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Initiation of reservation for small scale industries.

“An industrial company which has, at the end of any financial year, accumulated losses equal to, or exceeding, its entire net worth and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year”.

These industries are : 

1. Electronic related to aerospace and Defence. 

2. Gunpowder industrial explosives and detonator fuses 

3. Hazardous chemicals 

4. Tobacco, cigarettes, and other related products 

5. Alcoholic beverages.

Four contributions of small-scale sector in the development of Indian economy : 

1. Share in industrial production 

2. Expansion of small scale sector 

3. Contribution in employment 

4. Efficiency of small scale industries.

Prime Minister Mr. Narendra Modi launched the Make in India initiative on September 25, 2014, with the primary goal of making India a global manufacturing hub, by encouraging both multinational as well as domestic companies to manufacture their products within the country. A lion is shown as emblem of this programme which is not only a part of the India’s national emblem ‘ Ashoka Chakra’, but also the emblem of “Make in India” programme that depicts courage, intelligence and power.

Indian economy has been accorded the name ‘elephant’ by international economists and investors, which is very huge, but slow in movement, that indicates the limitless dynamism of the economy. With a view to shatter this view, the lion was adopted as emblem of the programme. Industrialists were of the view that ‘Make in India’ could become the main factor of lending speed to development of the country. If its policies are implemented properly, then 9 crore employment opportunities will be generated in the next 10 years.

Transformational sector could be the sector of registered manufacturing or services. It is as important to enhance the extensive skills of the economy as to improve conditions for increased population. Manufacturing and services sectors are such sectors, which, if focused upon, could bring about revolutionary changes in the economy. The principles of growth indicate that the evaluation of the transformational sector should be done on the basis of the qualities present in them, and not as a traditional manufacturing service. 

In this way, 5 qualities were identified :

1. High level productivity which could increase income. 

2. Rapid growth rate in productivity on both foreign and domestic fronts. 

3. Capability to attract resources, which could facilitate extension of benefits of economy. 

4. Increasing capacity of non-skill resources present in the country. 

5. Integrating skill-deficient resources with resources of the country.

However, these sectors have not been successful in attracting a large number of skilled workers, due to which the benefits of their dynamism have been limited. In other words, dynamic sectors should be skill-rich, in which India does not have any comparative benefit.

In 1991, the new Industrial Policy was adopted. It improved the structure of Indian industries. 

Here are some of its achievements and failures:

Its achievements are :

1. The rate of industrial development increased after adopting this policy. In the decade prior to economic reforms, this was 7.8 per cent in 1980-90, which increased to 13.0 per cent in 1995-96. It remained at 11.5 percent in 2006- 2007. 

2. The foreign capital investment increased as a result of the new industrial policy. Both, FDI and FII increased. 

3. According to UNCTAD investment report of 2010, it was 34.6 billion dollars in 2009. 

4. Foreign technology was encouraged by which India became world famous and productivity of industries increased by the import of foreign technology. 

5. Foreign Exchange Resieve of India increased. After that, the IMF included India in the category of creditor nations. 

6. The industries in the public sector got a competitive atmosphere, which improved their performance and execution.

Failures of New industrial Policy :

1. After the adoption of this policy, unemployment did not decrease substantially. The rate and magnitude of unemployment both are increasing. 

2. Many industries became sick or closed down under the new Industrial Policy. They could not arrange sufficient resources to adopt expensive foreign technology. 

3. Indian industries could not compete with foreign industries, which posed a threat to their existence and many industries went out of the competition. 

4. The dependence of Indian industries on foreign technology increased, which has been termed as Economic Colonialism by various experts. 

5. Foreign investments could not even touch some sectors. 

6. Small scale industries and cottage industries could not compete with foreign industries.

Conclusion : Thus, we can say that under the new Industrial Policy, many reformative and stabilizing efforts were made. Indian industries were able to exhibit their capabilities in the global market. But, decline of Indian cottage and small scale industries, increased dependence on foreign capital, problem of unemployment etc. emerged as the negative effects of the new Industrial Policy upon the Indian economy.

