act and its rules. This not only wastes
valuable time and costs money but also adversely affects the implementation of labour
standards, besides ironically making the cost of compliance higher than the cost of violation.
There are 429 different types of scheduled employments that have created more than 1,200
minimum wages. These laws belong to the colonial period, not for a 21st century India. The
problem is not in redrafting laws, rules and regulations; most ideas are already on the
intellectual table. The challenge is to effectively communicate these ideas to the entitled.
 GST 2.0:- GST 2.0 needs to deliver outcomes in the form of greater tax collections.
There are two major changes needed. The Govt. needs to bring real estate, electricity,
fuel and alcohol for human consumption under its fold. All these are revenue
generators for States that will fight back, citing economic reasons and not citing
political ones. The Union Govt. job here would be to reach out and persuade the
States. And second, the number of rates. Today, we have five rates — nil, 5%, 12%,
18% and 28%. In March 2019, the GST Council introduced yet another rate of 1% for
affordable housing, taking the effective total number to six. On top of this, we have a
surcharge, a policy precedent that can expand endlessly. What we need is clear and
unambiguous four rate-structure (counting nil, as a rate) before collapsing it to three
— nil, 5% and 12%.
 DIRECT TAX REFORMS: - A bill that proposes to consolidate and amend the laws
dealing with direct taxes — the Income Tax Act, 1961, and the Wealth Tax Act, 1957
— into a single and simple law, this is a much-needed policy intervention that has five
goals. First, to make taxation more predictable than it is. Second, to reduce the cost
of compliance and administration. Third, to minimise exemptions that serve a
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particular constituency and create a base for their expansion. Fourth, to reduce the
ambiguity that facilitates tax avoidance. And fifth, to check tax evasion. Sitting on
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these five legs, the bigger goal is to increase the tax-GDP ratio. Above all, the
approach to taxing citizens needs to be more respectful to the honest mass, even as
the hard force of law must fall on evaders.
 FINNCIAL ECTOR REFORMS: - It is essential for the government to attract capital

into the economy through financial products, convert savings into investments, and
drive India towards a $10 trillion economic powerhouse. The financialisaton of the
economy stands on the shoulders of financial products, from banking and funds to
insurance, pensions and securities.
That architecture is the Indian Financial Code

(IFC), a draft law that awaits Cabinet approval and Parliament’s enactment.
Conceptualised in March 2013, this law is the result of the Justice B.N.
Srikrishna-led Financial Sector Legislative Reforms Commission. In a nutshell,
this report and the accompanying draft law brings the consumer of financial
services at the centre of India’s financial architecture. The report overturns the
extant financial governance pyramid by placing the most important constituent,
the consumer, at the centre. This is the first time that consumers of financial
products have been given such a ‘protection’ by law. The draft law reorganises
finance under nine heads — consumer protection, micro-prudential regulation,
resolution, capital controls, systemic risk, development, monetary policy, public
debt management, and foundations of contracts and property.
Economic outcome from Digital India & Make in India

Digital India- To enable the digital revolution in India , P.M Narendra Modi began the Digital India
program with the aim to transform India into digital empowered society and knowledge economy.
It emphasizes on E- Delivery of documents thus reducing the harsh impact on environment as well to
provide internet as a backbone for communication over imperial methods through internet
connectivity in remote villages and also provide an infrastructure for digital development through
spread of learning computers and internet to every section of the society.
To prepare India for a knowledge future.

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On being transformative that is to realize IT (Indian Talent) + IT(Information Technology) = IT (India

Tomorrow)
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Making technology central to enabling change.
On being an Umbrella Programme - covering many departments
The programme, that opens in a new window weaves together a large number of ideas and thoughts
into a single, comprehensive vision, so that each of them is seen as part of a larger goal. Each
individual element stands on its own, but is also part of the larger picture. The weaving together
makes the Mission transformative in totality.
The Digital India Programme will pull together many existing schemes which would be restructured
and re-focused and implemented in a synchronized manner. The common branding of the
programmes as Digital India, highlights their transformative impact.
To understand the impact on economy let us understand the cases below:-
Digital India will help the country with 20-30% incremental GDP by 2025. The adoption of
technology across key sectors like financial services, healthcare, agriculture, energy, infrastructure
and education will provide an additional impact of $550 billion to $1 trillion on the India economy
annually by 2025!
The National Digital Literacy Mission is a classic example of a robust PPP that’s delivered impact at
the grassroots. Launched by Intel and Nasscom in 2012, the initiative brought together several
industry players on a common platform to accelerate digital literacy in the country. To date over 3
million citizens have been trained and one member in every household in the first three panchayats to
receive NOFN is e-literate.
The department of electronics and information technology, having seen the benefits of this
programme has fully adopted it to drive scale especially given the importance of widespread digital
literacy in India.
The one area where this kind of a model is needed with a high level of urgency is in developing the
culture of innovation in India. For the impact of Digital India to be realised, we have to use
technology to solve problems faced by Indians and for that we need a very strong culture of grounds-
up frugal innovation in IT.
The Government’s ‘Sabka Saath, Sabka Vikas’ philosophy encapsulates the importance of
collaboration and the time is right for both sides to make it happen because irrespective of the
challenge, the cost of inaction is far too damaging for not just the business but the nation at large.
Following the success of the DBT initiative, efforts are underway to provide more public services
online, in an ‘anytime, anywhere’ mode, thus converting the ubiquitous mobile phone into an
instrument of economic and social empowerment as well as access to livelihoods and information.
There is little doubt that this new wave of governance reform is likely to promote economic
empowerment, as well as radically enhance ‘ease of living’, particularly for those sections of the
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population whose aspirations are currently impeded by social barriers and geographic constraints. One
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of the major accomplishments of the ‘Digital India’ initiative is the fact that nearly 119,000 gram

panchayats in far-flung locales are connected by digital optical fibre. Karan Bhatia, Vice President,
Government Affairs and Public Policy at Google, said advanced new technologies like ML and
artificial intelligence can help address at scale some of the toughest social challenges that India faces
today The ‘Digital India’ initiative was launched by Prime Minister Narendra Modi on 1 July 2015,
and on the fourth anniversary of the programme, we can celebrate the fact that there have been
dramatic improvements in all of its three key facets: in the creation of pervasive national digital
infrastructure, in the electronic delivery of public services and financial succour to citizens, and in
enhancing digital awareness and literacy.
We can justly be proud of the fact that India is one of the fastest digitising nations in the world; driven
by an explosion in mobile connectivity, the permeation of internet infrastructure nationwide under the
iconic BharatNet programme, the exponential growth of data consumption, and the emergence of
start-ups in the digital transformation space that are creating new livelihoods, services and wealth for
millions of Indians. Currently, 1230 million Indians possess digital identities in the form of Aadhaar
cards, while there are over 1210 million mobile phones and 560 million internet connections.
One of the most successful outcomes of the ’Digital India’ initiative has been the runaway success of
the Jandhan-Aadhaar- Mobile[ JAM] initiative, which has provided a digital identity to more than a
billion Indian citizens as well as access to the banking system to millions of Indians who were earlier
excluded from the formal economy.
The government’s Direct Benefit Transfer [DBT] scheme now caters to around 350 million Indians,
liberating them from bureaucratic impediments, while ensuring that process leakages are a thing of the
past. Instantaneous and safe financial transactions are now within reach of all, with the Unified
Payments Interface having grown in three years from a mere 100,000 to 800 million transactions in
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March 2019.
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In the realm of digital literacy, the government’s Pradhan Mantri Gramin Digital Saksharta Abhiyan
[PMGDISHA] has ambitions of making 60 million Indians digitally literate, and it is anticipated that
this programme will attain greater traction in the days ahead.
Make in India- An initiative launched by PM Narendra Modi on

September 25, 2014.
Aim: To give the Indian Economy global recognition and emphasize manufacturing in India and to
revive the country's manufacturing sector over the past decade.
Pros:
1. Stresses on 25 sectors with emphasis on job creation and skill development which
increases people’s purchasing power leading to poverty eradication and expansion of
consumer base for companies.
PRO for industries and today’s youth
2. Change in laws like auto response mechanism to ensure ease of doing business in country.
Another PRO for investors and businessman-making it industry friendly
3. Foreign Direct Investment (FDI) gives technical expertise and innovative skills. Also to be
understood as FIRST DEVELOP INDIA and increase in foreign capital.
Cons:
1. Infrastructural bottlenecks and lack in logistics: To overcome, there’s a need to invest $

1trillion.Such a huge capital is tough.
2. Manufacturing sector demands highly skilled labour whereas India lacks highly skilled labour
force.
3. Environmental clearance, which has been surfaced in many mining projects. 4. Uncertainty in tax
system, like in Vodafone is a matter of concern for industries. 5. Land acquisition for establishing
manufacturing industries will prove to be challenging. challenging. What is really exciting is the
realisation that
India’s digital transformation saga has only just commenced. The creation of a nationwide digital
infrastructure, allied with potent new tools and technologies that are on the anvil: AI, Big Data, and
the Internet of Things [IOT]; is expected to galvanise sectors that affect the well-being of every
Indian, ranging from agriculture, that can benefit from the infusion of technological intelligence, to
natural-resource management, energy-use, transportation, urban-infrastructure and manufacturing:

22
indeed there is practically no aspect of modern life that cannot be improved by the application of
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intelligent digitisation. India is striving to become one of the early adopters of 5G technology, and its
induction is expected to multiply possibilities and opportunities across the spectrum in ways that we
cannot fathom now.
The Prime Minister has recently set a new national goal of India becoming a 5 trillion dollar economy
by the year 2025, and there is little doubt that the refreshed ‘Digital India’ programme will play a
critical role in realising this audacious ambition.
Special Notes on Digital India

With the aim of creating an economy which is digitally empowered, PM Narendra Modi launched
another of his pet projects named‘Digital India campaign.
The vision of Digital India programme also aims at inclusive growth in areas of electronic services,
products, manufacturing and job opportunities etc. The vision of Digital India is centred on three key
areas -
(i) Digital Infrastructure as a utility to every citizen
(ii) Governance & services on demand
(iii) Digital Empowerment of citizens
The Digital India programme aims to provide broadband highways, universal access to mobile
connectivity, public internet access programme, e-governance: Reforming government through
technology, eKranti - Electronic delivery of services, Information for all, Electronics manufacturing:
Target net zero imports, IT for jobs and early harvest programmes.  It makes possible the
implementation of digital locker system which in turn reduces paper
work by minimizing the usage of physical documents as well as enabling e-sharing through
registered repositories.
 It is an effective online platform which may engage people in governance through various
approaches like “Discuss, Do and Disseminate”.
 It ensures the achievement of various online goals set by the government.
 It makes possible for people to submit their documents and certificates online anywhere
which reduces physical work.

23
 Through e-Sign framework citizens may digitally sign their documents online.
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 It may ease the important health care services through e-Hospital system such as online
registration, taking doctor appointments, fee payment, online diagnostic tests, blood check-
up, etc.
 It provides benefits to the beneficiaries through National Scholarship Portal by allowing
submission of application, verification process, sanction and then disbursal.
 It is a big platform which facilitates an efficient delivery of government or private services
all over the country to its citizens.
Bharat Net programe (a high-speed digital highway) will connect almost 250,000 gram panchayats
of country.
There is a plan of outsourcing policy also to help in the digital India initiative.
For better management of online services on mobile such as voice, data, multimedia, etc, BSNL’s
Next Generation Network will replace 30-year old telephone exchange.
National Centre for Flexible Electronics will help in the promotion of flexible electronics.
Large scale deployment of Wi-Fi hotspots has been planned by the BSNL all across the country.
There is a Broadband Highways in order to handle all the connectivity related issues.
Open access of broadband highways in all the cities, towns and villages will make possible the
availability of world-class services on the click of mouse.
In line with these objectives, the government has launched some inititaives. Others are being readied
for launch. We take a look at some of them:
Digital Locker
System aims to minimize the usage of physical documents and enable sharing of e-documents across
agencies. The sharing of the e-documents will be done through registered repositories thereby
ensuring the authenticity of the documents online, says the government.
Vision of Digital India

Digital Infrastructure as a Utility to Every Citizen-Governance & Services on Demand Digital
Empowerment of Citizens
Pillars of Digital India

1. Broadband Highways
2. Universal Access to Phones

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3. Public Internet Access Programme

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4. e-Governance – Reforming government through Technology

5. e-Kranti – Electronic delivery of services
6. Information for All
7. Electronics Manufacturing – Target NET, ZERO Imports
8. IT for Jobs
9. Early Harvest Programmes
Impact of Digital India by 2019
 Broadband in 2.5 lakh villages, universal phone connectivity

 Net Zero Imports by 2020
 400,000 Public Internet Access Points
 Wi-fi in 2.5 lakh schools, all universities; Public wi-fi hotspots for citizens
Digital Inclusion: 1.7 Cr trained for IT, Telecom and Electronics Jobs
Job creation: Direct 1.7 Cr. and Indirect at least 8.5 Cr
e-Governance & e-Services: Across government India to be leader in IT use in services –

health, education, banking
Digitally empowered citizens – public cloud, internet access
Benefits of Digital Locker
Digital Locker facility will help citizens to digitally store their important documents like PAN card,
passport, mark sheets and degree certificates.
Digital Locker will provide secure access to Government issued documents. It uses authenticity

services provided by Aadhaar. It is aimed at eliminating the use of physical documents and enables
sharing of verified electronic documents across Govt Agencies.
Digital Locker provides a dedicated personal storage space in the cloud to citizens, linked to citizens
Aadhaar number.
Digital Locker will reduce the administrative overhead of government departments and agencies

created due to paper work.
It will also make it easy for the residents to receive services by saving time and effort as their
documents will now be available anytime, anywhere and can be shared electronically.
To sign-up for your Digital Locker, one need your Aadhaar number and a Mobile number that is
linked to that Aadhaar Number.
2. MyGov.in has been implemented as a platform for citizen engagement in governance, through a
"Discuss", "Do" and "Disseminate" approach. The mobile app for MyGov would bring these features
to users on a mobile phone.
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3. Swachh Bharat Mission (SBM) Mobile app would be used by people and Government
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organizations for achieving the goals of Swachh Bharat Mission.

