By-Smita Bansal IV sem IMP

Overview € Public sector - Need - Forms of organization - Contribution to Indian economy - Importance - Problems encountered - Pricing policy € Private sector - IPR 1948, 1956, 1991 - Role in Indian economy € Joint sector - Features - Role in Indian economy € Co-operative sector - Features - Challanges and solution

mixed economy € Industrial policy allows coexistence of Public sector Private sector Joint sector & Co-operative sector

€ Prior

to Independence- few ¶Public Sector· Enterprises in the country like Railways, the Posts and Telegraphs, the Port Trusts, the Ordinance Factories, All India Radio, few enterprises like the Government Salt

economy with a weak industrial base, low level of savings, inadequate investments and infrastructure facilities € Public sector could be an instrument for self reliant growth € Passage of Industrial Policy Resolution of 1948 and followed by Industrial Policy Resolution of 1956
€ Agrarian

and of commodities the export of which would increase earnings of foreign exchange(private sector) € Development . both agricultural and industrial.of core sectors through the public enterprises € Emphasis on the expansion of production. and in particular on the production of capital equipment(public sector) and goods satisfying the basic needs of the people.

small goods would block imports and utilization of excess capacity And increase profits € Public investment being autonomous investment in low profit yielding. long gestational period.€ Private investment. complex management industries .

€ Gave primacy to the role of the State which was directly responsible for industrial development € Planning process( 5 year plan) gained life to counter the needs of people .

shed year € Gave way to liberalization € Massive growth of industrial sector € Water .

Public sector undertakings Departmental undertakings Public corporations Government company Holding company .

security and currency presses etc € Financed out of general budget except railways € Directly .under control of Govt € Ex ² Indian Railways. Posts and Telegraphs. atomic power projects.

Can be molded acc to governmental requirements .best for defense and strategic industries .€ Merits .Earnings directed to treasury so helps in raising revenue .

too much political interference so does not run on sound business lines - .lack of flexibility due to excessive centralization in decision process( Beaurocracy ) .€ Demerits .

Indian Airlines etc . SBI etc .Financial corporations like LIC.€ It combines the flexibility of private enterprise with public ownership € Expected to run on commercial principles € Two types . UTI.Non financial corporations like ONGC.

Dependency on government for funds .€ Merits .Undue interference by Parliament .Managerial autonomy so helps in more benefits and easy running of the organization € Demerits .

commercial. miscellaneous € According .manufacturing and refining . a company which has not less than 51% of the paid up share capital held by central government or state government or jointly € Classified as .mining .to Companies Act 1956.

General insurance corporation of India etc .financial .promotional and developmental € Ex ² State trading corporation.

conduction of business on the lines of private sector .they become irresponsible in their business behavior .free from political interference .€ Merits .greater flexibility € Demerits .

reduce government control enabling them to function them in an efficient way €A .ending of fragmentation of industrial effort in the public sector .parent corporation that owns enough voting stock in another corporation to control its board of directors (and. therefore. controls its policies and management) € Merits .

Permits more utilisation of financial resources trough transfer of unutilised resources from one subsidiary to another € Ex ² First time the idea was incorporated in Iron and steel industry so SAIL was established in 1973 owned Bokaro Steel ltd.. as a subsidiary company .

€ Capital formation- .

UTI in mobilizing resources and collecting savings € Savings in public sector .€ Role of nationalized banks like IDBI.LIC.

the same is expected to be 6.of infrastructure. € Development . at both the Centre and state levels.4% of the GDP by FY12.a major role € Investment in infrastructure in the public sector.2% of the country·s GDP € As per Planning Commission estimates. was 4.


Industry contributed 29. chemicals and drugs etc hence giving a boost to consumer goods industries .1% in GDP in 2008 € Implies the importance and strengthening of industry base in Indian economy € Investment in iron and steel. petroleum and natural gas.€ Strong industrial base . heavy engineering machinery.

backward states like UP. Bokaro steel plant € Import substitution and export promotionSecond plan and subsequent plans gave way to import substitution by setting up industries like HAL. BHEL. ONGC etc .€ Removal of regional disparities. Orissa and Bihar by setting up plants like Bhilai steel plant. MP.

discriminatory policy in material supply promoting SME·s . township and colonies for labourers and better wages than private sector .diverting profits towards welfare programes for poorer sections of society .implementing programs of labour welfare.€ Abandoning concentration of economic power by .

main objective is to serve the masses Indian railways and State Electricity board enjoy monopoly but do not take advantage Also bodies like Fertilizer Corporation of India and Hindustan Insecticides etc have no profit motive .€ Price policy.

No profit no loss situation € Rate of return approach.focuses on ROI .€ The public utility approach.

