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MODULE - 2 MACRO ECONOMIC POLICY

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MONETARY POLICY
LEARNING OBJECTIVES Industrial Policies of the past1948,1956,,1977,1980,1991.

Monetary Policy Objectives of Monetary Policy


Credit Control tools

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INDUSTRIAL POLICY
Meaning of Industrial policy: Industrial policy refers to government's policy towards industries- their establishment, functioning, growth and management of this this indicates the respective areas of large, medium and small sector industries, foreign capital, labor tariff and other related aspects.

Industrial Policy
1947- India became independent. Industrial base small & beset with many problems: Shortage of raw materials, deficiency of capital, bad industrial relations. Investors not sure about the industrial policy of new national government & industrial climate wrought with uncertainties and suspicions. 1947 -Industrial conference in December 1947 adopted a resolution for industrial peace and recommended a clear-cut division of industries into Public & private sector & thus removed the uncertainties & suspicions in the minds of investors & entrepreneurs. Various industrial policies were passed from time to time to improve the industrialization our country.
McGraw-Hill/Irwin Strategic Management, 10/e Copyright 2007 The McGraw-Hill Companies, Inc. All rights reserved.

INDUSTRIAL POLICY RESOULTION OF 1948


IPR 1948 was the first industrial policy issued by the government. Following were the features of Industrial Policy of 1948: 1. Acceptance of the importance of both Private & Public sectors. Two important strategies: i) Expansion of the state sector in areas where it was operating and in new lines of production. ii) Allowing the private sector to submit and expand albeit under proper direction and regulation.
McGraw-Hill/Irwin Strategic Management, 10/e Copyright 2007 The McGraw-Hill Companies, Inc. All rights reserved.

INDUSTRIAL POLICY RESOULTION OF 1948


2. Division of the industrial sector into four categories: i) Industry where state had a monopoly : arms & ammunition, atomic energy and rail transport . ii) Mixed sector: six industries were specified: Coal, iron & steel, aircraft manufacture, ship building, manufacture of telephone, telegraph & wireless appratus & mineral oils. In the national interest the state itself finds it necessary to secure the cooperation of private enterprise.
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McGraw-Hill/Irwin Strategic Management, 10/e

INDUSTRIAL POLICY RESOULTION OF 1948

iii) The field of Govt. control: 18 industries of national importance were included in this category. . Industries were- automobiles, heavy chemicals, heavy machines, machine tools, fertilizers, electrical engineering, sugar, paper cement, cotton and woolen textiles. iv) The field of private sector: all other industries were left open to the private sector. However, the state could take over any industry in this sector if its progress was unsatifsctory.
McGraw-Hill/Irwin Strategic Management, 10/e Copyright 2007 The McGraw-Hill Companies, Inc. All rights reserved.

INDUSTRIAL POLICY RESOULTION OF 1948


Other imp. Features of the industrial policy 1948:

Small & cottage industries: IPR -1948 accepted the importance of small & cottage industries in industrial development. Best suited for the utilization of local resources and for creation of employment opportunities.

Factories Act -1948: The rosolution enunciated a policy of just labour conditions wherein workers would be given fair wages. For purposes of maintaining industrial peace, labour participation in management.

McGraw-Hill/Irwin Strategic Management, 10/e

Copyright 2007 The McGraw-Hill Companies, Inc. All rights reserved.

INDUSTRIAL POLICY RESOULTION OF 1948

As a result : Industrial policy of 1948 satisfied Indian capitalists. However, there were certain weakness and gaps in the 1948 policyand it was subjected to a number of Criticisms.

1948 policy remained for full 8 years and deermined the nature & pattern of industrial development in the Country.
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INDUSTRIAL POLICY -1991


The Congress Govt led by Mr. Narasimaha Rao announced the New Industrial Policy in July 1991. The main aim of the new Industrial policy was : To Introduce liberalization with a view to integrate the Indian economy with the world economy. To remove restriction on direct foreign investment as also to free the domestic entrepreneur from the restrictions of MRTP Act. To unshackle the Indian Industrial economy from the cobwebs of unnecessary bureaucratic control. The policy aimed to shed the load of the public enterprises which have shown a very low rate of return or were incurring losses over the years.