4. eSign framework would allow citizens to digitally sign a document online using Aadhaar
authentication.
5. The Online Registration System (ORS) under the eHospital application has been introduced. This
application provides important services such as online registration, payment of fees and appointment,
online diagnostic reports, enquiring availability of blood online etc, the government claims.
6. National Scholarships Portal is said to be a one stop solution for end to end scholarship process
right from submission of student application, verification, sanction and disbursal to end beneficiary
for all the scholarships provided by the Government of India.
7. DeitY has undertaken an initiative namely Digitize India Platform (DIP) for large scale digitization
of records in the country that would facilitate efficient delivery of services to the citizens.
8. The Government of India has undertaken an initiative namely Bharat Net, a high speed digital
highway to connect all 2.5 lakh Gram Panchayats of country. This would be the world's largest rural
broadband connectivity project using optical fibre.
9. Policy initiatives have also been undertaken by DeitY in the e-Governance domain like e-Kranti
Framework, Policy on Adoption of Open Source Software for Government of India, Framework for
Adoption of Open Source Software in e-Governance Systems, Policy on Open Application
Programming Interfaces (APIs) for Government of India, E-mail Policy of Government of India,
Policy on Use of IT Resources of Government of India, Policy on Collaborative Application
Development by Opening the Source Code of Government Applications, Application Development &
Re-Engineering Guidelines for Cloud Ready Applications
10. BSNL has introduced Next Generation Network (NGN), to replace 30 year old exchanges, which
is an IP based technology to manage all types of services like voice, data, multimedia/ video and other
types of packet switched communication services.
11. BSNL has undertaken large scale deployment of Wi-Fi hotspots throughout the country. The user
can latch on the BSNL Wi-Fi network through their mobile devices.
12. BPO Policy has been approved to create BPO centres in different North Eastern states and also in
smaller / mofussil towns of other states.
13. Electronics Development Fund (EDF) Policy aims to promote Innovation, R&D, and Product
Development and to create a resource pool of IP within the country to create a self-sustaining eco-
system of Venture Funds.
14. National Centre for Flexible Electronics (NCFlexE) is an initiative of Government of India to
promote research and innovation in the emerging area of Flexible Electronics.
15. Centre of Excellence on Internet on Things (IoT) is a joint initiative of Department of Electronics
& Information Technology (DeitY), ERNET and NASSCOM.
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. Here are some notable examples:

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* Thousands of citizens are showing their DigiLocker driving license and registration certificates to
traffic policemen everydaywhen stopped on the road
* Railway passengers are showing DigiLocker’s digital documents to ticket collectors for identity
Verification
* CBSE announced Std X & XII board results in May 2018; on that day itself, digital
marksheets of
students was made available to them in their DigiLocker accounts
* Many Fintech startups into consumer lending have integrated with DigiLocker for digitally
verifying loan applicants in a few minutes (versus hours or days earlier)
* After the recent Kerala floods, where over a million state residents have lost their identity
documents, the state government is working with Digital Locker for reissuing of digital documents
directly into citizens’ Digital Locker accounts to safeguard against a natural calamity occurring again.
So overall one can say that Digital Locker’s usage is growing, though a lot more needs to be done.
Digital Locker - The Way Forward
 National rollout of Digital Locker System
 Identification of Govt. agencies and Departments to be on boarded on Digital Locker
System
 Setup of Apex committee, Core group, Digital Locker Management Office (DLMO) and
Programme Management Unit as a part of governance structure
 Identification of implementation agency or agencies for architecture, implementation and
operations of Digital Locker System
 Develop self-sustaining business

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DIGITAL INDIA A PATHWAY FOR EFFICIENCY AND
PRODUCTIVITY
New digital technology emphasizing speed and mobility are fundamentally changing the way of life
work and impact on economy. It is providing unprecedented opportunities for the government ,
enabling them to radically transform the complex bureaucracies to become more agile , citizen centric
and innovative. Digital government may be expressed as the optimal use of electronic channels of
communication in India .Digital government is helping to increase
1. Improve citizen satisfaction in service delivery

2. Enhance economic competitiveness,
3. Forge new level of communication and trust
4. Increase productivity of public service
5. Long term goals to be set which are monitored periodically
6. Active respose to social change i.e population increase,value change etc.
7. Need for resolution of challenges i.e global warming, energy crisis etc
Current Achievements by the DIGITAL INDIA concept recently undertaken by the government is
the “Aadhar Card”, a unique identification card.
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The Relationship of Environment with Business
Environment is the framework within which business operation takes place
Two broad heads
Indogenous environment is the firm or unit specific
Exogenous environment are external factors which influence the operation of business
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Banking & Financial services
Financial sector plays a very crucial role in the process of development of a country. A financial
sector comprises financial markets, institutions and instruments. Institutions that constitute financial
markets are modern banks and indigenous banks as well as specialized banks that cater to the needs of
agriculture, industry, trade, tourism and social security. Thus, the structure of financial institutions is
both wide and varied.
Financial market
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Money market Capital market

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Indian financial market is dichotomized into organized and unorganized ones. The unorganized sector
is an important adjunct of the Indian financial system after competing and supplementing the
organized component of the financial market.
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Commercial banks
Banking sector i) private banks
ii) Public owned banks
iii) Regional banks
Cooperative banks
Insurance sector
i) LIC
ii) GIC
Other financial institutions Mutual funds
i) UTI
ii) others
Development banks
i) IDBI
ii) ICICI
iii) SIDBI
iv) others
Indian money markets are sub divided broadly into money markets and capital markets. Money
market comprises both organized and unorganized sectors. Unorganized sector is normally made up
of indigenous money lenders and bankers who do not follow formal lines of business. Their
businesses are informal and thus independent of RBI or banks for any fund support.
The organized component of money market consists of RBI, commercial banks and cooperative
banks. The RBI is the head of financial institutions as well as the monetary authority of the country.
In terms of size and business, cooperative banks in India are rather tiny as compared to commercial
banks. It is three-tier bankingstructure with
a) The State Cooperative bank operating in each state as an apex bank

b) At the district level, the central cooperative banks
c) At the village level, the primary agricultural societies.
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However long term loans beyond 5 years are given by the Primary Cooperative Agricultural
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and Rural Development Banks (PCARDBs).

In the realm of industrial finance there is an institution called capital market that provides
long term funds to both public and private sector units. Security market is the most important
component of the capital market that deals in both corporate and govt or gilt-edged securities.
Role of commercial banks
1) A developing Economy needs a high rate of capital formation to accelerate the tempo of
economic development. But the economic development depends upon the rate of savings.
Banks offer facilities for keeping savings and does encourage the habits of thrift in the
society.
2) Not only do the banks encourage savings but they also mobilize savings done by several
households and make them available for production and investment to the entrepreneurs in
various sectors of the economy.
3) Allocation of funds or economic surplus among different sectors, users or producers so as
to make maximum social return and thus to ensure optimum utilization of savings is
another important function performed by the banks.
4) By encouraging savings and mobilizing then from public,banks help to increase the
aggregate rate of investment in the economy. Banks not only mobilize the saved funds
from the public, but they also themselves create deposits or credit which serve as money.
The new deposits are created by the banks when they lend money to the investors or other
users. These deposits are created by the banks in excess of the cash reserves they obtain
from the deposits from the public.
Functions of Banks:
1) Receipt of deposits
2) Lending of money
3) Agency service
4) General services
Commercial banking in India:
At the time of independence, India had a fairly well-developed banking system with more
than 645 banks having more than 4800 branch offices. These banks although developed but
they could not conform to the social needs of the society. These banks generally catered to the
needs of industries and that too big ones. Other priority sectors like agriculture, small scale
industries, exports, etc. were almost neglected. To overcome these deficiencies, the govt
announced the nationalization of 14 major commercial banks with effect from July 1969. The
objectives of nationalization were to control the heights of the economy and to meet
progressively the needs of the development of the economy, in conformity with national
policy and objectives.
Merger of PSU banks and it’s expected effect on Indian Economy-
On 30 th August, 2019 Indian FM declared about the merger of 10 major PSU banks of India
to form 4
banks and thus taking the No. PSUs in Indian Banking sector to 12. The following is the list
33
of
mergers-
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1>Punjab National Bank, Oriental Bank of Commerce and United Bank of India.

2> Canara Bank and Syndicate Bank
3> Union Bank of India, Andhra Bank and Corporation Bank.
4> Indian Bank and Allahabad Bank.
The effects of these mergers on Indian economy is yet to be seen, but it is anticipated to be
good ,
going by the history of merger of banks in India since 1960s. The weaker banks have mostly
profited
and even resurged owing to such mergers and amalgamations in the past . Though the
dynamics of

Indian economy have changed over the years, but most of the economists are hoping for a
revival of
the banking sector, which have been devastated mostly by the NPAs and unrecovered loans
from
various sectors. The condition is such that banks are not providing loans to any new projects
or
companies and is concentrating mainly on recovering of the outstanding ones, through the
IBC. So
this merger of banks is one of the major steps taken by the GOI towards attempting of
economic
reforms of the country at a time when the growth is going through a very bad phase, in fact
nosedived
since the last quarter.
Basic features of the macro business environment in India

We have indicated below some of the basic features of the macro business environment which has
gradually changed during the plan periods, particularly during the post liberalisation period (i.e., since
early 1990s).
(1) Scope of business activities within the framework of mixed economy: The economic
environment of India is suitable for the business activities of both private and public sector
enterprises. The mixed economic system of India enables all types of business houses to operate
in different sectors of our economy.
(2) Increasing purchasing power of the people: The purchasing power of the Indian people, on an
average, has gradually increased over the years. On the other hand, the extent of inequalities in
the distribution of personal income and wealth has declined. As a result, there has been a gradual
expansion of domestic market for different types of goods and services.
(3) Gradual improvement in the infrastructural facility:During the last five decades, there have
been substantial improvements in road transport, railway transport, electricity generation and
distribution etc. in India. These infrastructural facilities have gradually improved the macro
business environment of India.
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(4) Gradual improvement in the banking and insurance facilities:Adequate expansion of Bank
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branches in the rural and semi-urban areas; nationalized, private and foreign banks; development
banks (such as IDBI, ICICI etc.); insurance companies both in public and private sectors, etc.
have been helpful in providing necessary credit and insurance facilities to the business firms of
India.
(5) Liberalization in Government policies in favour of the private sector: In the early years of
Indian planning, particularly during 1951-79, the Industrial Licensing Policy, Export-Import
Policy, Industrial Policy, Foreign Exchange Policy, etc. were supposed to be inefficient and
ineffective in creating a competitive business environment in India.
However, since early 1990s, the government of India has been following liberal policies through
substantial reduction in government control over various economic activities. Under this changed
environment, private sector enterprises get more scope to expand their business activities in
various sectors of India. The foreign investors and the multinational companies can also now
enter easily into different sectors of the Indian economy without much hindrance.
(6) Changes in the legal environment:Since early 1990s, the government has been following the
principle of gradual decontrol and delicensing to encourage private sector enterprise. Hence,
necessary amendments have been made in those acts. For, instance, MRTP act (1969) was
amended to give more scope to large business houses for their future expansion (the competition
act, 2002 has replaced the MRTp act, 1969). Some new acts have also been passed to allow the
entry of private sector enterprises in the insurance and IT sectors.
Since the establishment of World trade Organisation (WTO) in 1995, several countries of the
world along with India have become the members of WTO. As per the provisions of WTO, India
is obliged to amend her patent act (1970) to safeguard the trade related intellectual property rights.
The second labour commission as well as the Task Force on Employment Opportunities
(appointment by the planning commission of India) are of the opinion that labour laws of India
should be amended to bring in adequate flexibility in the ‘hiringand firing of labour’ by any
business firm.
(7) Growing urbanization, consumerism and demonstration effect: The percentage of urban
population to total population has gradually increased over the years. Most of these urban people
try to imitate the life-style and consumption patterns of the developed countries. Such changes in
the social and cultural environment have also created enough scope for the expansion of business
firms which produce and sell such consumer goods.
(8) Expanded domestic market: The growing population of India, the growing purchasing power of
the people, etc. have caused expanded domestic market for different types of goods and services
in India. If any business firm can attract even 2 per cent of the Indian population as its customers,
the absolute size of the market for its product might be equal to the entire market for the same in
any developed country.
Few other factors being,
(1) Recently we are having export led industrialization, removal of control, and hence delicensing,
de-regulation, de-bureaucratization.
(2) Currently we are having market driven technological, industrial development.
(3) We are also having open policy and globalization and therefore we are having competition and
knowledge driven society.
(4) All restrictions have been removed for foreign investment and for the entry of MNCs.
(5) We are also having de-regulation of interest rate, disinvestment of public sector, gradual removal
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of subsidies, entry of more private banks and finally movement towards capital account
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convertibility.

(6) The era is also witnessing simplification of “tax structure and laws” and stringent measures to
control expenditure.
(7) In the agricultural frontier we find, decontrol over internal movement of food grains, abolition of
subsidies and introduction of contract
farming.
 Possible ‘treats’ : So far we have indicated some of the basic features of the macro business
environment of India which create opportunities for the business firms, However, such changing
business environment can also generate some threats to some of the business firms, Some of these
possible threats to India business firms are noted below:
(1) The withdrawal of quantity restrictions on the import of many agricultural and manufactured
items may lead to greater inflow of these products from foreign countries. Some of these
manufactured products are produced by the small-scale industries of India. So, these
industries would be hard hit.
(2) Liberal export-import policy, industry policy, etc. would encourage entry of some Multi-
National Companies (MNCs) in different sectors of our economy. Most of the Indian firms
would not be able to compete with those big MNCs. As a result, these MNCs would
ultimately wield some oligopoly or monopoly power in the Indian market. There will also be
greater tendency of amalgamation and merger between big companies to exert their monopoly
power.
(3) The policies towards economic globalization make Indian business firms more vulnerable to
business fluctuations in the world economy. Thus, if the world economy suffers from
economic depression, or if there is a downfall of the share prices in the American and
European stock markets, that would immediately affect the business economy of India
(4) (4) Indian markets are in doldrums since the last 2 quarters as there have been marked
reduction
(5) in purchasing power of people and hence not enough consumption of goods,barring the
(6) necessary ones. So all major sectors viz. Automobiles, real estates, FMCG, power, cement,
(7) iron & steel etc. have taken huge setbacks recently, resulting mass lay-offs.
(8) (5) Due to accumulation of huge NPAs in most of the PSU and private banks, they are
refraining
(9) from providing any further loans to the new projects of any sector(s) and are concerned
(10) mainly with recovery of the outstanding ones, taking support of the newly formed
IBC.
(11)  Remedies- Some of possible remedies to the above threats-
(12) 1> Encouraging of Indian start ups and Govt. have started several schemes to
support
(13) them too. But the tax-structures need to be levied and norms/regulations be reduced
(14) to set up or start up a business in India.
(15) 2> MSMEs should be encouraged to increase in number and grow in strength too,
to
(16) challenge the foreign goods in our country, and also to increase employment and
(17) better the socio-economic condition of our masses.
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(18) 3> Try to open up new frontiers and collaborations with other countries than the
super-
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(19) powers for exporting our goods , trying to tap on untapped markets worldwide which

(20) is very important for building up our forex reserves.
(21) 4> The MNCs helping the small businessmen of India to increase their customer
base or
(22) market share by taking their businesses online (as done by the e-commerce industries
(23) like Amazon, Flipkart ) or providing them a bigger platform to sell their goods( as
(24) done by the retail chain industries as Reliance, spencers, Big Bazar).
(25) 5> Govt. providing stimulus packages, taking up the role as a consumer and
facilitator
(26) for creating demand in the market. RBI have slashed repo rates, facilitating the
(27) financial institutions to reduce housing loans, attempting to boost real estates. Also
(28) banks have been merged to support the weaker ones and bruising the effect of bad
(29) loans to some extent..
Meaning of privatisation
In a narrow sense, privatisation implies an introduction of private ownership inpublic sector
enterprises. However, in a broader sense, it signifies introduction of the following measures:
(1) Ownership measures: It indicates the transfer of public sector enterprises either fully (in the
form of joint venture, total denationalization, liquidation, etc.) to the private sector.
(2) Organizational measure: It shows the process of limiting the state control over the Public Sector
Unit (PSU) through a restructuring of its organizational framework (say, through leasing out).
(3) Operational measures: It shows the process of giving greater autonomy toPSUS in making
economic decisions, permitting the PSUs to raise funds from the capital market (say, by selling its
shares), and infusing the spirit of commercialization in the operation of the PSUs.
Government can proceed with the disinvestment broadly in two ways,

(1) Sell only minority stakes: Only small portion of total equity shares of any PSU are sold retaining
the management with the government.
(2) Strategic sale:The government sells a significant portion of equities to any private corporate
house. In that case, the management of that PSU is transferred to that private corporate house.
Even if that private corporate house does not hold 51 per cent of equities of that PSU.
The issue of privatisation in the public sector
The government of India wanted to solve the maladies of the public sector through greater emphasis
on the private sector enterprises. The Industrial Policy (1991) of the government also stressed the
need for gradual reduction in public sector enterprises. In summary, taking both the past and present
policies into consideration, 17 industries were reserved for public sector in the Industrial Policy
Resolution (1956). This number was reduced to only 8 in the Industrial policy of 1991; and this was
further reduced to only 3 industries. Moreover, the Industrial policy of 1991 has also emphasized on
the closing of sick public sector units. The Board for Industrial and Financial Reconstruction (BIFR)
makes necessary recommendation for the restructuring or winding up of sick public sector enterprises.
 Principle elements of the Governmentpolicy towards the public sector: The main elements of
37
the Government policy towards PSUs, are stated below:

(a) Bring down Government equity in all non-strategic PSUs to 26 per cent or lower, if
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necessary;

(b) Restructure and revive potentially viable PSUs;
(c) Close down the PSUs which cannot be revived; and
(d) Fully protect the interest of the workers.
 The ‘Disinvestment’ programme: The Government of India planned for the selling of shares of
some of the profit-making sector enterprises to the private sector. This is known as disinvestment
programme. The Government set up a Disinvestment Commission in August, 1996 to advise the
Government on disinvestment (However, this policy of disinvestment in profitable public sector
units are withheld in 2004 and the disinvestment department of the Government was also
abolished).
 The principal objectives of disinvestment policy:
(a) Modernisation and upgradation of PSUs and improvement of their competitive strength;
(b) Creation of new assets in the industrial sector through the participation of the private sector
enterprises;
(c) Generation of employment in the economy;
(d) Reduction of public debt;
(e) To ensure that disinvestment does not result in private monopolies and concentration of
national assets in the hands of a few private enterprises;
(f) Setting up of a Disinvestment Proceeds Fund; etc. The present Govt. has adopted the
divestment of it’s shares in many PSUs, which are
(g) recurring huge losses as Air India & BSNL to name a few , as one of the major means of
raising
(h) capital to revive the Indian bearish markets. This is also called as “Asset Recycling and Asset
(i) monetization”. In the last F.Y the Govt raised reportedly 85,000 cr. of INR through selling its
(j) assets in companies as CIL, BHEL etc. This year in Union Budget the F.M have stated that
the
(k) GOI targets raising 1,05,000 cr.of rupees through divesting it’s shares in as many as 23 PSUs.
(l) Though the Govt’s initiative to sell it’s stakes even in profit-making companies as LICI, along
(m) with the loss-making ones, is a debatable one but the experts have hailed this bold decision by
(n) the Govt. as a necessity if it wants to reduce the fiscal deficit to below 3.3% of the GDP.
Time
(o) will tell, how much of this target of disinvestment, mentioned in the Annual budget of 2019-
20,
(p) will be achieved and how will it affect the Indian economy.
Back Ground of Indian economy

India is set to emerge as the world’s fastest-growing major economy by 2015 ahead of China, as per
the recent report by The World Bank. India’s Gross Domestic Product (GDP) is expected to grow at
38
7.5 per cent in 2015, as per the report.

