FIRST ASSIGNMENT Course Code Course Title : : MS-03 Economic and Social Environment 03 TMA-!

SEM-I "003

Assignment Code : #$ No$ !

The Management cannot overlook the environment, whether market or non-market. In the light of the above statement, explain the link between social developments, the industrialisation process and the management culture. Give examples. Ans : The term environment refers to the totalit! of all the factors which are external to and be!ond the control of individual business enterprises and their managements. The environmental factors are essentiall! the givens within which firms and their management must operate. "nvironmental factors ma! be market related such as demand, suppl!, number of firms or price related competition, or non-price competition, etc or non-market forces such as government laws, social traditions, etc. Management, at all levels of specialised functions, is influenced b! the critical elements of the business environment. #or example, when an industr! faces recession, the management ma! decide to cut down the rate of production or to pile inventor!. $hen the market is being invaded b! an increasing number of closel! substitutable products, the management ma! decide to go in for aggressive advertising to face cut-throat competition. $hen the financial institutions start interfering too much with the da!-to-da! business operations of a firm, the firm s management ma! decide to do awa! with borrowed capital and depend upon its own resources. $hen the government enforces minimum wages legislation and other social securit!

measures for all permanent workers, the management ma! decide to recruit onl! casual workers through a labour contractor. %ence, the management alwa!s studies the environment and then takes a decision accordingl!. There exists a clear and inseparable link between social development, nature of industrialisation process and nature of management culture. To illustrate, with the social institutions and s!stems characteri&ed b! the caste s!stem, the 'oint famil! s!stem, patriarchal famil! the concurrent businesses were also confined to a particular caste, famil! etc. (ut as these age-old institutions are d!ing fast, business does not remain confined an! more within a given communit! or caste, attitude towards business as profession, towards achievement and work, towards ownership and management ) all are changing ver! fast. *econdl!, with the change in attitude towards business education, increase in number of business schools, etc., there have been noticed changes in ownership+management of businesses, there are now demands for professional managers even in public sector businesses and in famil! owned business houses. The industrialisation process in ever! societ! in the modern era can be traced to the work of a small elite group. In India for example, (ritish elite set up the first modern industries, built up railwa!s, opened up mines, plantations, etc. and developed managing agenc! s!stem. -ext came the domestic d!nastic elite, i.e., families belonging to certain castes and communities such as .aish!as, Gu'ratis, /hettiars, 0ho'as, (haibandhs, *uvama, (aniks, etc., traditionall! engaged in business. In this group the son succeeds the father and top management is confined to close relatives. -ext came the multi-nationals and their subsidiaries which further helped the industrialisation process. 1t the same time, *tate as the entrepreneur has also been one of the characteristics of Indian business 2though the recent trend towards divestment is to pull government out of business from consumer and undesirable sectors3.

"ach kind of elite built up its own management st!le and managerial personnel in India. The foreign-colonial elite group and their successors, the foreign firms operating in India, including the subsidiaries of multinationals used the racial approach to recruiting managerial talents. 4oung (ritons used to be recruited and brought over to India to manage various companies incorporated in the 5.0. *imilarl!, other foreign firms recruited managers from their own race and cultural background. (ut now the! have Indianised fast under the pressure of the government. -ow Indians even head the subsidiaries of some multinationals. The same practice was followed in India b! the big famil! concerns till recentl!. If the original famil! could not provide the talents need, the extended famil! 2i.e., close relatives and kinsmen3 was drawn upon. #ailing that, the communit! to which the famil! belonged provided the recruits. %owever, like the foreign firms, these also graduall! had to recruit professional managers who had no ties of blood or communit! with the owners. In 'oint stock companies which are not controlled b! famil! concerns and in the public sector enterprises, professionals are now graduall! coming into their own. The public sector initiall! drew upon the civil services, but the transfer of the bureaucratic culture to business operations, b! and large, proved unrewarding. The emphasis is now largel! on professional talent built up from within or recruited from the open market. 6bviousl! these have been the outcome of various social developments and social movements such as the Trade 5nion Movement, the /onsumer Movement, Management Movement, the *hareholders Movement, "nvironmental Movement, and so on. The histor! of social movements in other countries also is not different. The development of capitalist enterprises in India and elsewhere was ver!