Importance of small scale and cottage industries in Indian economy is as follows :

• Share in Industrial Output : In 2006-07, the total production value of MSME was 1198,818 crore rupees, and their contribution in GDP was 35.13 per cent. In 2012-13, the total production value of MSME increased to 18,09,976 crore rupees, while their contribution in GDP increased to 37.54 per cent. The contribution of MSME in GDP product is about 173rd even today.
• Expansion of small scale sector : The number of MSMEs in 2006-07 was 361.8 lakh, which increased to 467.54 lakh in 2012-13. This number further increased to 488.56 lakh in 2013-14. 
• Role in employment : In 2006-07, the MSME sector employed 805.23 lakh people, and in 2012-13, the number of people employed in MSME sector increased to 1114.29 lakh.
• Efficiency of small scale industries : Experts have different views in this context. Some experts believe that the efficiency of small scale industries is greater than that of large scale industries, while several others think otherwise. 
• Decentralization of national income : In comparison to large scale industries, their ownership is scattered and extensive. In addition, they are more capable in creating employment than large scale industries. A large number of people have been successful in providing greater contribution in national production. 
• Contribution in exports : Small scale industries have been expanding rapidly after independence. Their contribution in total exports has been increasing continuously. In 1971 -72, the total export from MSMEs was 155 crore rupees which increased to 6,77,318 crores in 2012-13.
• Regional dispersal of industries : Large scale industries are concentrated mainly in Maharashtra, West Bengal, Gujarat and Tamil Nadu, but small scale industries have been established in all regions. Today, Punjab is more prosperous than Maharashtra due to the presence of small scale industries. 
• Less industrial disputes : Experts are of the opinion that in comparison to large scale industries, less disputes emerge in small scale industries. They have a cordial relationship, thus have lesser disputes, problems like strikes and lockouts are also less in them. 
• Utilization of local resources : Small scale industries employ local capital and resources, which are not required by large scale industries. Local savings, raw materials and workers have been better used by MSMEs, which enhances their income. In urban areas, artisans, workers, craftsmen etc. are employed in them. 
• Conservation of traditional and artistic goods : Traditional and artistic goods are provided conservation and protection by small scale and cottage industries, which are a part of our cultural heritage.
• Less dependence on imports : MSME sector has less dependence on imports, which enables saving of our foreign exchange reserves. They use local technology and foreign technology is used at the minimum.

The Elephant metaphor is used for India as just like an Elephant, India is mighty and powerful, but does not know it, and just like an Elephant, it is slow to turn around. This economy is developing at a slow pace.

This policy is also known as the ‘Economic Constitution of India ‘or the ‘Magna Carta’ of industrial policy. 

This policy divided industries into three categories :

1. Monopolistic sector industries under the government of India were kept under Schedule A in the industrial policy proposal,

2. Industries having the coexistence of public and private sector were kept under schedule B. 12 industries were kept under this which in included fertilizers, chemicals roadways, etc. 

3. All the remaining industries were kept under the private sector.

Names of industries reserved for public sector are

1. Atomic energy 

2. Atomic Energy (Production and utilization control) 

3. In directive 1995 list, the listed sector of minerals and rail transport, in which, private investment was allowed in 2014.

The reasons of adopting the new Industrial Policy were : 

1. The fiscal deficit was continually growing due to increase in non-developmental expenditure and it became 8.4 per cent of Gross Domestic Product in 1990-91. 

2. Payment of interest increased to 36.4 per cent of total expenditure in 1990-91. 

3. Fiscal deficit was increasing in the Balance of Payment of India. 

4. Rate of inflation had become 17 per cent. 

5. In 1991, the foreign exchange reserves of India decreased to a quantity that could fund imports just for a fortnight.

The Make in India initiative was launched by the Prime Minister on 25 September 2014 as part of a wider set of nation-building initiatives. It is devised to transform India into a global design and manufacturing hub.