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The improvement in India’s economic fundamentals has accelerated in the year 2015 with the
combined impact of strong government reforms, RBI's inflation focus supported by benign global
commodity prices.
Market size
According IMF World Economic Outlook April, 2015, India ranks seventh globally in terms of GDP
at current prices and is expected to grow at 7.5 per cent in 2016.
India’s economy has witnessed a significant economic growth in the recent past, growing by 7.3 per
cent in 2015 as against 6.9 per cent in 2014. The size of the Indian economy is estimated to be at Rs
129.57 trillion (US$ 2.01 trillion) for the year 2014 compared to Rs 118.23 trillion (US$ 1.84 trillion)
in 2013.
The steps taken by the government in recent times have shown positive results as India's gross
domestic product (GDP) at factor cost at constant (2011-12) prices 2014-15 is Rs 106.4 trillion (US$
1.596 trillion), as against Rs 99.21 trillion (US$ 1.488 trillion) in 2013-14, registering a growth rate of
7.3 per cent. The economic activities which witnessed significant growth were ‘financing, insurance,
real estate and business services’ at 11.5 per cent and ‘trade, hotels, transport, communication
services’ at 10.7 per cent.
Stating that its great time to invest in India, Minister of State for Finance Mr Jayant Sinha said the
Indian economy has potential to become a US$ 4-5 trillion economy in the next 10-12 years.
Investments/developments
With the improvement in the economic scenario, there have been various investments leading to
increased M&A activity. Some of them are as follows:
India has emerged as one of the strongest performers with respect to deals across the world in terms of
mergers and acquisitions (M&A). M&A activity increased in 2014 with deals worth US$ 38.1 billion
being concluded, compared to US$ 28.2 billion in 2013 and US$ 35.4 billion in 2012. The total
transaction value for the month of May 2015 was US$ 3.3 billion involving a total of 115
transactions. In the M&A space, pharma continues to be the dominant sector amounting to 23 per cent
of the total transaction value.
 India’s Index of Industrial Production (IIP) grew by 4.1 per cent in April 2015 compared to
2.5 per cent in March 2015. The growth was largely due to the boost in manufacturing
growth, which was 5.1 per cent in April compared to 2.8 per cent in the previous month.
 India’s Consumer Price Index (CPI) inflation rate increased to 5.01 per cent in May 2015
compared to 4.87 per cent in the previous month. On the other hand, the Wholesale Price
Index (WPI) inflation rate remained negative at 2.36 per cent for the seventh consecutive
month in May 2015 as against negative 2.65 per cent in the previous month, led by low
crude oil prices.
 India's consumer confidence continues to remain highest globally for the fourth quarter in a
row, riding on positive economic environment and lower inflation. According to Nielsen’s
findings, India’s consumer confidence score in the first quarter of 2015 increased by one
point from the previous quarter (Q4 of 2014). With a score of 130 in the first quarter (2015),
India's consumer confidence score is up by nine points from the corresponding period of the
previous year (Q1 of 2014) when it stood at 121.
 India’s current account deficit reduced sharply to US$ 1.3 billion (0.2 per cent of GDP) in
the fourth quarter of 2015 compared to US$ 8.3 billion (1.6 per cent of GDP) in the previous
quarter, indicating a shrink in the current account deficit by 84.3 per cent quarter-on-quarter
basis.
 India's foreign exchange reserve stood at a record high of US$ 354.28 billion in the week up
to June 12, 2015 – indicating an increase of US$ 1.57 billion compared to previous week.
 Owing to increased investor confidence, net Foreign Direct Investment (FDI) inflows
39
touched a record high of US$ 34.9 billion in 2015 compared to US$ 21.6 billion in the
previous fiscal year, according to a Nomura report. The report indicated that the net FDI
Page

inflows reached to 1.7 per cent of the GDP in 2015 from 1.1 per cent in the previous fiscal
year.
Government Initiatives
Numerous foreign companies are setting up their facilities in India on account of various government
initiatives like Make in India and Digital India. Mr Narendra Modi, Prime Minister of India, has
launched the Make in India initiative with an aim to boost the manufacturing sector of Indian
economy. This initiative is expected to increase the purchasing power of an average Indian consumer,
which would further boost demand, and hence spur development, in addition to benefiting investors.
Besides, the Government has also come up with Digital India initiative, which focuses on three core
components: creation of digital infrastructure, delivering services digitally and to increase the digital
literacy.
Currently, the manufacturing sector in India contributes over 15 per cent of the GDP. The
Government of India, under the Make in India initiative, is trying to give boost to the contribution
made by the manufacturing sector and aims to take it up to 25 per cent of the GDP. Following the
government’s initiatives several plans for investment have been undertaken which are as follows:
Foxconn Technology group, Taiwan’s electronics manufacturer, is planning to manufacture Apple
iPhones in India. Besides, Foxconn aims to establish 10-12 facilities in India including data centers
and factories by 2020.
 India Electronics and Semiconductor Association (IESA) and Nasscom have signed a MoU
to push electronics manufacturing share to 25 per cent of GDP by 2025. Under the MoU
approval has been given to 21 electronic clusters.
 Hyderabad is set to become the mobile phone manufacturing hub in India and is expected to
create 150,000 – 200,000 jobs. Besides, the Telangana Government aims to double IT
exports to Rs 1.2 trillion (US$ 18.7 billion) by 2019.
 Ford Motor Company has started working on plans to manufacture EcoSport in India for
exporting it to US. The company has provided the quotation for 90,000 units every year,
which is greater than the vehicles it sells in India.
 Hyundai Heavy Industries (HHI) and Hindustan Shipyard Ltd have joined hands to build
warships in India. Besides, Samsung Heavy Industries and Kochi Shipyard will be making
Liquefied Natural Gas (LNG) tankers.
 Mercedes-Benz plans to increase the number of cars it manufactures in India by doubling the
capacity to 20,000 vehicles a year and has come up with a new plant in Pune.
Under the Digital India initiative numerous steps have been taken by the Government of India. Some
of them are as follows:
 The Government of India has launched a digital employment exchange which will allow the
industrial enterprises to find suitable workers and the job-seekers to find employment. The
core purpose of the initiative is to strengthen the communication between the stakeholders
and to improve the efficiencies in service delivery in the MSME ministry. According to
officials at the MSME ministry over 200,000 people have so far registered on the website.
 The Ministry of Human Resource Development recently launched Kendriya Vidyalaya
Sangthan’s (KVS) e-initiative ‘KV ShaalaDarpan’ aimed at providing information about
students electronically on a single platform. The program is a step towards realising Digital
India and will depict good governance.
 The Government of India announced that all the major tourist spots like Sarnath, Bodhgaya
and Taj Mahal will have a Wi-Fi facility as part of digital India initiative. Besides, the
Government has started providing free Wi-Fi service at Varanasi ghats.
Based on the recommendations of the Foreign Investment Promotion Board (FIPB), the Government
of India has approved 10 proposals of FDI amounting to Rs 2,857.83 crore (US$ 445.21 million)
40
approximately. Out of the 10 approved proposals, six belonged to the pharmaceutical sector with a
total value of Rs 1,415 crore (US$ 221.05 million) excluding the outflows.
Page

The Union Cabinet, chaired by the Prime Minister Mr Narendra Modi, has given its approval to enter
into a Memorandum of Understanding (MoU) for strengthening cooperation in the field of Micro,
Small and Medium Enterprises (MSMEs), between India and Sweden. The purpose of the MoU is to
achieve and promote cooperation between MSMEs of the two countries by providing a structured
framework and creating an environment to identify each other’s technologies, strengths, markets,
policies, etc.
The Government of India has launched an initiative to create 100 smart cities as well as Atal Mission
for Rejuvenation and Urban Transformation (AMRUT) for 500 cities with an outlay of Rs 48,000
crore (US$ 7.47 billion) and Rs 50,000 crore (US$ 7.78 billion) crore respectively. Smart cities are
satellite towns of larger cities which will consist of modern infrastructure and will be digitally
connected. The program was formally launched on June 25, 2015. The Phase I for Smart City Kochi
(SCK) is set to launch in July 2015 which will be built on a total area of 650,000 sq. ft., having a floor
space greater than 100,000 sq. ft. Besides, it will also generate a total of 6,000 direct jobs in the IT
sector.
Road Ahead
The International Monetary Fund (IMF) and the Moody’s Investors Service have forecasted that India
will witness a GDP growth rate of 7.5 per cent in 2016, due to improved investor confidence, lower
food prices and better policy reforms. Besides, according to mid-year update of United Nations World
Economic Situation and Prospects, India is expected to grow at 7.6 per cent in 2015 and at 7.7 per
cent in 2016.
As per the latest Global Economic Prospects (GEP) report by World Bank, India is leading The World
Bank’s growth chart for major economies. The Bank believes India to become the fastest growing
major economy by 2015, growing at 7.5 per cent.
According to Mr Jayant Sinha, Minister of State for Finance, Indian economy would continue to grow
at 7 to 9 per cent and would double in size to US$ 4–5 trillion in a decade, becoming the third largest
economy in absolute terms.
Furthermore, initiatives like Make in India and Digital India will play a vital role in the driving the
Indian economy.
Exchange rate used: INR 1 = US$ 0.015 as on June 17, 2015
References: Press Information Bureau (PIB), Media Reports, World Bank, Department of Industrial
Policy & Promotion (DIPP), Grant Thornton, Database of Indian Economy (DBIE)
Investments/developments
With the improvement in the economic scenario since the last few years , there have been various
investments leading to increased M&A activity. Some of them are as follows:
The M&A activity in India witnessed a record no.of deals worth $129.4 billion in 2018, which
smashed the previous record of $67.4 b 1 in previous year.illion of 2007. Also the no. of deals
increased by 17.2%since last financial year. The year witnessed 5 mega deals of $5 billion+(total $39
billions) co last financial year.
However the figures are not on the rise everywhere:

 India’s Index of Industrial Production (IIP) grew by just 2 per cent in June 2019 compared
to 4.6 per cent in June 2018. The decline is largely due to the slowd  All India general Consumer
Price Index (CPI) inflation rate increased to 3.05 per cent in
May 2019 compared to 2.99 per cent in the previous month.
On the other hand, the
41
Wholesale Price Index (WPI) inflation rate recorded 1.08 per cent for the month of May’19,
dipping from 2.02% in Apr’19 , led by low crude oil prices and low inflation of
Page
manufacturing products.

 India's consumer confidence continues to remain highest globally in the fourth quarter in
2018-19, riding on positive economic environment and lower inflation especially in the
earlier parts of the F.Y. According to Nielsen’s findings, India’s consumer confidence score
in the end of F.Y 2018-19 i.e Mar’19 stood at 133, just piping Phillipines(131) and
Indonesia(127). But with the private consumption lowering tremendously and many of the
sectors undergoing serious turmoil condition and job cuts becoming order of the day, India
may not be able to hold on to this rank for long.
 India’s current account deficit increased sharply to US$ 19.1 billion (2.9 per cent of GDP)
in the 2 nd quarter of 2019 compared to 2.4% of GDP in Apr-Jun’19, indicating a rise in the
current account deficit by 20% quarter-on-quarter basis.
 India's foreign exchange reserve stood at a record high of US$ 429.7 billion as on 23 rd
August 2019 – indicating an increase of US$ 1.62 billions compared to previous week.
FDI equity inflows in India fell by 1% to $44.4 bn when compared to the last year, when it
was$44.8bn. FDI inflows fell 56% in telecommunications to $2.7 billion and 74% in pharmaceuticals
to $266 million. Those in the power sector declined to $1.1 billion from $1.62 billion earlier.
Further, Singapore replaced Mauritius as the top source of foreign investment with FDI inflows twice
that from Mauritius during the year at $16.2 billion, compared with $8.1 billion from Mauritius.
Numerous foreign companies have set up their facilities in India on account of various government
initiatives like Make in India and Digital India. Mr Narendra Modi, Prime Minister of India, has
launched the Make in India initiative with an aim to boost the manufacturing sector of Indian
economy. This initiative is expected to increase the purchasing power of an average Indian consumer,
which would further boost demand, and hence spur development, in addition to benefiting investors.
Besides, the Government has also come up with Digital India initiative, which focuses on three
coreown in growth of
manufacturing and other core sectors of India, when compared to last year.
components: creation of digital infrastructure, delivering services digitally and to increase the digital
literacy.
Currently, the manufacturing sector in India contributes over 15 per cent of the GDP. The
Government of India, under the Make in India initiative, is trying to give boost to the contribution
made by the manufacturing sector and aims to take it up to 25 per cent of the GDP. Following the
government’s initiatives several plans for investment have been undertaken which are as follows:
Foxconn Technology group, Taiwan’s electronics manufacturer, is planning to manufacture Apple
iPhones in India. Besides, Foxconn aims to establish 10-12 facilities in India including data centers
and factories by 2020.

42
 India Electronics and Semiconductor Association (IESA) and Nasscom have signed a MoU
Page
to push electronics manufacturing share to 25 per cent of GDP by 2025. Under the MoU
approval has been given to 21 electronic clusters.
 Hyderabad was set to become the mobile phone manufacturing hub in India and was
expected to create 150,000 – 200,000 jobs. But this number is yet to be achieved.Besides,
the Telangana Government aims to double IT exports to Rs 1.2 trillion (US$ 18.7 billion) by
the next 3-4 years.
 Ford Motor Company started working on plans to manufacture EcoSport in India for
exporting it to US. The company has provided the quotation for 90,000 units every year,
which is greater than the vehicles it sells in India. But the auto industry in India is going
through worst of it’s phases, with Maruti laying off employees, reducing production and
working hours and similar is case with most other cos.of the sector.
 Hyundai Heavy Industries (HHI) and Hindustan Shipyard Ltd have joined hands to build
warships in India. Besides, Samsung Heavy Industries and Kochi Shipyard will be making
Liquefied Natural Gas (LNG) tankers.
Under the Digital India initiative numerous steps have been taken by the Government of India. Some
of them are as follows:
 The Government of India has launched a digital employment exchange which will allow the
industrial enterprises to find suitable workers and the job-seekers to find employment. The
core purpose of the initiative is to strengthen the communication between the stakeholders
and to improve the efficiencies in service delivery in the MSME ministry. According to
officials at the MSME ministry over 200,000 people have so far registered on the website.
 The Ministry of Human Resource Development recently launched Kendriya Vidyalaya
Sangthan’s (KVS) e-initiative ‘KV Shaala Darpan’ aimed at providing information about
students electronically on a single platform. The program is a step towards realising Digital
India and will depict good governance.
 The Government of India announced that all the major tourist spots like Sarnath, Bodhgaya
and Taj Mahal will have a Wi-Fi facility as part of digital India initiative. Besides, the
43
Government has started providing free Wi-Fi service at Varanasi ghats.