much conditioned b! the moves and motivations of the business communit! ) their capitalist spirit of earning like a king and living like a sage . 1s and when the philosoph! of capitalism was replaced b! that of socialism, a new business culture took shape. The private profit motive was replace b! the social welfare motive. The private propert! rights were replaced b! the social ownership ) the state sector was created through the process of nationali&ation. The free market price mechanism was replaced b! comprehensive planning b! the /entral Government. %istoricall!, neither pure capitalism nor pure socialism could survive as a stable social movement, and so came the philosoph! of a mixed econom! . The resultant social movement was to combine the private and public sectors, the market mechanism and centralised planning, commercial profitabilit! and social desirabilit!. The nature of Indian mixed econom! has been the outcome of a long-drawn process of social development and ideological revolution. If we look back on the histor! of such social development in an! countr! including India, we will find that corresponding to different stages of development, there developed different patterns of industr! and business culture. 1nd the culture in its turn also influenced the process of social development.

#$ No$ " 71s industrialisation of a countr! proceeds, the relative importance of consumer goods industries declines and that of capital goods industries increases.7 8ustif! this proposition b! using the relevant data. Ans$ The progress of industrialisation during the four decade and more since the beginning of the planning era has been a significant feature of the Indian economic development. The process of industrialisation, initiated as conscious and deliberate polic! under Industrial 9olic! :esolution of ;<=> and ;<?@ involved heav! investments in basic and heav! industries. India now has a well-diversified industrial sector covering the entire range of consumer, intermediate and capital goods industries. The progress the countr! has made in respect of industrial sector is clearl! reflected in the commodit! composition of India s foreign trade. The share of imports of manufactured goods in foreign trade has steadil! declined, while industrial products, particularl! engineering goods have become a growing component of India s exports. 1s industrial development proceeded in the Indian econom!, several structural changes have taken place in the industrial sector. %istoricall!, industrial development has proceeded in three stages. In the first stage, industr! was concerned with the processing of primar! products. Milling grain, extracting oil, tanning leather, spinning vegetable fibers, preparing timber, and smelting ores. The second stage in the evolution of secondar! industr! comprises the transformation of materials making bread and confectionar!, footwear, metal goods, cloth, furniture and paper. The third stage consists of the manufacture of machines and other capital eAuipment to be used not for the direct satisfaction of an! immediate want but in order to facilitate the future process of production.

If we consider two categories of industrial output, i.e., consumer goods and capital goods and classif! various stages in terms of the ratio of consumer goods to that of capital goods, we will find that in the first stage the consumer goods industries are of overwhelming importance, their net output being on the average five times as large as that of capital goods industries. This ratio is B.?C; in the second stage and falls to ;C; in the third stage and still lower in the fourth stage. This classification emphasi&es the increasing role of the capital and producer goods industries in the econom! as industrial development takes place. In the post-independence period economic planning for overall

development succeeded in la!ing firm foundations for future economic development. The heav! industr! strateg! formulated and implemented since the second plan helped in creating a strong industrial base. The table below provides data on production in both consumer as well as capital goods industries.