€ It is that part of the economy which is both run for private profit and is not controlled by the state .

1948 -Features ‡Division of the Industrial sector into 4 major categories.€ IPR . ‡Small and Cottage Industries were given privileges. ‡Considered the importance of private participation .

1.1948 ) ‡Six industries were specified -Coal -Iron & Steel -Aircraft Mfg -Ship Building -Telephone.State Monopoly ‡Arms and ammunition ‡Atomic Energy ‡Rail Transport 2. Mixed Sector (IPR . Telegraph & Wireless (Excluding Radio) -Mineral Oils .

The field of government control The government will regulate Industries in this category -Automobiles -Heavy Machinery -Heavy Chemicals -Fertilizers -Sugar -Paper -Cement -Cotton -Woollen textiles etc .€ 3.

The field of private enterprises All the other Industries .4.

future development a responsibility of state 2) 12 industries in schedule B.€ IPR 1956 divided industries into 3 major categories1) 17 industries in schedule A.state-owned but private enterprises will supplement the efforts of growth for development of them 3) All other industries not in schedule A or B given full freedom to operate .

€ Private sector flourished by taking advantage of the loopholes in IPR 1956 and the ¶elbow room· allowed to venture into industries reserved for state .

€ New era of liberalization. Manmohan Singh . Narasimha Rao and then finance minister Mr. P.after IMF bailed out the bankrupt state € Breakthrough reforms under the government of Mr.V.

curbing ´ The License rajµ .deregulation .tax reforms and inflation measures .initiation of privatization .opening for international trade and investment .€ Policies included .

of the role of public sector € Increased FDI € Curbing Red Tapism or License Raj € Tariffs were reduced considerably € Reduced fiscal deficit € Unbelievable growth rate € Dilution .

independence period -FMCG and chemical industries like paints.Initiator and moving force behind Industrialization. revolutionizing the production process by acting as innovator € Extensive modern industrial sector.potential to harbor modern industries like cotton textile. varnishes etc as offer early return on investment € Development- . sugar industry in pre.

personal decision making and small investment earn stupendous profits .€ Potentialities due to personal incentives in small sector .800 items reserved for Small scale industries .contribution by small and cottage industries .

€ Importance in National income generation ad employment .maximum employment generator as majority of people depend on this sector for livelihood .contributes >73% of GDP .

J.L Nehru and suggested € IPR 1956 led to government joining hands with private sector .€ Form of a partnership between government and private sector € Earlier only a few princely states like Travancore and Hyderabad practised € World Bank team visited during Pt.

R. by Industrial Licensing policy Enquiry committee this gained momentumwhich got approval .€ Few like Madras Fertilizer company with Amoco Ltd.D Tata a pioneer as Air India with 51% equity participation € In 1969. Cochin refineries with Phillips Petroleum Ltd USA € Indians like Mr. J.

Govt shares NLT 50% 2.mainly vests in the hands of maximum shareholder apart from Private representative 3.State Industrial Finance corporation etc € Features1.€ Main objective was development of State and small scale industries. Equity participation. Management and control. Accountability ² functioning not accountable to government .

employment opportunities € Better industrial growth € Broad basing of industrial entrepreneurshipgovt may instill confidence in SME·s . export sector development.€ Social control over industries.curb monopoly and concentration of economic power in the country € Fulfilling of social objectives like regional disparities.

and cultural needs and aspirations through a jointlyowned and democratically-controlled enterprise € Ex. social. coir and certain village industries € .handloom.Persons united voluntarily to meet their common economic.

.village credit societies were formed as a tool against prevalent indebtness € The act permitted the formation of such societies for various activities € GOI set up an Agricultural Credit Department in the RBI with a view to providing financial assistance and credit to the co-operatives.€ The Co-operative Societies Act.

production.€ Operation mechanisms. marketing etc all are undertaken jointly .members work independently but cooperative workshops are set up .cooperation only for certain activities like procuring raw material etc and production individually .

sanctioning of advances to cooperative financing agencies etc . tools and equipment .€ Government·s help .loans at concessional rates of interest .granting managerial staff.

€ Challenges .Internal and structural weaknesses & lack of proper policies along with corruption of financial corporations hinder the growth .Emergence of MNC·s and large scale economic activities .

Intensify linkages with NGOs or Self-help Groups to attract funds and assistance from World bank.reorientation of policies .venturing into capital market for mobilizing funds by debentures.incorporating professionalism by intensive training programs . Asian development bank etc . deposits etc .€ What can be done? . € € http://www.€ Economic environment of business by € € € http://news.K. Misra and V. Puri € .in/pdf/jscfnl.