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MONETARY POLICY
Monetary Policy refers to the measures adopted by the Central Bank of a country to control the money supply to achieve the objectives of general economic policy. According to RP KENT, Monetary Policy is the management of the expansion and contraction of the volume of money in circulation for the explicit purpose of attaining a specific objective such as all full employment

OBJECTIVES OF MONETARY POLICY


Price stability: when prices rise , the fixed group gets

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Adversely affected and when the prices fall, the producers and businessman Get affected. It is argued that the price stability ensures steady growth in Production and employment. Stability of Foreign Exchange: one of the traditional objectives of monetary policy. When countries were on the gold standard, the aim of the monetary authorities was to regulate credit in such a way as to minimize fluctuations in foreign receipts and payments and thereby protect gold reserves. Full Employment: The monetary policy should aim at solving the unemployment problem by expanding consumption and investment expenditure.

OBJECTIVES OF MONETARY POLICY

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High Rate of Economic Growth: the concept of economic growth implies qualitative and quantitative increase in the volume of goods and services produced in the economy. A large No. of branches of commercial banks have been set up in the rural areas, and special institutions for providing credit to industries have been started in the urban areas. Equitable Distribution of Income: Credit policy can be organized in such as way as to provide more credit to the poor and needy, to help them purchase productive assets. Such a policy will also help in tackling the problems of unemployment and poverty.

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Credit control Tools


In order to regulate credit in the economy, the Central Bank uses certain tools classified into:

1. General or Quantative BRP,OMP,VSRR, 2. Selective or Qulitative Methods of Credit Control General or Quantitative are used to control the quantum of credit in general throughout the economy. The effects of general methods are all pervading and affect the whole economy indiscriminately, as a result of which even the productive investments would be hard-hit whenever there is credit contraction.
BANK RATE POLICY: oldest method of credit control first used in England 1839. Whenever the Central Bank raises the bank rate, (dear money policy)all other interest rates rise and borrowings become less attractive and this results in contraction. A reduction in Bank rate (cheap money policy) on the other hand, reduces all other market rates of interest, borrowings more attractive and resulting in the expansion of credit .

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CREDIT CONTROL TOOLS


OPEN MARKET OPERATIONS: OMP refer to the buying and selling of government and other securities by the Central Bank. Whenever the Central Bank sells securities, it intends to contract the quantity of money and credit by absorbing the purchasing power in the hands of public. At the same time it, it manages to reduce the cash reserves of the commercial banks and thereby reduces their capacity to create credit. Reverse is the same.

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CREDIT CONTROL TOOLS


VARIABLE STATUATORY RESERVE RATIO:
Central Bank of a country enjoys the power to determine the statutory cash reserve requirements of the commercial banks. Under this policy, the central bank requires the commercial banks to maintain a certain percentage of their demand and time deposits as reserves. Ex: If the banking system has Rs. 6,000 crores in total reserves and legal reserve required is 8%, then the banking system can support Rs 5,520 crores of demand deposit. Let us suppose that legal reserve requirement is raised to 9% . Banking system will be able to support only Rs. 5,460 crores.

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CREDIT CONTROL TOOLS


SELECTIVE OR QUALITATIVE METHODS OF CREDIT CONTROL

They aim at curtailing the flow of credit into unproductive channels and diverting them into productive channels. They operate by means of official regulations issued and enforced by Central Bank. Some of the important methods of Selective Credit control tools are:
Rationing of credit: Central Bank may issue direction to commercial banks to restrict (ration) credit to certain sectors or sections of the population. This method is useful in controlling inflationary pressures.

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CREDIT CONTROL TOOLS


Variable Margin Requirements: This measure to thwart speculation and hoarding activities by traders. Instance : if traders hoard necessary commodities like food grains in an attempt to create artificial scarcity and thereby pushup prices, then the Central Bank can raise marginal requirements with respect to such goods. If the margin requirement is 50% , than the trader can get a loan of only Rs. 10 lakh against A security of Rs. 20 lakhs. If the margin requirements raised to Rs. 75% , he can get a loan of only Rs. 5 lakhs against the same security.

Moral suasion: measure used by the Central Bank to put pressure upon the
lending activities of commercial banks by urging them to voluntarily adopt certain restricitive practices.

MODULE - 2 FISCAL POLICY

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Copyright 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Fiscal policy
Fiscal Policy refers to the policy of the Government regarding Public Revenue, Public Expenditure and Public Debt. It tells the methods adopted by the government to earn revenue, to spend it and manage the deficit. Modern Economists believe that the Fiscal Policy can be used to change aggregate demand in a such an extent that contributes to economic stabilization.