%roduction o& Selected Industries !'(! to !''0

Industr) ; I$ Ca*ital Goods Industries ; B D = ? @ E > < ;F ;; ;B ;D ;= ;? ; B D = ? @ E > < ;F ;; ;B ;D ;= ;? /ommercial vehicles 1uto-ancillar! and parts "lectric motors 2GGTG3 :ailwa! locomotives Textile machiner! "lectric generators Machine tools *hip building and repairing /omplete tractors Giesel engines :ailwa! wagons Motor starters and contactors :ailwa! coaches (all rollers and needle bearings (oilers /otton textiles 2decentralised3 9aper and paper boards /otton cloth *ugar Tea $heat flour+Maida Tetrac!cline 1rtificial leather cloth /igarettes (eer .anaspati+"dible h!drogenerated oil 9enicillin *oaps all kinds Telephone instruments $rist watches MM5 FFF Tonnes FFF -umbers 7 DE= . D?= ?;F< DE@ . =<= DD@ . >;; BB> ;FFF >D= ??=F BD@ ;D<> <D; ?DBF D?; ;?D; ED= E?F; @BD ;?F@ E?= E=@E ?=? ;=EE ;;== <;@B @E= ;?B? ;BD@ ?BD ;?@D ;?E> FFF -umbers :upees /rore FFF %9 -umbers :upees /rore 7 7 7 FFF -umbers FFF -umbers -umbers FFF -umbers -umbers Hakh -umbers :upees /rore Mill.Mtrs. FFF Tonnes Mill.Mtrs. FFF Tonnes 7 7 Tonnes FFF Mtrs. /rore 9ieces Mill.Htrs. FFF Tonnes . ;=DD ;;;D D>@ D=@ ?F@F ;B;> @>=E @?E@ ??B BD<@ BD@ <;FF ;@B >@? <B @DE =?EE BF? B;= ;?F . ;F< >= . >@ @ED B;< BFE ;@F . ;<< @D . >> E;> B;F BB@ ;E; . BE@ E@ <E >B? =<=F BFF BBB ;E> DD@ ;=B >? ;B?= ;=;> ;BF< =E< =?@ @=BE ;D<F B@;< @;?B @=D D?B@ BDF >@?F BF? <;> ;FD <@B ?B?F B;F ;<E ;>< DD> DE> E@ BF=@ ;=?@ ;;E< ?E< @;E E@BE ;?;E B@FD @E?< @?E D?=@ BD> EEFF BF= >@> ;F@ ;FB@ =<=; B?< B<E ;DF =FE DBE >F BF<= ;?;B ;BD= @;> ED@ ?D=> ;>EF B=EF EEF; @BB DEE< B?B E;<; ;>E <BD ;BF <F< =B?B BBD D?> BDD =E= BE< >D ;><< ;>BB ;B== EF= @=E >=F> ;<<E BB=D >E@; @>F DE>D =F; @;>= ;=< <>F ;;@ ;=;D ?D;= B>; =F< ;<B ?<D =B@ ;;F ;>?? BBE< ;=F; ;;F= EE> EFFD BFE; BFB; <?E@ EF; ==<D D<F ?=?D ;EB <<@ ;B@ ;@F> ?BFD BE> ?B? B;= EDB =@< ;B? ;EE? B>F; ;=@B ;;<; >>= ED?E BB;B ;<>> EF@ =ED> ?;B ?<B> ;<< <D< ;=@ ;<?= ?>F< DFB >;E B<= >=? =@< ;=D ;EBF B=D> ;?== ;F;F ><D <<F; B=DD ;>>; E;< =E=> DB; @;>? BFD >B= 5nit B ;<>;- ;<>B- ;<>D- ;<>=- ;<>?- ;<>@- ;<>E- ;<>>- ;<><- ;<<F>B D >D = >= ? >? @ >@ E >E > >> < >< ;F <F ;; <; ;B

=@D@ ?;<<

;E@E@ ;=D=? ;E;ED ;DF;F ;D;FF ;@=E; ;?<F@ B;D@@ BD@DF BD@EF ;?;< ;D@@ ;;?> ;;<= D@E =BF =F@ ?;E

II$ Consumer Goods Industries ??@= @FDE ;BB; ;;>@ D;;> D?>> >@=D EBF? ?@; B@F @FD BDF B@BB DFF=

<=BD ;;>;F

B;;;B BB=?? BD=DF BBDFF B?=FF ;EED@ ;<D>> DB=;> D<FBD B>==E <=F? >E>B ;@< ><F ;@@ >><

?@<D ?;>=

<EE< ;;;E;

%roduction o& Selected Industries !''! to "00!