Page
Based on the recommendations of the Foreign Investment Promotion Board (FIPB), the Government

of India has approved 10 proposals of FDI amounting to Rs 2,857.83 crore (US$ 445.21 million)
approximately. Out of the 10 approved proposals, six belonged to the pharmaceutical sector with a
total value of Rs 1,415 crore (US$ 200 million) excluding the outflows.
The Union Cabinet, chaired by the Prime Minister Mr Narendra Modi, has given its approval to enter
into a Memorandum of Understanding (MoU) for strengthening cooperation in the field of Micro,
Small and Medium Enterprises (MSMEs), between India and Sweden. The purpose of the MoU is to
achieve and promote cooperation between MSMEs of the two countries by providing a structured
framework and creating an environment to identify each other’s technologies, strengths, markets,
policies, etc. GOI also declared in the last budget that if a MSME has all its docs ready, loan will be
disbursed in 59 minutes. But the truth is , post the DeMon and GST rollout, large no. of small and
micro business sectors have shut down or cannot earn enough profit to sustain in this market. Govt.
have ensured enough credit support to these sectors but the business is yet to pick up. Same is the sad
picture of real estates, which is still bearing the burnt of DeMon and coupled with the current gloomy
scenario, a huge no. of properties remain unsold, even after RBI slashing repo rates on housing
finances.
The Government of India has launched an initiative to create 100 smart cities as well as Atal Mission
for Rejuvenation and Urban Transformation (AMRUT) for 500 cities with an outlay of Rs 48,000
crore (US$ 6.47 billion) and Rs 50,000 crore (US$ 7.02 billion) crore respectively in 2015-16 . Till
2018 Jan, 33,970 cr were tendered and it increased to 126,000 cr.to Feb 2019 and the programme was
closely monitored from the PMO, thus yielding good results with double the projects completed in 1
year, than the previous 2 years combined. So, we can expect the target to be achieved in the next few
years and it will be a major step in sustainable growth and development of the semi-urban &
rural
India.
44
Road Ahead
Page
Only two quarters earlier, India was the fastest growing economy, but India’s growth in last quarter

which is estimated to have gone below the 6% mark, have put it behind China now.
The unfortunate truth is that the Indian economy is going through a vey poor state, all the sectors have
registered a huge dip in the growth. The major cos., both private and public, are undergoing huge
losses and hence job cuts as a result, like BSNL, Air India, Maruti, TATA motors, DHFL etc. to name
a few eminent ones, apart from numerous others. The purchasing power of Indian masses have taken a
major setback resulting in downslide of even FMCG-both durables and consumables. Our exports and
businesses have also been incurred a major blow owing to Sino US trade wars and protectionism
policies adopted by many developed nations.
The GOI have released stimulus packages for reviving auto sectors, housing finances, merged banks
to support the weaker ones, providing more credit facilities to MSMEs, removing surcharges from
FDIs and start-ups etc. but their desired results are yet to show. Most of the industry experts, global
and Indian financial institutions are hoping for a economic turnaround but the previous estimated
growth figures obviously need to be sacrificed to quite a extent considering the current global
financial crisis scenario and the practical state of turmoil in Indian markets.
Exchange rate used: US$1=71 INR
References: Press Information Bureau (PIB), Media Reports, World Bank, Department of Industrial
Policy & Promotion (DIPP), Database of Indian Economy (DBIE), ET, BT, livemint, trading
economics, money control, forbes india, Wikipedia.
Securities and Exchange Board of India (SEBI)

Securities and Exchange Board of India (SEBI) was first established in the year 1988 as a non-
statutory body for regulating the securities market. It became an autonomous body in 1992 and more
powers were given through an ordinance. Since then it regulates the market through its independent
powers.
Objectives of SEBI
As an important entity in the market it works with following objectives:
 It tries to develop the securities market.

 Promotes Investors Interest.
 Makes rules and regulations for the securities market.
45
Functions Of SEBI
Page

 Regulates Capital Market
 Checks Trading of securities.
 Checks the malpractices in securities market.
 It enhances investor's knowledge on market by providing education.
 It regulates the stockbrokers and sub-brokers.
 To promote Research and Investigation
SEBI In India's Capital Market
SEBI from time to time have adopted many rules and regulations for enhancing the Indian capital
market. The recent initiatives undertaken are as follows:
 Sole Control on Brokers:Under this rule every brokers and sub brokers have to get
registration with SEBI and any stock exchange in India.
 For Underwriters:For working as an underwriter an asset limit of 20 lakhs has been fixed.
 For Share Prices:According to this law all Indian companies are free to determine their
respective share prices and premiums on the share prices.
 For Mutual Funds:SEBI's introduction of SEBI (Mutual Funds) Regulation in 1993 is to
have direct control on all mutual funds of both public and private sector.
National Stock Exchange
In the year 1991 Pherwani Committee recommended to establish National Stock Exchange (NSE) in
India. In 1992 the Government of India authorized IDBI for establishing this exchange.
In National Stock Exchange there is trading of equity shares, bonds and government securities. India's
Stock Exchanges particularly National Stock Exchange has achieved world standards in the recent
years. The NSE India ranked its 3rd position since last four years in terms of total number of trading
per calendar year.
Presently there are 24 stock exchanges in India, out of which 20 have exchanges National Stock
Exchange (NSE), over the Counter Exchange of India Ltd, (OTCEI) and Inter-connected Stock
Exchange of India limited (ISE) have nationwide trading facilities.
New NSE Reference Rates
Both MIBOR (Mumbai Inter Bank Offer Rate) and MIBID (Mumbai Inter Bank Bid Rate) are the two
new references rates of the National Stock Exchanges. These two new reference rates were launched
on June 15, 1998 for the loans of inter bank call money market.
Both MIBOR and MIBID work simultaneously. The MIBOR indicates lending rate for loans while
MIBID is the rate for receipts.  SEBI In India's Capital Market
SEBI has adopted a number of revolutionary steps to re-establish the credit of capital market,
which include the following-
1. Control on Utilizing' Application Amount' having no Interest by Companies Releasing
Public Issues- At the instance of SEBI commercial banks introduced Stock Investment Scheme
46
under which investor has to submit stock-invests, purchased from banks, with their share
Page
application. If the investor is allotted shares/debentures, the required amount is transferred in

concerned company's account by the bank issuing 'Stock invests'.
In other case (if share/debenture is not allotted), investor gets a pre-determined interest rate on
invested capital. This step of SEBI ensured interest earning to the investor until he got share/
debenture allotment. It also ensures the refund of invested amount to the investor in case shares
are not allotted.
2. Share Price and Premium Determination - According to the latest directions of SEBI,
Indian companies are now free to determine their share prices and premium on those shares. But
determined price and premium amount will be equally applicable to all without any
discrimination.
3. Underwriters-The minimum asset limit has been fixed to be ~ 20 lakh to work as underwriter.
Besides, SEBI has warned under writers that their registration can be cancelled if any irregularity
is found in the purchase of unsubscribed part of the share' issue.
4. Control on Share Brokers-Under new rules every broker and sub-broker has to obtain
registration with SEBI and any stock exchange in India.
5. Insider Trading-Companies and their employees usually adopt malpractices in Indian capital
market to variate share prices. To check this type of insider trading, SEBI introduced SEBI
(Insider Trading) Regulation 1992 which will ensure honesty in the capital market and will
develop a feeling of faith among investors to promote investments in capital market in the long
run.
6. SEBl's Control on Mutual Funds-SEBI introduced SEBI (Mutual Funds) Regulation 1993 to
take over direct control of all mutual funds of government and private sector (excluding UTI).
Under this new rule, the company floating a mutual fund should possess net assets of ~ 5 crore
which should consist of atleast 40% contribution from promoter's side.
7. Control on Foreign Institutional Investors-SEBI has made it compulsory for every foreign
institutional investor to get registered with SEBI for participating in Indian capital market. SEBI
has issued directives in this regard.

47
Page
 MSME:

The Ministry of Micro, Small and Medium Enterprises, a branch of the Government of
India, is the apex body for the formulation and administration of rules, regulations and laws
relating to micro, small and medium enterprises in India. The Minister of Micro, Small and
Medium Enterprises is Nitin Gadkari and the Minister of State is Pratap Chandra
Sarangi since 31 May 2019.Contact msme.gov.in
 The statistics provided by the annual reports of Ministry of Small and Medium
Enterprises (MSME) shows a rise in the plan amount spent on the khadi sector from
₹1942.7 million to ₹14540 million, and non-plan amounts from ₹437 million to ₹2291
million, in the period from 1994–95 to 2014–2015. The interest subsidies to khadi
institutions increased from ₹96.3 million to ₹314.5 million in this period.
 History;
The Ministry of Small Scale Industries and Agro and Rural Industries was created in October
1999. In September 2001, the ministry was split into the Ministry of Small Scale Industries and
the Ministry of Agro and Rural Industries. The President of India amended the Government of
India (Allocation of Business) Rules, 1961, under the notification dated 9 May 2007. Pursuant to
this amendment, they were merged into a single ministry.
The ministry was tasked with the promotion of micro and small enterprises. The Small Industries
Development Organization was under the control of the ministry, as was the National Small
Industries Corporation Limited public sector undertaking).
The Small Industries Development Organisation was established in 1954 on the basis of the
recommendations of the Ford Foundation. It has over 60 offices and 21 autonomous bodies
under its management. These autonomous bodies include Tool Rooms, Training Institutions and
Project-cum-Process Development Centres.
Services provided include:
 Facilities for testing, toolmenting, training for entrepreneurship development

48
 Preparation of project and product profiles

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 Technical and managerial consultancy

 Assistance for exports
 Pollution and energy audits
It also provides economic information services and advises Government in policy formulation
for the promotion and development of SSIs. The field offices also work as effective links
between the Central and State Governments.
 Budget 2019: 15 key takeaways for the MSME sector
Presenting the Budget 2019-20 in Parliament, Nirmala Sitharaman unveiled a slew of
initiatives and new provisions to tackle issues related to the MSME sector in the country.
From widening the net for a reduction in corporate tax for companies to strengthening
TReDS, Sitharaman’s budget speech will have wide-ranging impact on small businesses.
Here are the key takeaways
1) Lower rate of 25 % Corporate Tax extended to companies with annual turnover
up to Rs 400 crore from earlier cap of upto Rs 250 crore.
2) For the MSME sector, Rs 350 crore has been allocated for FY 2019-20 under
the Interest Subvention Scheme, for 2% interest subvention for all GST registered
MSMEs, on fresh or incremental loans.
3) The Finance Minister said that the Government will create a payment platform
for MSMEs to enable filing of bills and payment. This will help eliminate delays
in payment and give a boost to investment in MSMEs .
4) To bring more participants, especially NBFCs, not registered as NBFCs-Factor,
on the TReDS platform, amendment in the Factoring Regulation Act, 2011 is
necessary and steps will be taken to allow all NBFCs to directly participate on the
TReDS platform.
5) Government of India has decided to extend the pension benefit to about three
crore retail traders and small shopkeepers whose annual turnover is less than
49
Rs.1.5 crore under a new Scheme Pradhan Mantri Karam Yogi Maandhan
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Scheme. Enrolment into the Scheme will be kept simple requiring only Aadhaar

and a bank account and rest will be on self-declaration.
6) The Stand Up India Scheme has been extended upto the year 2025.
7) Skill development to focus on new-age skills like Artificial Intelligence (AI), Internet of
Things, Big Data, 3D Printing, Virtual Reality and Robotics.
8) More than Rs. 3.75 Lakh Crore is blocked in litigations in Service Tax and Excise (pre-GST
regime). The budget proposes a dispute resolution-cum-amnesty scheme, called “the Sabka
Vishwas Legacy Dispute Resolution Scheme, 2019” that will allow quick closure of these
litigations. The relief under the scheme varies from 40 percent to 70 percent of the tax dues for
cases other than voluntary disclosure cases.
9) To ease the liquidity crisis in NBFCs, the Government says fundamentally sound ones should
continue to get funding from banks and mutual funds without being unduly risk averse. For
purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rs 1
lakh crore during the current financial year, Government will provide one time six months'
partial credit guarantee to Public Sector Banks for first loss of up to 10%.
10) “Make in India”, with particular emphasis on Micro, Small and Medium Enterprises, is one
of the major focus areas of the Union Budget this year.
11) Under the Scheme of Fund for Upgradation and Regeneration of Traditional Industries’
(SFURTI) 100 new clusters will be set up during 2019-20 enabling 50,000 artisans to join the
economic value chain. Focused sectors are Bamboo, Honey and Khadi clusters.
12) The Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship’ (ASPIRE)
would be consolidated for setting up of 80 Livelihood Business Incubators (LBIs) and 20
Technology Business Incubators (TBIs)in 2019-20 to develop 75,000 skilled entrepreneurs in
agro-rural industry sectors.
13) There will be an interchangeability of PAN and Aadhaar to file tax return proposed.
14) 2 % TDS on cash withdrawal exceeding Rs. 1 crore in a year from a bank account to
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encourage digital payments.