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OBJECTIVES OF FISCAL POLICY


1. Attaining Full Employment : Increase in Govt. Exp.pushes up aggregate and thru multiplier effect, there woulde be multiple increase in national income and employment. 2. Maintenance of Price Stability and Economic Stability: Fiscal policies of the Govt. should be framed in such a manner as to counteract the cyclical fluctuations. Ex: Booms and Depression During a depression, appropriate fiscal policy would be to increase public expenditure and decrease tax rates. During Inflation : Appropriate policy would be to reduce public expenditure and increase taxes, thereby reducing purchasing power in the hands of the people. This will help in achieving price and economic stability.

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OBJECTIVES OF FISCAL POLICY


3. Increasing the Rate of Capital Formation: In a developing countries where the level of income and employment are very low, the fiscl policy must aim at increasing the rate of investment. This can be done by restricting consumption. 4. Minimizing inequalities in income and wealth : reduce disparities of income and and wealth, the Govt. may design a tax structure which is progressive in nature. Indirect Taxes should be heavy on luxury goods and light on necessary goods.

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OBJECTIVES OF FISCAL POLICY


5. Reducing Unemployment and under employment :Fiscal policy of the govt. Can tackle the problem of unemployment and under employment, with the help of specific public expenditure programmes. Ex; Building roads, bridges undertaking multipurpose river projects, can provide employment to the urban unemployed population. Building of schools, hospitals , irrigation canals etc., during off season can provide employment to the rural under employed population.

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FOREIGN TRADE POLICY


Indian economy is foreign trade oriented. Government of India has announced massive Trade Policy in 1991 to open up the economy to foreign trade and to integrate the Indian economy into the global economy. Indian economy has undergone changes both in its composition and direction of Foreign trade.

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FOREIGN TRADE POLICY


Before the economic planning was started in India, main exports were primary goods and imports consisted of manufactured goods. But after planning , there has been a total change in its composition. In recent years India started exporting various kinds of manufactured goods like engineering goods, ready made garments, chemicals and allied products, software, leather and leather products etc.,

FOREIGN TRADE POLICY 2004-2006


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KEY STRATEGIES : 1. Unshackling (set free) of controls 2. Creating an atmosphere of trust and transparency Simplifying procedures and bringing down transaction costs. Identifying and nurturing different special focus areas to facilitate development of India as a Global hub for manufacturing, trading and services.

Highlights of Foreign Trade Policy 2004-2006

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STRATEGY: it is for the first time a comprehensive Foreign Trade Policy is being notified. FTP takes an integrated view of the overall development of Indias Foreign trade.

OBJECTIVES OF THE FOREIGN TRADE POLICY:


1. To double Indias Percentage share of global merchandise trade by 2009. 2. To act as an effective instrument of economic growth by giving a thrust to employment generation, especially in semi-urban and rural areas.

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EXIM POLICY 2002-2007


EXIM policy of India is primarily a five year policy, Commerce ministry announces appropriate amendments every year , keeping in mind the latest national and international developments. This is usually done on 31st march every year.
Exim policy is supposed to last for 5 years, the UPA Government announced new five year Foreign Trade Policy: by changing the name EXIM POLICY.

The Exim Policy -2002-2007 places a special focus on the small scale sector which generates almost 50% of Indias exports.

NEW FOREIGN TRADE POLICY 2004-2006

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The NDA Government in India was replaced by the UPA Government in 2004. The UPA Government changed the name of EXIM Policy, to Foreign Trade Policy and the new five year FOREIGN TRADE POLICY On August 31, 2004. Kamalnath,Union Minsister from Commerce and Industry announced Indias Foreign Trade Policy. It replaces the five year export Import Policy 2002-2007.

The new Foreign Trade Policy also designed to act as an effective instrument of economic growth by boosting employment.

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EXIM POLICY 2002-2007


Union Commerce and Industry Minister Mr. Murasoli Maran announced the EXIM policy for the 5 years period . The main thrust of the policy is to push Indias exports aggressively by undertakings several measures aimed at augmenting exports of farm goods, small scale sector, textiles, gems and jewellery, electronic hardware etc. Policy aims to reduce transaction cost to trade through a number of measures to bring about procedural simplifications.

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EXIM POLICY 2002-2007


EXIM policy initiated a number of measures which would help employment orientation. External Sector is becoming increasingly important for the growth of the Indian economy. The Main Initiatives announced in the Exim Policy 2002-2007. The focus of trade policy reforms in India have been on liberalization, openness, and globalization with a basic trust on export promotion activity. Exim Policy 2002-02 had removed quantitative restrictions on all imports. Imports of second hand or used vehicles, meat and poultry products and and textile and textile articles were allowed.