Industr)

5nit

;<<;- ;<<B- ;<<D- ;<<=- ;<<?- ;<<@- ;<<E- ;<<>- ;<<<-FF BFFF<B <D ;= <= ;? <? ;@ <@ ;E <E ;> <> ;< << BF B; F; 9 BB

; I$ Ca*ital Goods Industries ; B D = ? @ E > < /ommercial vehicles 1uto-ancillar! and parts "lectric motors 2GGTG3 :ailwa! locomotives Textile machiner! "lectric generators Machine tools *hip building and repairing /omplete tractors

;D

FFF -umbers :upees /rore FFF %9 -umbers :upees /rore 7 7 7 FFF -umbers FFF -umbers

;?F BD<= @FEF DFB <FF =FF <B= =B; ;@@ ;@EE

;=< BE;D ??=@ D;E >D> D=F ;FFE @?E ;=E ;@>B

;@B

B;@

B<@ ?B=< @D?F BED ;;?; =E= ;@=? @E; BFB ;<>> DDE@ B<?? ;>BB

DD> @E?@ >D?F D;B E>B ==B ;=F> E<; B=? ;<>> D@=> B<;F B=D;

BB< @?;F >=BE DB< ><< ?E< ;@=? <D= BE> ;<=@ ==;> B?<B BF=;

;>@ <?=E >?=> DB@ ;F@> ?F@ ;DB= ;BB@ BED BBBB =@E> BE;F B==@

;E= EB;= E?=E B?< ;B>E =>; ;?B; ;BD? B>F B<B> D@@@ DD@< B=;<

;?B EB?; E=D@ BBD ;B?D =F< ;DEE ;DFD B>= B<;E DD?= DD<E BB=<

DBDB D>DE @DDD @?EB B<= DFF

;F?B ;;BB DFE >?B ?;; ;D< D<? <DD @ED ;?>

;F Giesel engines ;; (roadgauge covered wagons I ;B Motor starters and contactors ;D (roadgauge 9assenger carriage II ;= (all rollers and needle bearings

;@E= ;E@@ BFFF B?>= B;?> B@B@ B=EF ;@B?

-umbers B?E>F B?FFF FFF -umbers -umbers B?=? ;?>= B;DD B@;?

Hakh -umbers

>ED

<=D

<@< ;=<D

BD;D

B;=B

;<@?

;@EE

B<;F

DEE<

;? (oilers II$ Consumer Goods Industries ; B D = ? @ E > < /otton textiles 2decentralised3 9aper and paper boards /otton cloth JJ *ugar Tea $heat flour+Maida Tetrac!cline 1rtificial leather cloth /igarettes

:upees /rore

<B@

<E?

<F> ;FB?

;BFB

;=;B

;D;;

;;>F

;B@E

;B@F

Mill. Mtrs. ;B<<? ;=<D@ ;@BEB ;?>@> ;EE=; FFF Tonnes Mill.Mtrs. B=@E ;@?F B?@D ;=FE BED< D;E= D??=

. D<F>

. =B<=

. ==?F

. ?F><

. =>D=

;D?@ ;DE;B ;==;B ;?;=B ;=EF= ;D;FE <<ED ;B@@? ;=>;F ;?DFE ;DB?F ;=DF> E?= E=D E@B =>FF . . @<?< DEF ;F>< E<; ;E<> D>F@ EE? =>FF . . ED>= =B? ;;F; @B> ;=>F D><; >?F> >D> ?F=F . . >D;@ =DD ;FF@ D?B ;?>@ =<>< @<?; >?; D@B? . . E<D; =DD ;F;F DD; ;<@< =?D= <@;;

;DE?= ;=;ED ;E=@E ;<B=D >;@ BDBD . . >BE B==D . .