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15) Businesses with annual turnover more than Rs. 50 crore to offer low cost digital modes of

payment; no MDR charges to be imposed on customers/ merchants.
As a manager, explain the significance of the linkages between

the business and government. Why do you think it is necessary in
the modern context of globalisation and open market?
Business and Government go hand in hand. They are inseparable. They are complementary to
each other. In fact, it is the ‘business’ of the government to help firms do business. The
government is a tool of business; while business firms are the bottom line thinkers and doers.
Governments across the globe are trying their best to attract industries to be set up in their
countries.
In the modern world today, the state-run public sector and private sector companies are
competing against each other to get a pie of the market share. It is the very base of Mixed
Economic Policy that India follows, taking the best of both the worlds of Capitalism and
Socialism. At the time of independence, the onus of setting up an industrial base of the country
fell on government’s shoulders, as private sector neither had the expertise nor the bandwidth.
Sixty years from then, the private sector is competent enough to execute projects of any capacity.
After the Liberalisation, Privatisation and Globalisation LPG reforms of the 1990’s, government
assumed the role of a facilitator-cum-regulator, by assisting industrial houses and new
entrepreneurs in setting up businesses. For the past two decades, government’s interference in
business may seem to be less direct. Paradoxically, it has increased government’s importance in
business.
In the light of the statement given the Government is an important stakeholder because it
represents the general public and it has to cater to the welfare of the country. Hence government
is needed to act as a watchdog of the business by private sectors. Nevertheless Government
wants a Public-Private Partnership in building the economy. The derivatives of this strategy are
rapid economic growth, full employment and reducing the inequalities in the distribution of
wealth.
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In the current scenario, governments and central banks worldwide, are trying their best to boost
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the economy by providing stimulus and bail-out packages. Increasingly, protectionist measures

such as subsidies and import duties are being imposed by the governments to protect domestic
businesses. No government wants to see a business fail, which leaves thousands of employees
jobless and reduces the contribution to the exchequer.
Political Stability is very important to create an environment for setting up businesses. It is one
of the key factors that foreign investors look forward to. Less than a week after Union finance
minister Nirmala Sitaraman assumed office, the Sensex index moved south, investors and the
overall market looses their confidence in the government.
India’s economic growth has come about in a big way mainly because of government
intervention. From 1991 onwards, reforms became a continuous process encompassing almost all
sectors of the economy.
 Delicensing ensured the number of industries that required licenses was reduced. The
number of industries reserved for the public sector was reduced. Rest were opened to the
private sector. Public sector units were given more autonomy. Disinvestment of sick
public sector units was sanctioned, but there were few takers. That ended up in the
government divesting its stake in profit-making public sector companies.
 Securities Exchange Board of India (SEBI) was established to regulate the Capital
Markets. Mutual funds were opened to the private sector, apart from the state owned
Unit Trust of India (UTI).
 Export Processing Zone (EPZ) scheme and 100% EOU schemes were introduced to
provide for duty free enclaves. Foreign Exchange Regulation Act (FERA) was replaced
by Foreign Exchange Management Act (FEMA).
 Insurance Regulatory Development Authority (IRDA) was set up to regulate the
Insurance sector. New Generation Bank formats were allowed in the private sector.
 Maximum marginal rate of personal income tax (56% in 1990) and corporate tax
(51.75% in 1990) was reduced in successive budgets to touch 30% by early 2000s.
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 Peak customs duty (300% in 1990) was reduced in successive budgets. With such
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absurd levels of protection, domestic producers were under zero pressure to perform

competitively in the market. Presently, excluding a small list consisting of liquor, used
cars, etc. the peak customs duty stands at 10%.
 Service Tax was introduced for the first time in India and currently stands at 12%, up
from 10% last year.
The importance of Business and Government link stands true even in the global village
dominated by the major economies like the United States and the European Union.US lose AAA
Credit rating – a peculiar case wherein the US Government was downgraded by the industry. At
the brink of an EU crisis; Governments, Central Banks, and bodies like the International
Monetary Fund (IMF) are trying their best to avoid a double dip. Unemployment numbers is as
high as 24% in Spain, and supporting businesses that provide jobs holds the key to bringing an
economic revival.
An economy cannot thrive without a minimum degree of policy, predictability and direction, the
government has to offer up at least the basics of a business friendly environment. History is
replete with the success stories of the economies that have risen from their lowest phase of
growth mainly due to the role played by the government. The government has put in place the
pro-business policies that allowed the private sector to accelerate the economic growth of the
country. For instance the government of Singapore, Dubai, South Korea and Taiwan provided
the much needed education system, infrastructure facility, and stable macroeconomic and policy
environments crucial for supporting economic advancement. The Indian growth story is not
different either. Despite all its shortcomings, global firms are interested to invest in India. Owing
to the recent government’s business friendly initiatives several economic hubs were set up in
Gurgaon, Bangalore - the Silicon Valley of India, Sector V, Rajarshat-Unitech in Kolkata.
As per the 2010-2011 data on GDP, the capital formation rate was 35.1% of GDP, while the
saving rate was 32.3%.This led to a shortfall of capital for investment to the amount -2.8% of
GDP. This shortfall has to be met through foreign savings for example FDI, External
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With the inflow of FDI, India not only benefits from the availability of capital but also the from

the advanced technical knowhow that the foreign firms bring; for example if FDI is allowed in
the retail sector then giant retail players like Walmart, Carrefore can bring about massive
improvements in the supply chain system of the Indian retail sector.
CABOTAGE - a protective measure for the Indian ship owners; if this law could be repealed
then it would open doors for foreign investors eager to explore the Indian shipping industry.
A move of the government machinery towards protecting the interests of people can result in
certain businesses being wound up. Supreme Court has banned the use of Endosulfan, a generic
off-patent pesticide, which is very cost effective.
The role of the private sector has been of immense support to the government. It has helped the
government by providing capital for infrastructure development, generated employment for the
growing population for example the business process outsourcing sectors employs a major
section of the youth population. With rise in incomes and increase in the purchasing power, the
society at large has been able to improve their standard of living.
It is no doubt that the key to a successful economy would be to embrace the opportunities that
promises to spearhead the country’s growth and do away with rigidity ( red tapism and
bureaucracy) that interrupts the normal cycle of growth. Despite the off late corruptions and
scams, India can still be a powerful nation in the making if there is harmony in the
amalgamation of the public and private sector for instance the implementation of Goods and
Service Tax, Land acquisition, environmental clearances and speedy execution of infrastructure
projects. These hold the key to the success of the nation.
GST-What is GST?
GST is a consumption based tax levied on sale, manufacture and consumption on goods & services at
a national level. This tax will be substitute for all indirect tax levied by state and central government.
Exports and direct tax like income tax, corporate tax and capital gain tax will not be affected by GST.
GST would apply to all goods other than crude petroleum, motor spirit, diesel, aviation turbine fuel
and natural gas. It would apply to all services barring a few to be specified. With the increase of
international trade in services, GST has become a global standard. The proposed tax system will take
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the form of “dual GST” which is concurrently levied by central and state government.
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This will comprise of:
 Central GST (CGST) which will be levied by Centre

 State GST (SGST) Which will be levied by State
 Integrated GST (IGST) – which will be levied by Central Government on inter-State supply
of goods and services.
GST is a tax that we need to pay on supply of goods & services. Any person, who is providing or
supplying goods and services, is liable to charge GST.
Pros of GST
There is no doubt that in production and distribution of goods, services are increasingly used or
consumed and vice versa. Separate taxes for goods and services, which is the present taxation system,
requires division of transaction values into value of goods and services for taxation, leading to greater
complications, administration, including compliances costs. In the GST system, when all the taxes are
integrated, it would make possible the taxation burden to be split equitably between manufacturing
and services.
 GST will be levied only at the final destination of consumption based on VAT principle and
not at various points (from manufacturing to retail outlets). This will help in removing
economic distortions and bring about development of a common national market.
 It will also help to build a transparent and corruption-free tax administration. Presently, a tax
is levied on when a finished product moves out from a factory, which is paid by the
manufacturer, and it is again levied at the retail outlet when sold.
 The tax structure will be made lean and simple
 The entire Indian market will be a unified market which may translate into lower business
costs. It can facilitate seamless movement of goods across states and reduce the transaction
costs of businesses.
 It is good for export oriented businesses. Because it is not applied for goods/services which
are exported out of India.
 In the long run, the lower tax burden could translate into lower prices on goods for
consumers.
 The Suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on
input costs as tax credits. This reduces the cost of doing business, thus enabling fairer prices
for consumers.
 It can bring more transparency and better compliance.
 Number of departments will reduce which in turn may lead to less corruption
 More business entities will come under the tax system thus widening the tax base. This may
lead to better and more tax revenue collections.
 Companies which are under unorganized sector will come under tax regime.
Benefits of GST Bill
For the Centre and the States
According to experts, by implementing the GST, India will gain $15 billion a year. This is because, it
will promote more exports, create more employment opportunities and boost growth. It will divide the
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burden of tax between manufacturing and services.

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For individuals and companies

In the GST system, taxes for both Centre and State will be collected at the point of sale. Both will be
charged on the manufacturing cost. Individuals will be benefited by this as prices are likely to come
down and lower prices mean more consumption, and more consumption means more production,
thereby helping in the growth of the companies.
Cons of GST
 Doesn't include petroleum and alcohol products. Heavy loss to the exchequer.
 Instead of blurring out the difference between goods and services tax, it highlights them. An
aam aadmi (common man) filing the tax-returns will have to suffer.
 It requires strong IT (Information Technology) infrastructure at grass-root levels. India
essentially lacks this. This factor is going to be the bottleneck, if not addressed well in
advance.
 Very high rates 16% compared to current 12.5 % VAT.
 Tax-sharing between states and the Centre was another bottleneck. Nice to see that there is a
consensus now.
 Service businesses operating pan-India need to take state-wise registration leading to
increased compliance
 Any supply (Ex: stock transfer, job-work)would be taxable (although fully creditable)
leading to cash flows getting blocked
 Businesses operating in multiple states need to re-align their branch network / warehouse /
logistics strategy
 Input credit is subject to matching of invoices
 A number of exemptions would be removed
 Requirement to determine ‘Point of Supply’
 No ITC for purchases from Compounding dealers
Central bank (RBI)

The central bank is one which constitutes the apex of the monetary and banking structure of a country
and which performs, in the national economic interest, the following functions:
1) The regulation of currency in accordance with the requirements of business and the general
public.
2) The performance of general banking and agency services for the state.
3) The custody of cash reserve of the commercial banks.
4) The custody and management of the nations reserves the international currency,etc.)
Role of Reserve Bank Of India

1) It is the apex monetary institution of the highest authority India. Consequently it plays an
important role in strengthening, developing and diversifying the country’s economic and
financial structure.
2) It is responsible for the maintenance of economic stability and assisting the growth of the
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economy.
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3) It is India’s eminent public financial institution given the responsibility for controlling the
country’s monetary policy.
4) It acts as an advisor to the govt in its economic and financial policies, and it also represents
the country in the international economic forums.
5) India being a developing country, the RBI has to keep inflationary trends under control and
see that the main priority sectors like agriculture, exports, and small scale industry get credit
at cheap rates.
6) It has also to protect the market for govt securities and channelize credit in desired directions.
Functions of RBI:
1) Issue of currency
2) Banker to the govt
3) Banker’s bank
4) Custodian of foreign exchange reserves
5) Controller of credit
6) Promotional functions
7) Collection and publication of data.
Indian monetary policy
It is usually defined as the central bank’s policy pertaining to the control of the availability,
cost and use of money and credit with the help of monetary measures in order to achieve
specific goals.
The broad concerns of monetary policy in India are
1) To regulate monetary growth so as to maintain a reasonable degree of price stability

and
2) To ensure adequate expansion in credit to assist economic growth;
3) To encourage the flow of credit into certain desired channels including priority and
hitherto neglected sectors;
4) To introduce measures for strengthening the banking system and creating institutions
for filling credit gaps.
Monetary policy is implemented by the RBI through the instruments of credit control. Generally two
types of instruments are used to control credit:
(1) Quantitative or general measures:they have general effect on credit regulation, they are
used for changing the total volume of credit in the banking system without special regard for
the use to which it is put. It `consists of:
a) Bank rate policy
b) Open market operations
c) Variable Reserve Requirements
d) Repo rate and reverse rate
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2) Qualitative or selective measures:these measures are meant to regulate credit for specific
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purposes. The central bank usually uses the following forms of credit control

a) Securing loan regulation by fixing of margin requirements
b) Consumer credit regulation
c) Issue of directives
d) Rationing of credit
e) Moral persuasion
f) Direct action
TAXATION
Nature of taxes
Seligman defines a tax as “a compulsory contribution from a person to the government to defray
the expenses incurred in the common interest of all, without reference to special benefits
conferred.”
Following are the four important characteristics defining the nature of tax,
1. Compulsory Contribution- Tax is a compulsory contribution to the state from the people on
account of the income earned, ownership or property and certain economic activities carried
on behalf of the tax payers. As it is a compulsory contribution no one can refuse to pay taxes.
2. Personal Obligation- It is the duty of the tax payer to pay taxes he is liable to pay. He should
not hide his income and should not try to evade taxes.
3. General Benefit- The taxes received from the tax payers may not be incurred for their benefit
alone, but for the general and common benefit.
4. No Quid Pro Quo-There is no give and take relationship between the government and the tax
payer. In other words a tax payer does not receive a definite, direct, and proportionate benefit
from the government for paying taxes.
Objectives of taxes
The following are the main objectives of taxes:
1. Raising Revenue- The primary purpose of the taxation is to raise revenue to defray the
expenses incurred by the government in performing several functions for the welfare of the
public.
2. Regulation and Consumption and Production- Taxes are sometimes used to discourage the
consumption and production of unnecessary or harmful goods like liquor, tobacco, etc. This
also results in diversion of resources from the production of nonessential goods to essential
goods.
3. Encouraging Domestic Industries- Taxes in the form of custom sometimes used to reduce
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the imports of certain goods which are domestically available and thereby encourage the
domestic industries producing these goods.
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4. Stimulating Investment- The instrument of taxation can also be used to stimulate investment
in the private sector by providing various tax incentives in the form of tax-holidays, subsidy
for investment, investment allowance and lower taxes on profits.
5. Reducing Income Inequalities- Inequality of incomes can be reduced through progressive
income tax under which rich are required to pay more taxes than the poor people. Inequality
can be further reduced by using the taxes collected from rich people in providing social
services which benefit people largely in the low-income groups.
6. PromotingEconomic Growth- The revenue collected by the government can be used in
promoting development of agriculture and industry and providing infrastructure like transport
and communication, power, irrigation, etc.
7. Development of Backward Regions- Entrepreneurs can be motivated to set up industries in
the backward areas of a country by giving them special tax concessions like lower taxes, tax-
holiday, etc.
8. Ensuring Price Stability- Direct taxes like income taxes reduces the disposable income of
individuals and thereby reducing their purchasing power thus helping in reigning in inflation
by reducing aggregate demand. On the other hand indirect taxes like sales tax, excise duty,
may lead to rise in prices.
Canons of Taxation – Characteristic of a Good Tax System
A good tax system is based on certain principles. Various economists since Adam Smith have spelt
out various principles which a good tax system should follow. These principles are called canons of
taxation.
1. Canon of Equality- Canon of equality states that persons should pay taxes according to their
ability to pay, i.e. in accordance to the income earned by them. Hence this canon is also
known as the canon of ability. Canon of equality implies a progressive tax system and tries to
observe the objective of economic justice.
2. Canon of Certainty- According to this canon, the time of payment, the manner of
paymentand the amount to be paid should be clear to every tax-payer. Certainty creates
confidence in tax-payers, it makes the tax system fair, prevents unnecessary harassment and
exploitation of tax-payers by the tax officials.
3. Canon of Convenience-It implies that taxes should be imposed in such a manner and at the
time which is most convenient to the tax-payers.E.g.: During harvest.
4. Canon of Economy- The canon of economy implies that the cost of collectingtax should be
minimum. The tax should be such as to bring the maximum part of the collected revenue into
the government treasury.
The above four canon of taxation have been given by Adam Smith. A few more, suggested by
other economists are listed below,
5. Canon of Productivity- A tax system should be able to generate enough revenue to meet the
requirements of the government. Taxes should be imposed in such a manner as not to obstruct
and discourage production.
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6. Canon of Elasticity- This implies that the taxes should be so levied that the yields of the
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taxes can be easily increased or decreased according to the needs of the government.