FOREIGN TRADE POLICY 2004-2006


Special focus initiatives have been identified for the Agriculture, handlooms, handicraft, gems and jewellery and leather sectors.

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1. New Scheme Vishesh Krishi Upaj Yojana (spl. Agricultural produce scheme)
for promoting the export of fruits, vegetables, flowers, minor forest produce, and their value added products has been introduced. 2. Funds shall be earmarked for the development of Agri Export Zones(AEZ) 3. Units in AEZ shall be exempted from bank guarantee under Export Promotion Capital Goods scheme. 4. New towns of export excellence with a threshold (points of entry or beginning) limit of Rs. 250 crore have been identified. 5. Specific funds earmarked under Market Acess Initiative Scheme for promoting handloom and handicraft exports.

FOREIGN TRADE POLICY 2004-2006


Special focus initiatives have been identified for the Agriculture, handlooms, handicraft, gems and jewellery and leather sectors.

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6. New handicrafts SEZs shall be established which would procure products from the cottage sector and do the finishing for exports.

7. The Handicraft Export promotion Council has been authorized to import trimmings, embellishments(Beautify) and consumables on behalf of those exporters for whom direct importing may not be viable.
8. Import of gold of 18 carat and above shall be allowed under the replenishment(fill up again).

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EXIM POLICY 2002-2007


The five year 2002-2007 policy removed quantitative restrictions on exports except jute and onion which were retained for export through the state trading enterprises. Government decided to focus on the export of 106 items including engineering goods, electrical goods, electronic goods ,watch, footwear, chemicals, textiles, jewellery ect., Many measures were announced to give major thrust agri- exports. Policy announced transport assistance for the export of fresh and processed fruits, vegetables, floriculture, poultry, dairy products

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EXIM POLICY 2002-2007


Salient features : The Exim policy 2002 was described as pro-growth and positive with certain concrete measures.

The most important initiatives of the policy were:


Removal of Quantitative Restrictions on Agricultural exports. Setting up of 20 Agri-Export Zones in 12 states.

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EXIM POLICY 2002-2007


Salient features :

The policy also made the special Economic Zones (SEZs) more attractive by extending income tax benefits to the units in SEZs.
Setting up SEZs units would be able to import capital goods and raw materials duty free. SEZs units shall be deemed to be foreign territory for the purpose of trade operations and tariffs. Goods going t the SEZ area would be treated as ddemed exports. Reduction in interest rate from 24 to 15 % in case of non-fullfillment of export obligations by exporters under the various schemes. This measure is likely to tap immense export potential.

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EVALUATION OF EXIM POLICY 2002-2007


Due to pressure of USA, which carried on acrusade against QRs by India, a case was filed by USA in WTO gave its verdict against India in 1997. Government of India filed an appeal, but the verdict went against India. India thus forced to lift QRs.

Government of India is conscious of the fact that removal of QRs can open the floodgates of foreign goods in the Indian market.
The removal of QRs on the import of second hand automobiles also posed a threat to automobile manufacturers, but by imposing two conditions that only cars above 1000 c.c. capacity and automobiles, which are not more than 3 years old, can be imported, the govt. claims to have protected the interests of the automobile industry.

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EVALUATION OF EXIM POLICY 2002-2007


Due to pressure of USA, which carried on a

crusade against QRs by India, a case was filed by USA in WTO gave its verdict against India in 1997. Government of India filed an appeal, but the verdict went against India. India thus forced to lift QRs. Government of India is conscious of the fact that removal of

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EVALUATION OF EXIM POLICY 2002-2007


The removal of QRs on the import of second hand automobiles also posed a threat to automobile manufacturers, but by imposing two conditions that only cars above 1000 c.c. capacity and automobiles, which are not more than 3 years old, can be imported, the govt. claims to have protected the interests of the automobile industry. The critics felt that government has opened the doors of the Indian market for a variety of goods used by Upper and Indian middle classes. USA and other advanced countries had an eye on 250 million members of the middle class who are prone to follow foreign styles. There is a strong fear that by opening the floodgates of imports in all kinds of goods, India may be faced with the prospect of closure of lakhs of small scale industries.

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EVALUATION OF EXIM POLICY 2002-2007


The removal of QRs on the import of second hand automobiles also posed a threat to automobile manufacturers, but by imposing two conditions that only cars above 1000 c.c. capacity and automobiles, which are not more than 3 years old, can be imported, the govt. claims to have protected the interests of the automobile industry. The critics felt that government has opened the doors of the Indian market for a variety of goods used by Upper and Indian middle classes. USA and other advanced countries had an eye on 250 million members of the middle class who are prone to follow foreign styles. There is a strong fear that by opening the floodgates of imports in all kinds of goods, India may be faced with the prospect of closure of lakhs of small scale industries.