FFF Tonnes ;B<>< ;B?D; 7 7 Tonnes EBE =EE? B<B EBE =>FF B>B

=>FF =>FF B?F . .

FFF Mtrs. BEDEB B;FBD BF@?F /rore 9ieces Mill.Htrs. FFF Tonnes MM5 FFF Tonnes FFF -umbers 7 @?;D B;= >DE ?;@ ;?=> ;;>D @;=; BBD ><@ EDF ;=EF ;=DF

E;>= E;F= DF? <FF E@B BE> <<> <F@

>B?F E?F>? D@D ;DBF =>> B<<= =<>> <B?= DFD ;==? >BD D?;= >=@F >EF=

;F (eer ;; .anaspati+"dible h!drogenated oil ;B 9enicillin ;D *oaps all kinds ;= Telephone instruments ;? $rist watches

;=@? ;?EF ;<D? ;<;F

<@@? ;F@@;

>??< E?@; ;F<<F

GGTG C Girectorate General of Technical Gevelopment. J C Includes sacking and hessian. 9 C 9rovisional. K C Includes light L medium structurals also from ;<<=-<?. M C These groups are now termed as filament !arn from ;<<=-<? onwards. I C 9rior to ;<<D-<=, data relate to :ailwa! wagons as per ;<>F->; II9 basket. II C 9rior to ;<<D-<=, data relate to :ailwa! coaches as per ;<>F->; II9 basket. JJ C #rom ;<<=-<? onwards classification is cotton cloth 2excluding hosier!3. Note C #igures from ;<>;->B to ;<<B-<D ma! not be comparable thereafter due to change in classification. Source C ;. /entral *tatistical 6rganisation, Government of India. B. 6ffice of "conomic 1dviser, Ministr! of /ommerce and Industr!, Government of India.

+se-,ased Classi&ication -& Industrial %roduction .,ase : !''3-'/0!001 Industr! Group ; ;. (asic Goods B. /apital Goods D. Intermediate Goods =. /onsumer Goods 2aNb3 a3 /onsumer Gurables b3 /onsumer -on-durables II% - General 9 9rovisional. Note #igures in bracket are relative contributions, computed as the ratio 2in percentage terms3 of the change in the index of the respective industr! group to the change in the overall index ad'usted for the weight of the relative industr! group. Source : /entral *tatistical 6rganisation. $eight Index BFF;-FB 9 BFFF-F; B D = D?.?E ;?B.? ;=>.? <.B@ B@.?; B>.@@ ?.D@ BD.DF !00$00 ;@F.@ ;>F.; ;E?.; B?D.E ;?E.F !23$0 ;@@.B ;EE.= ;@?.B BBE.@ ;?F.> !2"$4 BFF;-FB ? B.E 2D;.<3 -D.= 2-;;.@3 ;.@ 2;@.;3 @.F [email protected] ;;.? 2D;.=3 =.; 2DB.=3 "$( Growth :ate 29er cent3 BFFF-F; ;<<<-FF ;<<>-<< @ E > D.@ ?.? ;.@ 2B=.F3 2BE.E3 2;D.<3 ;.> 2D.?3 =.E 2BE.B3 >.F 2=?.=3 ;=.? 2BF.;3 ?.> 2B?.;3 /$' @.< 2;F.B3 >.> 2DE.E3 ?.E 2B=.=3 ;=.; 2;D.E3 D.B 2;F.@3 2$3 ;B.@ 2B>.;3 @.; 2=B.D3 B.B 2;?.>3 ?.@ 2>.E3 ;.B 2@.@3 /$! ;<<E-<> < @.< 2D=.<3 ?.> 2E.>3 >.F 2DD.F3 ?.? 2B=.B3 E.> 2E.D3 =.> 2;@.>3 2$3

The weight assigned to the basic and capital goods industr! in the index of industrial production rose from BD.D per cent and =.E per cent to D<.= percent and ;@.= percent respectivel! during the period ;<?@ to ;<>Fs, while that of the consumer goods industries during the same period decreased from =>.= per cent to BD.E per cent. Thus, over the period the relative importance of (asic and /apital goods industries increased and /onsumer goods industries decreased. %ence, to conclude we endorse the statement as industrialisation of a countr! proceeds, the relative importance of consumer goods industries declines and that of capital goods industries increases.