Small scale industries- Small scale, industries, also known as MSMEs, are defined and categorized by Micro, Small and Medium Enterprises. This divides the industries into various types, on the basis of investment in plant & machinery in case of manufacturing industries and on the basis of investment in equipment in case of service sector industries.

Cottage Industry : A business or manufacturing activity carried on in people’s homes by the family members. Example- weaving clothes etc.

Micro Units Development and Refinance Agency.

Economic reform is the process by which a nation improves the economic, political, and social well-being of its people. 

Reasons for the need of the same are :

1. Job creation 

2. Industry diversification 

3. Business retention and expansion 

4. Economic fortification 

5. Increased tax revenue 

6. Improved quality of life.

World Trade Organization.

Under MSME Act, 2006.

Four failures of the new Industrial Policy are : 

1. Under this, unemployment did not decrease substantially. The rate and magnitude of unemployment both are increasing.

2. Many industries became sick or closed down under the new Industrial Policy. They could not arrange sufficient resources to adopt expensive foreign technology. 

3. Indian industries could not compete with foreign industries, which posed a threat to their existence and many industries went out of the competition. 

4. The dependence of Indian industries on foreign technology increased, which has been termed as Economic Colonialism by various experts.

Four achievements of the new industrial policy : 

1. The rate of industrial development increased after adopting this policy. In the decade prior to economic reforms, this was 7.8 per cent in 1980-90, which increased to 13.0 per cent in 1995-96. It was 11.5 per cent in 2006-2007. 

2. The foreign capital investment increased as a result of the new Industrial Policy. Both, FDI and FII increased. According to UNCTAD investment report of 2010, it was 34.6 billion dollars in 2009. 

3. Increase has been recorded in the foreign exchange reserve, due to which IMF has included India in the list of creditor nations. 

4. Foreign technology received encouragement, which enables Indian industrialists to establish . their identity in the global market.

The objective of the Skill Development Scheme is to enable a large number of Indian youth to take up industry-relevant skill training that will help them in securing a better livelihood. Individuals with prior learning experience or skills will also be assessed and certified under Recognition of Prior Learning (RPL). Under this Scheme, training and assessment fees is completely paid by the government. The Special Projects component of PMKVY envisages the creation of a platform that will facilitate training in special areas and/or premises of Government bodies, corporate or industrial bodies, and training in special job roles not defined under the available Qualification Packs. It has been integrated with the 25 sectors of “Make in India”.

Ram Singh K.Ashar, in his study, proved that on investment of 1 rupee of fixed capital, small scale industries provide employment to maximum workers. Upon investment of one rupee in fixed assets, seven fold production takes place, as compared to large scale sectors and an investment of 1 rupee in small scale industries provides three times more value added price as compared to large scale industries.

Industries were categorized on the basis of investment under the new Industrial Policy, and industries which required high investments were listed and 51 per cent foreign investment was permitted without governmental clearance in them. For industries in service sector, the limit for foreign investment was raised from 51 per cent to 74 per cent and later to 100 per cent. In recent time, foreign investment is fully restricted in certain sectors, such as- retail business, atom energy, trade of lottery and gambling.

A labour facilitation portal has been set up, so that online registration of units, submission of self certified simplified single online returns, initiation of transparent labour inspection plan through compromised system in accordance with risk based parameters and uploading of inspection reports within 72 hours is made possible and complaints are redressed in time. The Apprentice Regulation, Act of 1961, has been made more flexible, and in order to make it more attractive for youth and industry, amendments have been made in it and Appreciate Incentive Plan has been started for assistance to MSME in employing apprentices in the manufacturing sector.

Environment, coastal regulatory zone (CRZ) and forest related clearances are being made online, and the process for this has been started. The process of decision making by making federalism strong has been decentralized. In order to ensure industrial development, the pre-requisites of acquiring environment related clearance for projects of construction of such industrial sheds have been removed where plants and machinery, educational institutes and hostels exist.

Those units were included in small scale industries in which the investment on plant and machinery was less than 10 lakh. The investment for Ancillary industrial units was kept at a maximum upper limit of 15 lakh and the maximum investment limit for Tiny units was 1 lakh.