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EVALUATION OF EXIM POLICY 2002-2007


Critics, therefore allege that very dangerous situation is likely to emerge in the very near future which may give a serious set back to Indian producers. The nationalist government developed since 1947 policies to protect Indians from the onslaught of Foreigners by imposing restrictions on the import of a very large number of items. The slogan of Government was BE INDIAN, BUY INDIAN The danger posed by the EXIM policy is expressed in the new paradigm shift BE INDIAN, BUY FOREIGN This will be negating the chief objective of the national struggle for independence.

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EXIM POLICY 2002-2007


The imports of our country has undergone a change. Major position of import expenditure goes to POL(Petroleum, Oil and Lubricants). India joining the WTO in 1995 as a founder member has made its obligatory to strike down all quantitative restrictions on imports and reduce import tariffs so as to open up the economy to world trade and forces of globalization.

The Government of India announced the new Five Year export-import policy covering the Tenth Five year Plan period 2002-2007

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UNION BUDGET
Budget Governments annual estimate or plan of revenue and expenditure. Union budget is an important event which has great significance for the entire nation and is normally introduced in the last week of February every year. The budget is prepared and present by finance minister before the parliament . The finance bill has to be cleared to authorise expenditure.

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UNION BUDGET
Tax revenue comes broadly from three sources: A) Taxes on income and expenditure B) Taxes on property and capital or property transactionsand C) Taxes on commodities and services. Non tax revenue consists of: 1. Currency, coinage and mint 2. interest receipts and dividends 3. other tax revenue

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UNION BUDGET
The Budget of Government of India, for any year, gives a complete picture of the estimated receipts and expenditures of the Government for that year on the basis of two previous years. Every Budget, for instance, gives three sets of figures : A. actual figures for preceding year. B. budget and revised figures for the current year C. Budget estimate for the following year For instance, the budget estimate for the year 2006-07 contains: A) actuals or accounts for the year 2005-06 B) budget for the revised figures for the year 2006-07 C) budget estimates for 2007-08.

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UNION BUDGET
Budget in India is divided into two parts; 1. Revenue budget or revenue account 2. Capital budget or capital account .

Revenue budget or revenue account can be classified into: Revenue receipts and Revenue expenditure. Receipts which involve no disposal of assets or incurring of liabilities are revenue receipts. Revenue budget deals with receipts from taxation and from non-tax sources and expenditure met out of these sources.

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UNION BUDGET
Revenue receipts include direct taxes like corporation tax, income tax, wealth tax ,gift tax and so on. Indirect taxes like customs duty,excise duty,sales tax etc., Non tax revenue like net income by public sector undertakings are also accounted under Revenue Receipts Capital receipts: Money include governments market borrowings, provident fund, small savings and the external assistance like loans grants etc.,

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BUDGET
Revenue Expenditure are those which neither add to the governments assets nor reduce the liabilities. - Salaries of Government employees, purchase of of stationery, maintenance of public utilities etc are part of revenue expenditure. Capital Expenditure refers to items that involves acquisition of assets. Ex: investment in railways, roads, bridges, power projects and irrigation works. When total expenditure exceeds the total receipts is Budget deficit.

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UNION BUDGET
The excess of the total expenditure over the revenue receipts are financed by borrowings of the Government under Domestic Capital Receipts and External Capital Receipts The Market borrowings, small borrowings, provident funds etc., come under domestic capital receipts. The loans and other assistance received from international agencies come under external capital receipts. Deficit in the revenue account implies that the Government is living beyond its means and that its forced to borrow even to meet its current expenditure.

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CHELLIAH COMMITTEE RECOMMENDATIONS

The Committee, set up in August 1991, submitted its Interim Report in February 1992, and final report in two parts in August 1992 and January 1993.

The recommendations made by the committee have been made with a view to make the tax-system generate revenue in an efficient and equitable manner. For this the committee has suggested some major changes in direct and indirect taxes.

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CHELLIAH COMMITTEE RECOMMENDATIONS

Direct taxes: In respect of direct taxes, the committee stressed the importance of lower/moderate rates of taxation, a narrower spread between the rate and the maximum marginal rate, and the fewest special exemptions and deductions. Income tax: In terms of personal income tax, it means lower tax rates, fewer slabs, a higher exemption limit, and reductions in the savings linked tax exemptions. It has also been recommended that agricultural income in excess of Rs. 25,000 accruing to the non-agriculturists be taxed by aggregating it with non-agricultural income.