The Indian econom! is growing faster than ever before. (etween ;<<B-<D and "00!-0", IndiaOs GG9 at ;<>F->; prices has recorded a trend growth rate of @.< per cent compared to ?.? per cent through the decade of the

;<>Fs 2i.e. ;<>F->; to ;<<F-<;3. -ever once has the growth rate fallen below ? per cent since ;<<;-<B when it grew b! onl! ; per cent and when the economic liberalisation process started. The reason wh! GG9 growth has remained strong since ;<<;-<B is that the contri5ution o& nonagricultural sectors 6as considera5l) increased . This has enabled the econom! to withstand sharp declines in the agricultural sector and !et register good overall growth. #or exampleC in ;<<?-<@, agricultural output rose b! a negligible F.B per cent, !et India registered its most impressive GG9 growth everC >.@ per cent. Throughout the ;<<Fs, i.e. from ;<<F-<; to "00!-0", agricultureOs share in the GG9 has fallen b! =.;F per cent from DF.<D per cent to B@.>D per cent. The declining role of the agricultural sector in the Indian econom! is the most noteworth! development. In the ;<>Fs and earlier, fortunes in the agricultural sector used to determine the GG9 growth rate as is t!pical of the less developed economies. $ith the increasing contribution of the nonagricultural sectors, the Indian econom! is arguabl! undergoing a structural shift towards the fundamentals of a developed econom! 2in the developed economies, the industrial and service sectors contribute a ma'or share in GG9 while consumer and agriculture accounts for a relativel! lower share3. 6f the consumer+non-agricultural sectors, it is the service sector that has shown maximum growth and has gained at the expense of both the agricultural and industrial sectors. The service sectorOs share in GG9 has grown from =D.@< per cent in ;<<F-<; to ?;.;@ per cent in "00!-0". In contrast, the industrial sectorOs share in GG9 has declined from B?.D> per cent to BB.F; per cent in ;<<F-<; and "00!-0" respectivel!. agricultural sectorOs share too has fallen as mentioned above. *ome economists caution that if the service sector b!passes the industrial sector, economic growth can be distorted. It is true that, in India, the service sectorOs contribution in GG9 has sharpl! risen and that of industr! has fallen . (ut, there are other economists who argue that IndiaOs service has grown -6T ("/15*" the industrial sector has slowed down. :ather, The

the! sa!, IndiaOs industrial sector has indeed grown steadil! 2except in ;<<>-<<3 and three times between ;<<D-<= and ;<<>-<<, industr! surpassed the growth rate of GG9. Thus, the service sector has grown at a higher rate than industr! though industr! too has grown. The rise of the service sector therefore does not distort the econom!.