7. Canon of Diversity- This canon requires that the tax system should be such that the
government depends on a number of taxes so that every class of citizen may be called upon to
contribute something towards the state revenue.
8. Canon of Simplicity- The tax system should be easy and simple so that the tax-payer can
easily understand its implications, the method and basis of calculation, etc., without the costly
help of tax experts.
9. Canon of Expediency- According to this canon, the tax should be based on sound principles
so that it requires no justification from the side of the government and is not subject of any
criticism from the public.
10. Canon of Co-ordination- This implies that there must be co-ordination between different
taxes that are imposed by various authorities, i.e. central, state and local governments so as
not to overlap with each other.
11. Canon of Flexibility- It should be possible for the tax authorities to easily revise the tax
structure, both with respect to the coverage and rates, to suit the changing requirements of the
economy and the government.
Direct and Indirect taxes
Some economists distinguish direct and indirect taxes on the basis of shifting of the ultimate burden
(called incidence) of taxation. In this context, it is important to differentiate between impact and
incidence of a tax. The impact refers to the person who pays it to the government in the first place.
The incidence of a tax refers to the money burden of a tax on the person who ultimately pays it. For
example,income tax on ones income. Accordingly, a direct tax is that tax whose burden is borne by
the same person on whom it is levied. On the other hand, an indirect tax is that tax which is initially
imposed on and paid by one individual, but the burden of which is passed over to some other
individual who ultimately bears it. For example, excise duty on motor cars.
Some economists have classified taxes into direct and indirect on the basis of income or expenditure
on which a tax is imposed. Accordingly, a direct tax is one which is imposed on the income and
property of a person. E.g.income tax, corporation tax, property tax, death duty, capital gains tax,
wealth tax. On the other hand, an indirect tax is one which is levied on expenditure. Excise duty, sales
tax, custom duties.
Merits of Direct Taxes
1. Economical- Collecting direct tax is relatively low as they are usually collected at source
2. Certainty- The tax-payers know how much they have to pay and on what basis they have to
pay.
3. Equity- Direct taxes can be made to conform to “principle of ability” by making rate-
structure progressive.
4. Reducing Inequalities-Direct tax can be used for reducing inequities of income and wealth in
the economy.
5. Elasticity- Direct taxes areelastic as it can be increased by raising the tax rates in time of
crisis.
6. Civic Consciousness- Direct taxes inculcate a spirit of civic responsibility as they take keen
interest in seeing that the funds are properly utilized.
7. Simplicity- Direct taxes are generally easy and simple to understand.
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Demerits of Direct Taxes

1. Unpopular- Direct taxes are unpopular as the tax-payers feel their pinch directly.
2. Possibility of evasion- Direct taxes encourages tax evasion.
3. Inconvenience- Direct taxes cause a lot of inconvenience (especially to businessman) as they
are required to pay in one big installment and also they are required to maintain elaborate
accounts.
4. Uneconomical- Direct taxes become expensive when number of tax-payers is large and each
tax-payerpays only a small amount of tax.
5. Adverse Effects on the Will to Work and Save- High rates of income tax, for example, may
discourage people from working hard or working overtime. These taxes are likely to
discourage saving and investment as well.
6. Arbitrariness- It is difficult to determine the precise degree of progression in the direct taxes
because it is difficult to measure the ability of people to pay.
7. Narrow in Scope- Direct taxes are generally imposed on certain group of persons rather than
on all groups.
Merits of Indirect Taxes

1. Convenience-Indirect taxes are convenient as they can be paid in small amount and at
intervals instead of one lump-sum amount.
2. Elastic- Indirect tax can be made elastic and productive, particularly when they are imposed
on essential goods and services.
3. Less chances of Tax-evasion- In the case of indirect taxes, with proper administration, the
chances of tax evasion in their case are less.
4. Wide Coverage- Indirect taxes can be imposed on a large variety of goods so that most of the
persons contribute something to the revenue of the government.
5. Equity- Indirect taxes can be made equitable by imposingheavy taxes on luxury goods
consumed by the rich and low taxes on the essential commodities.
6. Social Welfare- Heavy taxes on articles which are undesirable and injurious to health may
restrict their consumption. Curtailment of consumption of harmful goods increases social
welfare.
7. Promote Production and Investment- The government can shift the production and
investment from low priority industries to high priority industries by imposing high rate of
taxation on low priority products.
Demerits of Indirect Taxes

1. Regressive and Unjust- They are indiscriminate in the sense that poor people have to pay as
much as rich people. They negate the principle of ability to pay. This makes them regressive
in nature.
2. Inflationary Impact- The Indirect taxes feed inflationary forces. The inflationary forces are
fed through higher prices, higher costs, higher wages and again higher prices.
3. Uneconomical-The administrative cost of collecting indirect taxes is generally heavy because
they have to be collected from a large number of persons.
4. Uncertainty- An indirect tax on a commodity leads to rise in the market prices consequently
to the fall of demand, but it is difficult to know the extent to which the demand for the
commodity will fall as a result of imposition of tax, hence there is no certain way of
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5. No Civic Consciousness- Indirect taxes are collected through traders and manufactures and
are collected in small amounts. Consumers, therefore, do not very much feel the extra burden
of these taxes and thus are indifferent towards these taxes.
Specific and Ad Valorem Taxes
On the basis o the assessment, taxes on commodities may be classified into two categories, viz.,
Specific and Ad Valorem tax.
1. Specific Tax- Taxes which are levied on the basis of specific qualities or attributes, such as
weight, size, volume, etc. are called Specific taxes.
2. Ad Valorem Tax- Taxes which are imposed according to the value of the commodity are
known as Ad Valorem taxes. E.g. import duty.
Value-added tax (VAT)

VAT is an important tax reform introduced in India to replace the present system of sales tax and
central excise. MODVAT and CENVAT have been introduced in India as a form of modified excise
duty with a view to eliminate the cascading effect of multi-point excise duty.
What is VAT?
A value added tax is a tax which is levied not on the total value of the commodity sold, but on the
value added to it by the producer or trader. Under the VAT, the tax base happens to be the value
added, i.e. the tax is levied on the value added. Value added is defined as the difference between the
value of the output produced by the producer and the value of the intermediate goods purchased by
the producer for producing that output.
Thus, VAT can be looked upon as a multi-stage tax levied on the value added at each stage as a
proportion of the value added. The value added at each stage of production and distribution is taxed. It
is an alternative way of collecting a tax on consumption expenditure replacing sales tax.
Rationale of VAT
Value added tax aims at replacing the existing sales tax system. It is considered superior to the
existing sales tax system for the following reasons:
1. VAT would simplify the existing sales tax system. VAT has the advantage of eliminating
cascading associated with the sales tax system.The present sales tax system is highly complex
because of multiplicity of rates, surcharges, turnover tax and additional sales tax. If VAT gets
adopted, the number of rates would be reduced to a minimum and the number of exemptions
would be curtailed.
2. The adoption of VAT would help in reducing the amount of tax evasion. This system requires
that each dealer issue and maintain tax invoices in order to benefit from tax deduction. The
requirement of maintaining invoices would act as self-policing mechanism to check the
evasion of tax.
3. VAT has a novel advantage of tax transparency. That is the total burden of tax can be clearly
seen from the transactions.
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4. VAT also holds our great potentials of raising additional resources by bringing within its
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purview various services.

Taxation system in the Republic of India is quite well structured. The Department of Revenue of the
Finance Ministry of the Government of India is responsible for the computation; levy as well as
collection of most the taxes in the country. However, some of the taxes are even levied solely by the
Local State Bodies or the respective governments of the different states in the nation.
Over a period of 10 years to 15 years, the tax system in the nation has undergone some significant
changes. The entire system has been tremendously reformed. The slabs for the imposition of taxes
have been modified. Besides that, the rates at which any particular tax is being levied have been
restructured as well as the various laws that govern the levying of taxes were being simplified. All of
these reformations have resulted in the following:
 Better compliance
 Better enforcement
 Easy payment of the levied taxes
The date of 1st April of the year 2005 is marked as the date of the implementation of the V. A. T. or
the Value Added Tax by almost all the State Governments as a replacement of the earlier Sales Tax.
Some of the states in the Indian Republic, where V. A. T. has not been implemented yet, still levy
Sales Tax though. Apart from these, the process of rationalization of the tax laws is still in progress.
Taxes Levied by the Central Government of India
The Central Indian Government that is officially named as the "Union Government" is responsible for
the imposition of both direct taxes as well indirect taxes. Listed below are some of the taxes that are
levied by the India Government:
Direct Taxes
 Banking Cash Transaction Tax
 Capital Gains Tax
 Corporate Income Tax
 Fringe Benefit Tax
 Personal Income Tax
 Securities Transaction Tax
Indirect Taxes
 Customs Duty
 Excise Duty
 Service Tax
Taxes Imposed by the State Governments
Though the majority of the taxes are levied by the Central Government of the country, there are some
taxes, which can not be levied by them. These kinds of taxes are the one of the sole responsibilities of
the governments of the individual states. To name a few of such taxes in India are:
 Dividend Tax
 Endowment Tax
 Estate Tax
 Gift Tax
 Flat Rate Tax or Flat Tax
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 Fuel Tax
 Inheritance Tax
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 Transfer Tax

 Payroll Tax
 Poll Tax
 S. E. T. or Self Employment Tax
 Social Security Tax
 Usage Tax
 Value Added Tax or Sales Tax
 Wealth Tax
Taxes Levied by the Local Bodies
The Octori Tax or Entry Tax is the most famous tax, which is being imposed by the local bodies or
the municipal jurisdictions on the goods' entry.
Tax Incentives in India
The India Government offers tax incentives that are subject to some specified conditions. Such
incentives are provided for the following:
 Allowance for accelerated depreciation

 Corporate profit
 Certain expense deduction on the basis of some particular conditions
A tax incentive is available for any fresh investment in any of the below mentioned sectors:
 Companies involved in Research and Development

 Development of housing projects
 Development by undertakings
 Food processing industry
 Infrastructure
 Mineral oil production and refining
 Operating industrial places
 Organisations handling food grains
 Power distribution
 Hospitals located in the rural areas
 Specialised economic zones
 Telecom services (For some specified services)
 Undertakings based in some specified hill state
Taxes (or duties) are defined as the financial charges levied by the Government upon an individual or
an organisation or property in return for the government services received by them. These taxes may
be broadly classified into direct and indirect taxes. Direct taxes are those where the tax payer pays the
taxes directly to the imposing authority like income tax and wealth tax. Whereas, indirect taxes are
those which are not paid directly to the imposing authority but paid to someone else who acts as an
intermediary link between the tax payer and the tax levying authority like excise duty and service tax.
In India, the power to levy taxes and duties is distributed among the three tiers of Government, in
accordance with the provisions of the Constitution. The main taxes/duties that the Union Government
is empowered to levy are:- Income Tax (except tax on agricultural income, which the State
Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax. The principal
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taxes levied by the State Governments are:- Sales Tax (tax on intra-State sale of goods), Stamp Duty
(duty on transfer of property), State Excise (duty on manufacture of alcohol), Land Revenue (levy on
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land used for agricultural/non-agricultural purposes), Duty on Entertainment and Tax on Professions

& Callings. The Local Bodies are empowered to levy tax on properties (buildings, etc.), Octroi (tax on
entry of goods for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User
Charges for utilities like water supply, drainage, etc.
The tax system in India has under gone a radical change as a result of economic reforms. Some of the
changes include:- rationalization of tax structure; progressive reduction in peak rates of customs duty,
corporate tax rate reduced, customs duties to be aligned with ASEAN levels; value added tax
introduced;widening of the tax base; tax laws have been simplified to ensure better.
Business and Government go hand in hand. They are inseparable. They are complementary to each
other. In fact, it is the ‘business’ of the government to help firms do business. The government is a
tool of business; while business firms are the bottom line thinkers and doers. Governments across the
globe are trying their best to attract industries to be set up in their countries.
In the modern world today, the state-run public sector and private sector companies are competing
against each other to get a pie of the market share. It is the very base of Mixed Economic Policy that
India follows, taking the best of both the worlds of Capitalism and Socialism. At the time of
independence, the onus of setting up an industrial base of the country fell on government’s shoulders,
as private sector neither had the expertise nor the bandwidth. Sixty years from then, the private sector
is competent enough to execute projects of any capacity. After the Liberalisation, Privatisation and
Globalisation LPG reforms of the 1990’s, government assumed the role of a facilitator-cum-regulator,
by assisting industrial houses and new entrepreneurs in setting up businesses. For the past two
decades, government’s interference in business may seem to be less direct. Paradoxically, it has
increased government’s importance in business.
In the light of the statement given the Government is an important stakeholder because it represents
the general public and it has to cater to the welfare of the country. Hence government is needed to act
as a watchdog of the business by private sectors. Nevertheless Government wants a Public-Private
Partnership in building the economy. The derivatives of this strategy are rapid economic growth, full
employment and reducing the inequalities in the distribution of wealth.
In the current scenario, governments and central banks worldwide, are trying their best to boost the
economy by providing stimulus and bail-out packages. Increasingly, protectionist measures such as
subsidies and import duties are being imposed by the governments to protect domestic businesses. No
government wants to see a business fail, which leaves thousands of employees jobless and reduces the
contribution to the exchequer.
Political Stability is very important to create an environment for setting up businesses. It is one of the
key factors that foreign investors look forward to. Less than a week after Union finance minister P
Chidambaram assumed office, the Sensex index moved north, investors and the overall market
regained their confidence in the government. The three key issues that the Finance minister
highlighted were better coordination between the monetary and fiscal policies, a return to fiscal
consolidation, and clarity in tax laws and a “non-adversarial” tax regime in the country.
India’s economic growth has come about in a big way mainly because of government intervention.
From 1991 onwards, reforms became a continuous process encompassing almost all sectors of the
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economy.
 Delicensing ensured the number of industries that required licenses was reduced. The
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number of industries reserved for the public sector was reduced. Rest were opened to the
private sector. Public sector units were given more autonomy. Disinvestment of sick public
sector units was sanctioned, but there were few takers. That ended up in the government
divesting its stake in profit-making public sector companies.
 Securities Exchange Board of India (SEBI) was established to regulate the Capital Markets.
Mutual funds were opened to the private sector, apart from the state owned Unit Trust of
India (UTI).
 Export Processing Zone (EPZ) scheme and 100% EOU schemes were introduced to provide
for duty free enclaves. Foreign Exchange Regulation Act (FERA) was replaced by Foreign
Exchange Management Act (FEMA).
 Insurance Regulatory Development Authority (IRDA) was set up to regulate the Insurance
sector. New Generation Bank formats were allowed in the private sector.
 Maximum marginal rate of personal income tax (56% in 1990) and corporate tax (51.75% in
1990) was reduced in successive budgets to touch 30% by early 2000s.
 Peak customs duty (300% in 1990) was reduced in successive budgets. With such absurd
levels of protection, domestic producers were under zero pressure to perform competitively
in the market. Presently, excluding a small list consisting of liquor, used cars, etc. the peak
customs duty stands at 10%.
 Service Tax was introduced for the first time in India and currently stands at 12%, up from
10% last year.
The importance of Business and Government link stands true even in the global village dominated by
the major economies like the United States and the European Union.US lose AAA Credit rating – a
peculiar case wherein the US Government was downgraded by the industry. At the brink of an EU
crisis; Governments, Central Banks, and bodies like the International Monetary Fund (IMF) are trying
their best to avoid a double dip. Unemployment numbers is as high as 24% in Spain, and supporting
businesses that provide jobs holds the key to bringing an economic revival.
An economy cannot thrive without a minimum degree of policy, predictability and direction, the
government has to offer up at least the basics of a business friendly environment. History is replete
with the success stories of the economies that have risen from their lowest phase of growth mainly
due to the role played by the government. The government has put in place the pro-business policies
that allowed the private sector to accelerate the economic growth of the country. For instance the
government of Singapore, Dubai, South Korea and Taiwan provided the much needed education
system, infrastructure facility, and stable macroeconomic and policy environments crucial for
supporting economic advancement. The Indian growth story is not different either. Despite all its
shortcomings, global firms are interested to invest in India. Owing to the recent government’s
business friendly initiatives several economic hubs were set up in Gurgaon, Bangalore - the Silicon
Valley of India, Sector V in Kol.
MSME
Micro, Small and Medium Enterprises have been playing a vital role in the balanced economic growth
of India. Today, Micro, Small and Medium Enterprises are operating across the sectors utilizing
available domestic resources and producing more than 6000 quality products. The sector
contributes a formidable portion to the nation’s GDP, export and industrial production. This paper
primarily focuses on the contributions made by Micro, Small and Medium Enterprises. It also aims to
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analyse the present status and future prospects of the sector in India. The study concludes that the
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MSME sectors contribute greatly to the overall balanced growth of the economy and it is suggested