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CHELLIAH COMMITTEE RECOMMENDATIONS


Corporate tax: Committees recommendations are reduction in the corporate rate: reduction in the differential between the rates on domestic and Foreign companies . INDIRECT TAX: As for the reform of indirect taxes is concerned, the committee made the following important recommendations: customs tariffs on finished goods should be higher than on basic raw materials and those on components and machinery should be in between: agricultural imports should be subject to some import duty. MODVAT: ultimately, of course the full fledged VAT (as a replacement of various indirect taxes) is to be introduced.

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NEW INDUSTRIAL POLICY RESOLUTION OF 1991

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In line with liberalization measures announced during the 1980s, the then congress government announced a new industrial policy on July 24,1991. Architects behind industrial policy of 1991 were the then prime minister PV Narasimha Rao and finance minister Manmohan Sing.

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OBJECTIVES
The major objectives of the policy was to build on the gains which was already made and correct the weakness that had crept in.

Maintenance of a sustained growth in productivity and gainful employment and international competitiveness.

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In pursuit of these objectives, the government announced a series of initiatives like Industrial Licensing Foreign Investment Foreign Technology agreements Public Sector Policy MRTP Act

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ABOLITION OF INDUSTRIAL LICENSING


Industrial licensing policy in India is governed by the Industrial development and Regulation Act of 1951. Industrial licensing policy which was being resented by entrepreneurs as it led to unnecessary governmental interference, which delayed in investment decisions and bureaucratic red tapism, corruption etc., And also Industrial licensing policy failed to achieve the objective laid down by the government.

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Thus bearing all the above factors and also to liberalize the economy, the industrial policy of 1991 abolished industrial licensing for all but 18 industries. The industries under licensing policy act were coal and lignite; distillation and brewing of alcoholic drinks; sugar; animal fats and oil; cigars and cigarettes; asbestos and asbestos based products; plywood and other wood based products; raw hides, skins and leather; tanned or dressed fur skins; motor cars; paper and newsprint; electronics aerospace and defense equipments; industrial explosive; hazardous chemicals; drugs and pharmaceuticals; entertainment electronics; and white goods domestic refrigerators, washing machines etc.).

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With the passage of time most of these industries have also been delicenced except for alcohol, cigarettes, hazardous chemicals, electronic aerospace and defense equipment, drugs and pharmaceuticals and industrial explosives.

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DILUTION OF PUBLIC SECTOR INDUSTRIES


As many as 17 public sector industries was reduced to 8, they were Arms and ammunition Atomic energy Coal and lignite Mining of iron ore, manganese, chrome, gypsum, sulphur, gold, diamond, copper, lead, zinc, tin, molybdenum, and wolfram. Minerals specified in the scheduled in the atomic energy. Rail transport Till date many have been deleted from reserved list only a total of 3 industries are reserved for the public sector. Public sector enterprises were reviewed and sick units was referred to the Board for Industrial and Financial Reconstruction for rehabilitation and reconstruction. The government also announced to offer a part of government shareholding in the public sector enterprises to mutual funds.

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RELAXATION OF MRTP ACT


Under this act all the firm with assets worth rupees 100crore (since 1985) were classified as MRTP firms. Such firms were permitted to enter selected industries only on a case by case approval basis.

The government realizing the effect of this restrictions on the path of growth and diversification of this firms has scrapped the threshold limit of assets. After many such amendments the MRTP Act gives more emphasis to the prevention and control of monopolistic, restrictive and unfair trade practices, so that consumers are safeguarded from such practices.

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FREE ENTRY TO FOREIGN INVESTMENT AND TECHNOLOGY


The new industrial policy has prepared a specified list of high technology and high investment priority industries wherein automatic permission was made available for foreign direct investment up to 51% foreign equity. The various industries with automatic approval are metallurgical industries, entertainment , electronics, food processing, and the service sectors having export potential. There is a total ban on FDI in handful of sectors like arms and ammunitions, atomic energy, railway transport, coal and lignite, mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, cooper and zinc.

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OTHER LIBERALIZATION MEASURES


Liberalization for obtaining approval from the centre, for establishing of industries of non polluting nature in cities with a population of more than 1 million. Abolition of phased manufacturing programmes for new projects. Removal of mandatory convertibility clause imposed by financial institutions.