#$ No$ 3 Giscuss with two or more small scale entrepreneurs as to how far Government polic! is beneficial to a prospective entrepreneurP (ased on the above, anal!se the points of merits and demerits. 1s a part of this assignment I met with few small scale entrepreneurs and enAuired extensivel! about their experiences with the government agencies and the existing scheme+ polic! framework for **I sector. "xcept some of the problems associated with procedural dela! and the bureaucratic st!le of the government working, most of the entrepreneurs appreciated the policies and schemes of the government in this sector. 9resented below is the outcome of m! discussion with these entrepreneurs which is self explanator! and exhibits some of the answers for the posed Auestion. :eservation of products for exclusive manufacture in the **I *ector has been one of the important polic! measures for promoting this sector. This polic! was initiated in ;<@E with =E items which was enlarged to >FE items in ;<E>. 1t present >;B items are reserved for manufacture in this sector. This 9olic! got a legal backing when the I2GL:3 1ct was amended in March, ;<>= empowering the Government to reserve items under this 1ct. The overwhelming consideration for reservation of an item is its suitabilit! and feasibilit! for being made in the small scale sector without compromising Aualit! aspects. The small units manufacturing items served for manufacture in small scale sector do not reAuire an! prior licence. This is a ma'or relaxation where no licensing or restriction in production in small scale sector exists. The locational restrictions have also been minimised. *imilarl!, 7a5our Act 6as 5een sim*li&ied in ;<>> to assist the small establishments.

Single 8indo9 Sc6eme The *cheme envisages sanction and disbursement of working capital and term loan together from a single agenc!. It is applicable to pro'ects with cost upto :s. ?F lakhs. The *cheme is operated both b! banks and financial institutions. *tate #inancial /orporations under *ingle $indow *cheme provide working capital loan along with the term loan to new tin! and small scale sector units so as to overcome the initial difficulties and dela!s faced b! them to start production expeditiousl!. Industrial Estates Industrial "state 9rogramme in India is perhaps the biggest undertaken b! an! developing countr!. The programme started in ;<?B when the first such estate was established at %adapsar in Maharashtra. The main ob'ective of the programme is to encourage and support the creation, expansion and modernisation of **I through provision of factor! accommodation, common service facilities and assistance and servicing throughout, all stages of establishment and operation and developing subcontracting relationships within the small scale and large scale industries and specialised manufacturing activities. *ubseAuentl!, the programme has also assumed the role of regional development through provision of built-in factor! accommodation with the reAuisite facilities and services in semi-urban, rural and backward areas. National A9ards &or -utstanding SSI Entre*reneurs To bolster and motivate small entrepreneurs for setting up **I and modernisation, Aualit! upgradation, market expansion, export development, innovation and technological improvements, an Incentive-cum-:ecognition *cheme of -ational 1wards for outstanding **I entrepreneurs has been introduced since ;<>D. The 1wards consist of a citation, troph! and cash

pri&e amount of :s. B?,FFF+-, :s.BF,FFF+- and :s. ;?,FFF+- for I, II and III positions respectivel! and are given on national basis b! *IG6. *pecial 1wards to */+*T and women entrepreneurs have been introduced since ;<<D-<= in this categor!. 1part from the -ational-level 1wards, *tate-wise *pecial :ecognition 1wards are also given in this categor! to the entrepreneurs in each *tate. National A9ards &or #ualit) %roducts in Small Scale Sector *ince ;<>@ a *cheme for giving -ational 1wards to small scale units producing Aualit! products in ;? selected group of industries of consumer interests has been introduced. The selection of ;? industries var! from !ear to !ear. This 1ward also consists of a citation, a troph! and lump sum amount of :s. B?,FFF+- as pri&e mone! for each of the ;? selected products. The purpose of this 1ward is to bring awareness amongst entrepreneurs for manufacturing Aualit! products both of -ational and International standards E:cise E:em*tion Sc6eme Ta: ;olida) "xcise dut! concessions have been given to the small scale industries in what is called the General "xcise Gut! "xemption *cheme for small Industries. This is to enable the small scale industries to compete on favourable terms with their counterparts in the large and medium sector. 1s of now, the "xcise Gut! "xemption *cheme applies to the entire small scale industries spectrum, barring a few specified items. <enture Ca*ital .enture capital is a relativel! new phenomenon. Technolog! based small scale units and first generation entrepreneurs keen to enter new technolog! areas are the ones who can be supported b! venture capital.