that the government should take measures to create environment which is conducive to smooth
operation of the units.
Indian economy has been witnessing economic deregulation in many ways since 1991. The policy
makers implement the liberalization policies in all the sphere of the economy despite strident criticism
from every nook and corner of the country. The very purpose of the loosening the economic policy is
to achieve the targeted economic growth and to cope up with the global economic needs. Employment
generation is top among the important aims. No economy can economically sustainable until and
unless it generates adequate employment opportunities to its people. India like developing countries
are concerned employment is crucial problem which hinder the economic growth of the country.
SMEs plays an inevitable role in growth both in developing countries as well as developed countries
as SMEs have been the important source of employment generation, output growth , ( Tambunan
2008). In India, role of SMEs have become very crucial as SMEs have potential to balanced
distribution of income, reduction of poverty, generation of employment and growth in export,
development of entrepreneurship, development of industry and rural economy. With over 44 million
units SMEs contributes around 9% GDP, 45% of manufacturing output, 40% of the export of
the country, SME units estimated to employ about 101million people.
Though the SMEs contribute a commendable portion o the nation’s economy, it strives for adequate
and timely support from government or from financial institutions. The major problems faced by
SME are lack of sophisticated technology, low production capacity, lack of skilled managers,
ineffective production and distribution strategy etc. As SMEs have great potential to contribute
much more to the economic growth, they should be necessarily provided financial, technical and
other supports. The entrepreneurs should be empowered giving education and training so that
acquires necessary skills to stand with global development.
SMEs help the countries having low level investment by contributing to socio-economic benefits
(Gamage 2003). The SMEs had to face many challenges as well as they have got many opportunities
due to the globalization of the country. SMEs faced problems such as lack of management
efficiency, poor skill of employees, poor marketing strategy, lack of R&D and innovative
technology (Grimsholm & Pobelete, 2010). Other problems faced by the SMEs were lack of finance
( Hussain, Farooq and Aktar 2012). There were lack of corporate governance and legal &
regulatory frame works are also hindering the growth of SMEs. On this back ground, the researcher
critically evaluates contributions and role of MSMEs in Indian economy.
The term MSME encompasses a broad spectrum of definition and it varies from country to country.
In India it is classified under Micro, Small, and Medium Enterprises on the basis of investment. The
criteria like number of employees, sales and investment level are commonly used internationally to
define SMEs. In India MSMEs are defined on the basis of their investment level as per MSME
Development Act 2006.
SMEs have great role in the balanced development of the economy. SME sector presently employs
over 100 million people over 44 million units and SMEs accounts for 9% of the country’s GDP.
Annual report of Ministry of MSME states that the sector accounts for about 45% of total export of
the country. SME sectors produce more than 6000 quality products. MSME sector, thus, shows
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greater opportunity for expansion and diversify its activities in various sectors. It is estimated that
there are 1.6 million registered MSMEs in India and major portion of MSMEs working in India
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are not registered. MSMEs are dominated by micro enterprises with 94.9 percent share followed by

small enterprises with 4.9 percent of share. These enterprises deployed throughout India by
operating 55 percentages in rural India and rest operating in semi-urban and urban region of
India. And hence the MSMEs contribute a commendable portion to the balanced growth of Indian
economy. On the activity basis, if we are exploring, it can be seen that 67.1 percent of total
registered units are manufacturing units, 16.8 percent of total registered units are service units
and 16.1 percent units of total registered units are repair and maintenance units. From the
diagram given below we can get some clearer picture about the distribution of 6000 units of MSMEs
into their respective sectors.
FDI
As per the International Monetary Fund (IMF), Foreign Direct Investment, commonly referred to as
FDI is an investment made to acquire lasting or long-term interest in enterprises operating
outside of the economy of the investor. It is not 'portfolio foreign investment (supine investment in
another country's securities like bonds and stocks)'. Inorganically or organically done investment in
another country is not FDI. To understand the difference better, a British daily, the Financial Times
puts it this way: “Standard definitions of control use the internationally agreed 10 percent
threshold of voting shares, but this is a grey area as often a smaller block of shares will give control
in widely held companies. Moreover, control of technology, management, even crucial inputs can
confer de facto control”.
Ever since coming to power, the NDA government has taken a number of steps to bolster the FDI
scenario in India. It has enabled international entities like Carrefour and Walmart to come and invest
in the multi-brand retail market in India. The retail market in India has been growing at a
substantial rate and at present, it is worth somewhere around 28 billion dollars. It is expected
that in 2020, this value will reach approximately 260 billion dollars. However, there are certain
conditions that need to be fulfilled by international entities that are thinking of coming and investing
in the retail market in India.
The minimum amount that needs to be invested by a foreign entity to gain entry in India’s retail
market is 100 million dollars. There are also some restrictions in choosing the place where their
stores can be opened. They can only start stores in cities where the population is at least 1 million. At
least half of their investment should be for back-end infrastructure such as warehouses. They will also
need to get permission from the state government where they wish to open their stores.
Foreign Direct Investment (FDI)
The economic development witnessed during the past two decades in India rests to a great extent on
Foreign Direct Investment (FDI). FDI has been a vital non-debt financial force behind the
economic upsurge in India. Special investment vantages like cheap cost wages and tax exemptions
on the amount being invested attract foreign companies to invest in India. FDI in India is done across
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a wide range of industries and its relentless influx reflects the tremendous scope, faith and trust that
foreign investors have in the Indian economy.
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To ensure an uninterrupted inflow of FDI in India, the Indian government has created conducive trade
atmosphere and effective business policy measures in place. This strategy is reflected in the steps
taken by the government, such as easing out the restrictions levied on sectors like stock exchanges,
power exchanges, defence, telecommunications and PSU oil refineries to name a few.
The first five months of the 2014-15 fiscal year noticed a net inflow of US$ 14.1 million FDI in
India, amounting to a good 33.5 percent rise in the FDI influx registered for the corresponding
period during the previous fiscal year. With an aggregate investment of US$ 353,963 million
between April 2000 and November 2014, neighbouring country Mauritius has become the country
with the largest Foreign Direct Investment (FDI) inflow into India.
Advantages of FDI in India
There are several benefits of increasing foreign direct investment in India. First of all, with more FDI,
consumers will be able to save 5 to 10 percent on their expenses because products will be available at
much less rates and to top it all, the quality will be better as well. In short, it will be a win-win
situation for the buyers. It is also expected that the farmers who face a lot of economic problems will
also get better payment for their produce. This is a major benefit considering how many farmers have
been giving up their lives lately. It is expected that their earnings will increase by 10 to 30 percent.
FDI is also supposed to have a positive effect on the employment scenario by generating
approximately 4 million job opportunities. Areas like logistics will be benefited as well because of
FDI and it is assumed that 6 million jobs will be created. The governments – both central and state –
will be benefited because of FDI. An addition of 25-30 billion dollars to the national treasury is
also expected. This is a substantial amount and can really play a major role in the development of
Indian economy in the long term.
Steps Taken by Government to Promote FDI

The Indian Government has taken a number of steps to show its willingness to allow more foreign
direct investment in the country. In the infrastructure development sector, it has relaxed the norms
pertaining to area restriction, the laws regarding gaining a comfortable exit from a particular project
and the requirements relating to minimum capitalization. If companies are ready to commit 30
percent of their investments for affordable housing, then the rules for minimum capitalization and
area restriction will be waived off. It is expected that this will benefit the construction sector a lot,
especially in the form of greater investment inflow.
The situation will only get better once sectoral conditions are further relaxed and the terms that have
been used in the policy are clarified up to a greater extent. This is likely to get more investment
especially in the newer areas. This will also act as a fillip for entities eagerly interested in developing
plots for serviced housing. This is going to be a major development considering the fact that the land
in the urban areas is inadequate. One also needs to factor in the high costs of land in this regard. It will
also lead to the creation of cost-beneficial, affordable houses. It will help with the ‘Smart Cities’
programme as well. In the insurance sector too, the government has increased the upper limit of FDI
from 26 percent to 49 percent. It is an amalgamation of different areas of investment such as:
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 Foreign portfolio investment

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 Foreign venture capital investment

 Foreign institutional investment
 Non-resident investment
 Qualified foreign investment
The Indian Ministry of Finance has also proposed that 100 percent FDI will be allowed in railways-
related infrastructure. However, this does not include the operational aspects. While it is true that
the foreign investors will not be allowed to intervene in railway operations, they will be able to
provide for high-speed trains, such as bullet train, and enhance the overall network in the process.
Investments in India during 2015-16
The ruling NDA government in the centre has announced a lot of relaxations for FDI and the business
done under the FDI umbrella in India. The Union Budget presented in the Lok Sabha (the Lower
House of the Parliament) by Finance Minister Arun Jaitley mentioned that the procedures through
which the corporate houses attract foreign investment into India will be simplified and made
uncomplicated. From now onwards, there will hardly be any difference between 'Portfolio Foreign
Investment' and 'Foreign Direct Investment'. The composite cap has replaced the concept of individual
cap; for instance, there is now a composite cap of 49 percent foreign investors allowed in the
insurance sector.
The Indian government, during the 2014-15 fiscal year, announced that it would allow FDI worth
US$ 14.65 billion into the railways infrastructure. Some of the most expensive and largest railway
projects will be carried out under these investments.
During the next three years, ADAMA Agrochemicals, an Israeli firm, has set its targets to spend
US$ 50 million in
India. The company plans to enhance R&D and manufacturing facilities in India to grow at a better
rate than the current industry growth rate. Hundred percent FDI into the health sector will be allowed
by the Department of Industrial Policy and Promotion (DIPP) to enable indigenous
manufacturing and reduce imports of medical devices. By the next fiscal year, the value of
medical devices in the world market will be worth US$ 400 billion. The equity investment in the
real estate is expected to go twofold as the Indian government has allowed 100 percent FDI into the
construction sector. As per the real estate experts' beliefs, the demand from foreign property buyers
will rise. Currently valued at US$ 1.5 billion, the real estate equity will reach a value of US$ 3 billion
in a few years, the experts and analysts opine Data for 2018-19 indicates that the services sector
attracted the highest FDI equity inflow of US$ 9.16 billion, followed by computer software
and hardware – US$ 6.42 billion, trading – US$ 4.46 billion and telecommunications – US$
2.67 billion. Most recently, the total FDI equity inflows for the month of March 2019 touched
US$ 3.60 billion.
As of February 2019, the Government of India is working on a road map to achieve

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its goal of US$ 100 billion worth of FDI inflows.

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In February 2019, the Government of India released the Draft National e-Commerce
Policy which encourages FDI in the marketplace model of e-commerce. Further, it
states that the FDI policy for e-commerce sector has been developed to ensure a
level playing field for all participants.
Government of India is planning to consider 100 per cent FDI in Insurance

intermediaries in India to give a boost to the sector and attracting more funds.
In December 2018, the Government of India revised FDI rules related to e-

commerce. As per the rules 100 per cent FDI is allowed in the marketplace based
model of e-commerce. Also, sales of any vendor through an e-commerce
marketplace entity or its group companies have been limited to 25 per cent of the
total sales of such vendor.
In September 2018, the Government of India released the National Digital

Communications Policy, 2018 which envisages increasing FDI inflows in the
telecommunications sector to US$ 100 billion by 2022.
In January 2018, Government of India allowed foreign airlines to invest in Air India
up to 49 per cent with government approval. The investment cannot exceed 49 per
cent directly or indirectly.
Expectations
It is expected that at the current rate and as far as the future implications are concerned, FDI may be
doubled and reach a mark in excess of US$ 60 billion during the 2015-16 fiscal year. The experts
believe that the foreign investors are displaying immense faith in the 'Make in India' drive of the
Narendra Modi government and that may propel the FDI influx into India. Further advancement and
up gradation of the infrastructure in various sectors is also expected as it has been noticed that various
sectors like telecommunications, automobiles, computer software and hardware and construction
development had registered huge FDI inflow during the 2013-14 and 2014-15 fiscal years.
How Will FDI Benefit India?
Industrial studies have revealed that as foreign investors’ confidence in the Indian government will increase,
their levels of investment in India will also go up. In the 2015-2016 fiscal year, it is expected that FDI will
exceed 60 billion US dollars. In the 2013-14 fiscal year, the aggregate foreign investment amounted to 29
billion dollars. This increase owes a lot to the high expectations that foreign investors have from the Modi
administration. It has been estimated that in the ongoing Twelfth Five Year Plan, which continues till 2017,
India will need almost a trillion US dollars in FDI. This money will be used to develop infrastructure such as
highways, airways and ports. Road ahead
India has become the most attractive emerging market for global partners (GP)
investment for the coming 12 months, as per a recent market attractiveness survey
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conducted by Emerging Market Private Equity Association (EMPEA).

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Annual FDI inflows in the country are expected to rise to US$ 75 billion over the next
five years, as per a report by UBS.
The Government of India is aiming to achieve US$ 100 billion worth of FDI inflows in
the next two years.
The World Bank has stated that private investments in India is expected to grow by
8.8 per cent in FY 2018-19 to overtake private consumption growth of 7.4 per cent,
and thereby drive the growth in India's gross domestic product (GDP) in FY 2018-19.
Exchange Rate Used: INR 1 = US$ 0.0143 as on December 31, 2018 Data for 2018-19
indicates that the services sector attracted the highest FDI equity inflow of US$ 9.16 billion,
followed by computer software and hardware – US$ 6.42 billion, trading – US$ 4.46 billion
and telecommunications – US$ 2.67 billion. Most recently, the total FDI equity inflows for the
month of March 2019 touched US$ 3.60 billion.
As of February 2019, the Government of India is working on a road map to achieve

its goal of US$ 100 billion worth of FDI inflows.
In February 2019, the Government of India released the Draft National e-Commerce
Policy which encourages FDI in the marketplace model of e-commerce. Further, it
states that the FDI policy for e-commerce sector has been developed to ensure a
level playing field for all participants.
Government of India is planning to consider 100 per cent FDI in Insurance

intermediaries in India to give a boost to the sector and attracting more funds.
In December 2018, the Government of India revised FDI rules related to e-

commerce. As per the rules 100 per cent FDI is allowed in the marketplace based
model of e-commerce. Also, sales of any vendor through an e-commerce
marketplace entity or its group companies have been limited to 25 per cent of the
total sales of such vendor.
In September 2018, the Government of India released the National Digital

Communications Policy, 2018 which envisages increasing FDI inflows in the
telecommunications sector to US$ 100 billion by 2022.
In January 2018, Government of India allowed foreign airlines to invest in Air India
up to 49 per cent with government approval. The investment cannot exceed 49 per
cent directly or indirectly.
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START UP INDIA
To promote a culture of entrepreneurship, the government on Saturday announced a slew of incentives
including a Rs10,000-crore corpus for innovation-driven enterprises, a three-year break from paying
income tax on profits, a Rs500-crore per year credit guarantee mechanism, and exemption from
capital gains tax for start-ups. After a full day of discussions at the launch of the ‘Start-up India’
programme attended by hundreds of young entrepreneurs, Prime Minister Narendra Modi unveiled his
government’s action plan to help entrepreneurs, and asked them to play a transformative role in
India’s development.
BACKGROUND- India is country of 1.3 billion people and still counting.Terms like Population
explosion is being used in context Of India's population. As population grows, employment should
also be generated simultaneously but it hasn't been so smooth. There are too many reason behind it
but one of the main reason is lack of manufacturing products in India. For ex. USA, Germany, China,
Japan, all these countries have around zero employment and most significant reason is that they have
robust manufacturing culture.
PRESENT SCENARIO- Current NDA government also wants to erase unemployment but this
couldn't be done in 1 day or 1 year. It takes time. Even China was in similar condition in 80s but
today China is competing with USA and that took around two decade. Now, India cant wait for
decades because nearly 2 crore youngsters are joining the workforce every year and are forced to do
meagre jobs in lack of opportunity. Condition is even worse when it comes to Btech and Mba pass
outs. People keep blaming Namos foreign visit but he has tried his best to solve this problem and
result is also infront of us. India is currently on 130 rank(earlier 142) on ease of doing business
according to world bank report. PMs visit to Germany was a master stroke as Germany have best skill
development infrastructure and Skill India mission was launched after that. But only skill will not
eradicate unemployment, what's more important is proper utilisation of that skill so that India also
gains in long term.
Start Ups will come in play over here. As Namo explained “Start-up is not just about mobiles and
laptops… Start-up does not only mean a company with billions of dollars of money and 2,000
employees. If it is able to provide employment to even five people, it would help in taking the country
forward. Young people have to change their mindsets from being job seekers to try and become job
creators. Once you become a job creator, you will realise that you are transforming lives,”
Banks are going to make or break this initiative as not all start up get funding from softbank and
alibaba. Mudra is already there to help start ups even in rural and semi urban area. Start ups will also
help in make in india campaign to be successfull.
START UP INDIA EVENT- PM Narendra Modi concluded what was perhaps the largest startup
conference for entrepreneurs in India with his action plan, which included new policies and initiatives
that would make it easier for for investors and startup founders to incubate their ventures in the
country. Many startup founders had expressed their wishes in the run up to the event, and would find
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many potential game changers in the new policies announced in the action plan. Here's what changed
for India's startup ecosystem on Saturday.
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1) A Rs. 10,000 crore fund for startups
The government will set up a fund with an initial corpus of Rs. 2,500 crore and a total corpus of Rs.
10,000 crore over a period of four years, which will be be managed by a board with private
professionals drawn from industry bodies, academia, and successful startups. The fund will participate
in the capital of SEBI registered venture funds, and invest in sectors such as manufacturing,
agriculture, health, and education.
2) A single point of registration for startups
The government will launch a mobile app and a portal on April 1, which will enable startups to
register their company in a day. The portal will also serve as a single point of contact for clearances,
approvals and registrations, and for companies to apply for schemes under the Startup India Action
Plan.
3) A simplified regulatory regime based on self-certification
To reduce the regulatory burden for startups, the government will allow startups to self-certify
compliance on nine labour and environment laws through the startup mobile app. No inspections will
be conducted in case of the labour laws for a period of three years.
4) A fast-track mechanism filing patent applications
Launched on a pilot basis for a year, the Central Government shall bear the cost of patents, trademarks
and designs for a startup, with an 80 percent rebate to encourage the creation and protection of its
intellectual property.
5) A credit guarantee fund for startups
A credit guarantee mechanism willl help startups raise debt funding through the formal banking
system through National Credit Guarantee Trust Company (NCGTC)/SIDBI, which has an annual
corpus of Rs. 500 crore for the next four years.
6) Tax exemption for three years, and capital gains
Aimed at facilitating growth and help retain capital, startups will be exempted from income-tax for a
period of three years. However, the exemption shall be available subject to non-distribution of
dividend by the startup. To augment the funds available to various VCs and alternative investment
funds, capital gains invested in SEBI registered venture funds will be exempt from tax as well.
7) A Startup India Hub for collaboration
The Startup India Hub will serve as a single point of contact for startup ecosystem players, and will
function in a hub and spoke model with central and state governments, Indian and foreign VCs, angel
networks, banks, incubators, legal partners, consultants, universities and R&D institutions. The hub
will assist startups in obtaining financing, and organise mentorship programs to encourage knowledge
exchange.
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8) Relaxed norms of public-procurement

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The Central Government, State Government and PSUs will exempt startups in the manufacturing
sector from the criteria of "prior experience/ turnover" as long as they have their own manufacturing
facility in India, and have the requisite capabilities and are able to fulfil the project requirements.
9) Faster exits for startups
Startups may be wound up within a period of 90 days from making of an application for winding up
on a fast track basis, as per the recently tabled Insolvency and Bankruptcy Bill 2015, which has
provisions for voluntary closure of businesses. This process will respect the concept of limited
liability.
10) Atal Innovation Mission to encourage entrepreneurship and innovation
The Atal Innovation Mission will establish sector specific incubators and 500 'Tinkering Labs' to
promote entrepreneurship, provide pre-incubation training and a seed fund for high-growth startups.
Three innovation awards will be given per state and union territory, along with three national awards,
as well as a Grand Innovation Challenge Award for finding ultra-low cost solutions for India.
11) Innovation focused programs for students
An innovation core program targeted at school kids aims to source 10 lakh innovations from five lakh
schools, out of which the the best 100 would be shortlisted and showcased at an Annual Festival of
Innovations, to be held in Rashtrapati Bhavan. A Grand Challenge program called NIDHI (National
Initiative for Developing and Harnessing Innovations) shall be instituted through Innovation and
Entrepreneurship Development Centres (IEDCs) to support and award INR 10 lakhs to 20 student
innovations. Uchhattar Avishkar Yojana, a joint MHRD-DST scheme has earmarked Rs. 250 crore
annually to foster "very high quality" research amongst IIT students.
12) An annual incubator grand challenge
The government will identify and select ten incubators, evaluated on pre-defined Key Performance
Indicators (KPIs) as having the the potential to become world class, and give them Rs.10 crore each as
financial assistance to ramp up their infrastructure.
Current Situation: A tweet form the Ministry of Commerce and Industry recently stated that the
government led Startup India movement has recognised 15,667 startups till Jan 2019. It also claimed
to be training 2.34 lakh startups in the learning and development module. According to NASSCOM,
the Indian start-ups actually pulled in $4.2 bn in last financial year, a increase of 108% from the
previous F.Y. About 1200 tech-based start ups have been reportedly added and the no. of tech-based
start-ups in India now stands at about 7200. But there have been fall in funding of the start-ups at
seeding stage, which obviously needs protection as low funding at an early stage affects innovation of
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the start-up founders. These companies reportedly created 40,000 new direct jobs while there was
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three fold increase in indirect jobs. The various states of India are coming forward to help the start-

ups financially and so not only the metros, but the Tier-II and Tier-III cities in India will have a lot of
new enterprises coming up in the recent times. The Central Board of Direct Taxes also made it clear
on 10 th of Aug’19, that start-ups and angel investments will not be brought under the “Angel Tax”,
which came as a relief for many entrepreneurs of these companies.
Stand up India what is it?

Aims to promote entrepreneurship among the Scheduled Castes and the Scheduled Tribes and women
by providing loans between 10 lakh and 1 crore.
Under the scheme, 1.25 lakh bank branches would each be expected to lend every year to at least one
Dalit or tribal entrepreneur and one woman entrepreneur in their service area.
Features
The scheme is a part of Start-up India, Stand up India slogan, spread by the Department of Financial
Services (DFS) to encourage entrepreneurial projects
Composite loan between Rs. 10 lakh and upto Rs.100 lakh, inclusive of working capital component
for setting up any new enterprise.
The Stand Up India scheme will facilitate two entrepreneurial projects on an average of one for each
category (Women and SC/ST) of entrepreneurs per bank branch
Debit Card (RuPay) for drawal of working capital.
Credit history of borrower to be developed.
Refinance window through Small Industries Development Bank of India (SIDBI) with an initial
amount of Rs.10,000 crore.
Creation of a corpus of Rs. 5,000 crore for credit guarantee through NCGTC.
Handholding support for borrowers with comprehensive support for pre loan training needs,
facilitating loan, factoring, marketing etc.
Web Portal for online registration and support services.

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The overall intent of the proposal is to leverage the institutional credit structure to reach out to these
underserved sectors of the population by facilitating bank loans in the non-farm sector set up by such
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SC, ST and Women borrowers.

The initiative will also develop synergies with ongoing schemes of other Departments.
The process would be led by SIDBI with involvement of Dalit Indian Chamber of Commerce and
Industry (DICCI) and various sector – specific institutions all over the country.
The offices of SIDBI and National Bank for Agriculture and Rural Development (NABARD) shall be
designated Stand Up Connect Centres (SUCC).
The scheme will provide financial aid through the Small Industries Development Bank of India
(SIDBI) with an initial amount of Rs 10,000 crore
The system will personally guide each entrepreneur through the pre-loan and operational phases
The margin money for the composite loan will be up to 25 percent to help the credit system reach out
to the entrepreneurs
The scheme will also familiarise the entrepreneurs with factoring services, e-market places and
registration with online platforms and other aspects of web entrepreneurship.
CONVERGENCE AND INTER-SECTORAL LINKAGES IN THE SCHEME:
5100 E-Rickshaws were distributed at the launch of this scheme by Bhartiya Micro Credit (BMC)
under the Pradhan Mantri Mudra Yojna scheme.
In addition the recipients will also be covered under Pradhan Matri Jan Dhan Yojna, Pradhan Mantri
Suraksha Yojana, Pradhan Mantri Jivan Jyoti Yojana, Atal Pension Yojana schemes and other eight
significant Prime Minister schemes.
Bhartiya Micro Credit (BMC) aims to spread awareness of the financial inclusion and social security
schemes and proposes to take the benefits to poor and destitute people in the country.
The idea is to facilitate the up gradation of pedal rickshaw pullers into E Rickshaw owners and help
create threefold increment in their income.
Credit for all these facilities are being provided under Mudra Scheme.
The progression to E rickshaw from pedal rickshaw will also help contribute towards achieving the
goals of Swachh Bharat Abhiyan.
Under the scheme, charging and service station will also be set up, which will help the growth of
emergence of small and micro enterprises along with creating many opportunities for entrepreneurs.
This organically integrates Bhartiya Micro Credit (BMC) E-Rickshaws program into ‘Stand Up India’
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initiative.
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Eligibility Criteria to apply for the scheme:

The company must be a private limited/LLP or a partnership firm.
The company should be less than 5 years in age.
The turnover of the firm should not be more than 25 crores
The company should be dealing with any commercial or innovative consumer goods. For the same an
approval of the DIPP is also required.
The company should have patents granted.
What is the need for this scheme?
At present, only established cities get a boost from the establishment of new industries . After this
scheme, near about 1.25 lakh places across the country, new industrial activity will be triggered by 2.5
lakh people every year
Bank nationalisation was done in the name of the poor, but for the first 70 years after Independence,
nearly 40 per cent of the population did not have access to banking services
The idea is to provide finance and loans to not only big businesses but also to the common man .
Awareness generation:
As a part of media awareness and reporting the following initiatives will be taken up:
Tax Benefits/Incentives in Stand Up India
The applicants will get 80% rebate after filling the patent application form. This can be only filled by
startups and the benefits are also more for them as compared to other companies.
There is also an inclusion of Credit Guarantee Fund and the entrepreneurs enjoy relaxation in Income
tax at least for the first three years.
There will be complete relaxation for the entrepreneurs for the Capital Gain Tax.
Moreover, for the entities who qualify the program will further enjoy benefits like redemption of tax
on the profits earned.
This is to ease the entities during the initial startup phase and that there is no burden of paying heavy
costs for taxes.
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Benefits of Stand Up India:

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The basic aim of the initiative is to provide expertise and encourage new entrepreneurs so as to
minimize unemployment.
If you are an angel investor then Start up India gives you the right platform where you get
professional advice, time, and knowledge about laws and also they would be there to aid you for two
years during the initial phase of startup.
They also provide post set up aid to the consultants.
Moreover, another benefit for the entrepreneurs is that they do not have to worry much about how to
pay back the amount that they have taken for the loan.
They need to pay back all that money in a span of seven years, which does not lay any stress of
repayment on them. Further, it is the decision of that person to decide what amount needs to be paid
back per month.
This scheme will help to eliminate legal, operational and other institutional bottlenecks for the
entrepreneurs as well.
It can be a very positive impetus for the desired spin off effects of job creation leading to socio-
economic empowerment of dalits, tribals and women.
It can provide the driving force for skill india and make in india.
It will help harness the demographic dividend in India
With the access to bank accounts and technological education, it will lead to financial and social
inclusion of this strata of society.
Challenges:
The education of the people about the socio-economic dimensions of dalit entrepreneurship and
women entrepreneurship has not been paid much attention. If this is not done, the Stand up India
scheme may not be very effective.
The criteria for this scheme says that the company needs to be innovative. Judging whether a product
is innovative or not is left to the discretion of the DIPP. This may lead to delays and also potentially
good entrepreneurial ventures may be lost in the process
The company is required to have a turn-over of 25 crores. There are very few women led
entrepreneurs and SC/ST led firm which fit this criteria
The self help group’s which have indeed provided some impetus to women entrepreneurs, especially
in rural areas have been subject to elite capture and have been overwhelmed by locally dominant
interests. The stand up India scheme does not make a mention of any institutional measures to address
these challenges
Further, the banking sector has not yet penetrated to the hinterlands in a meaningful manner.
79
Therefore, the challenges of lack of institutional bank linkages, awareness among the people, digital
divide and many other technological challenges can be obstacles to bank account linkages despite the
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success of Pradhan Manthri Jan Dhan Yojana.

The funding support of about 10 lakhs to 1 crore is inadequate for manufacturing sector
The SC/ST’s and women have not been fully and meaningfully empowered in terms of tech-know
how, access to skilled labour, knowledge about the sectors and so on
Conclusion:
Most of the women entrepreneurs involved in co-operative movement and self help group movement
are dominantly contributing to the services sector. Experts are of the opinion that, the government
through this scheme can provide an institutional framework and support services to the women to
make a beginning in the manufacturing sector too.
The SC/ST population needs to be educated and socio-politically empowered further to reap the
benefits of this scheme meaningfully.
If implemented with the adequate ecosystem support , this scheme can indeed transform the socio-
economic architecture of rural and urban India and realise the Gandhian directive principle of
encouraging village and cottage industries could be fully and meaningfully . Current Scenario:
The amount of money allocated by the Govt. for such start-ups and funding to projects under stand-up
India have not been utilised even half till now. So the amount of loan disbursal to such projects till
remain quite low. As per the stand-up India portal more than 20000 people have been trained under
the scheme. Also more than 100 small and micro banks with more than 130000 branches pan India
have been supporting this scheme with already 3500 loan disbursals done against 10000+ loan
applications. Also Govt.have decided to provide more credit facilities to MSMEs and provide quicker
and hassle-free loan disbursal to them. This initiative will provide positive impetus to Stand-up India
scheme. This along with Start-Up India are expected to be the major pillars which will make the
Indian population self-sufficient and help in the financial and socio-economic development of large
number of people living in rural and semi-urban areas. Since Stand up India entrepreneurs depends
mainly on Govt.funding to get going(unlike the Start up India entrepreneurs) and also needs a greater
amount of technical training, so it will take a few more years before substantial people will be
benefitted from this scheme.

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2019

Business and Government

Indian Economy: Growth, Development and Employment

Growth and Development

Growth and Employment

Growth generates employment and employment generates further growth. In general,

Growth and Employment

IISWBM-MBA (PS) _S.G Page 3

Issues in India’s growth, development and employment:

 India’s growth is declining. (currently at 5%).

 Indian agriculture is still heavily dependent on monsoon. Nearly 50 % of population dependent

IISWBM-MBA (PS) _S.G Page 4

NITI Aayog: The new ‘think-tank’ to replace Planning

What’s new with NITI Aayog?

 NITI Aayog = more a “think tank” than a finance distributing agency.

 Better inter-ministry coordination.

IISWBM-MBA (PS) _S.G Page 5

IISWBM-MBA (PS) _S.G Page 6

 Priorities include upliftment of the poor, marginalized and downtrodden.

 Empower vulnerable and marginalized sections, redressing identity-based inequalities of all

NITI Aayog: Objectives and Opportunities

 An administration paradigm in which the Government is an “enabler” rather than a “provider

IISWBM-MBA (PS) _S.G Page 7

Structure and Composition of NITI Aayog

IISWBM-MBA (PS) _S.G Page 8

1. Vice-Chairperson: to be appointed by the Prime Minister.

IISWBM-MBA (PS) _S.G Page 9

Difference between NITI Aayog and Planning Commission

Relation with states

Constitution and Reporting

Chief Ministers and Lieutenant governors.

IISWBM-MBA (PS) _S.G Page 10

7 Major Steps of Economic Reforms Taken by Government of

(1) New Industrial Policy

(i) Abolition of Licensing:

IISWBM-MBA (PS) _S.G Page 11

(ii) Freedom to Import Technology:

(iii) Contraction of Public Sector:

(iv) Free Entry of Foreign Investment:

(v) MRTP Restrictions Removed:

(vi) FERA Restrictions Removed:

IISWBM-MBA (PS) _S.G Page 12

(vii) Increase in the Importance of Small Industries:

(2) New Trade Policy

(i) Reduction in Restrictions of Export-Import:

(ii) Reduction in Export-Import Tax:

(iii) Easy Procedure of Export-Import:

Import-export procedure has been simplified.

(iv) Establishment of Foreign Capital Market:

(v) Full Convertibility on Current Account:

In 1994-95, full convertibility became applicable on current account.

has been done as follows:

(vi) Providing Incentive for Export:

(3) Fiscal Reforms

(i) Fiscal Deficit:

(ii) Gross Domestic Product (GDP):

Solutions of Fiscal Deficit

following are the major steps taken in this direction:

IISWBM-MBA (PS) _S.G Page 14

(ii) Tax procedure has been simplified.

(iii) Heavy reduction in the import duties has been implemented.

(4) Monetary Reforms