*mall Industries Gevelopment (ank of India has recentl! introduced a venture capital scheme to extend venture capital support to **I units. This concept needs to be widel! practiced in both the public and private sector. .enture capital funds can give fund support to new units in a variet! of wa!s. *etting up of limited partnership with the entrepreneur is one such. Factoring Services #actoring services make available the much needed working capital to *mall *cale "nterprises and is likel! to induce customers to make timel! pa!ments for fear of adverse 7customer-image7 in the market. #actoring services are being increasingl! set up, which is a good sign. *ome private factoring companies have also come up. Tec6nolog) =evelo*ment > Modernisation Fund *IG(I has set up Technolog! Gevelopment L Modernisation #und 2TGM#3 scheme for direct assistance of small sale industries to encourage existing industrial units in the sector, to modernise their production facilities and adopt improved and updated technolog! so as to strengthen their export capabilities. 1ssistance under the scheme is available for meeting the expenditure on purchase of capital eAuipment acAuisition of technical know-how, upgradation of process technolog! and products with thrust on Aualit! improvement, improvement in packaging and cost of TQM and acAuisition of I*6-<FFF series certification. National E?uit) Fund -ational "Auit! #und 2-"#3 under *mall Industries Gevelopment (ank of India 2*IG(I3 provides eAuit! t!pe assistance to **I units, tin! units at one per cent service charges. The scope of this scheme was widened in ;<<?<@ to cover all areas excepting Metropolitan areas, raising the limit of loan

from :s. ;.? lakhs to :s. B.? lakhs and covering both existing as well as new units. %artici*ation in International Fairs E:6i5itions $ith a view to ensure that exporters from small scale sector exhibit their products in the International "xhibitions, reAuired assistance L support is provided. "xpenditure on account of space rent, handling and clearing charges, insurance and shipment charges etc. are met b! the office of the Gevelopment /ommissioner 2*mall *cale Industries3 under one of the plan schemes. "nAuiries generated during such exhibitions abroad are disseminated to all **I units through a net work of field offices of this organisation. This strateg! has been found to be successful for exporters from small scale sector in identif!ing new foreign bu!ers+markets. %ac@aging &or E:*orts :ole of packaging for exports has gained much significance in view of trends in the world markets. The need for better and scientific packaging for exports from small sector was recognised long back. $ith a view to acAuaint **I "xporters of the latest 9ackaging standards, techniAues etc. training programmes on packaging for exports are organised in various parts of the countr!. These programmes are organised in association with Indian Institute of 9ackaging which has reAuisite expertise on the sub'ect. Tec6nical > Managerial Consultanc) Services Technical L Managerial /onsultanc! *ervices to the **I

manufacturers+exporters is provided through a network of field offices of this office so as to ensure higher level of production and generation of higher exports.

Mar@eting =evelo*ment Assistance Marketing Gevelopment *cheme 2MG13 is being operated b! Ministr! of /ommerce under which MG1 is given to exporters through #I"6 and "xport 9romotion /ouncils+ /ommodit! (oards to plan their marketing strateg! for export growth. A9ards to e:*orters Ministr! of /ommerce gives awards to exporters for their outstanding export performance, under the scheme of -ational "xport 1ward for export performance. "arlier, a total of ;E 1wards including ? 1wards for *mall *cale *ector in the form of Troph! were given ever! !ear. %owever, from the !ear ;<<E-<> and onwards, the number of awards have been increased to BF, out of which the number of 1wards 2Troph!3 earmarked for small scale sector have been increased from ? to >. 5pto > awards will be given to the exporters in the small scale and cottage sector sub'ect to achievement of normative level of performance b! the concerned **Is and cottage sector units. 6ut of > 1wards., one will be given for 0hadi L .illage Industr!.

SEC-N= ASSIGNMENT Course Code Course Title : : MS-03 Economic and Social Environment 03 TMA-" SEM-I "003

Assignment Code :

#$ No$ ! Industrial licensing is an instrument to channelise the limited resources of an econom! in the most productive wa! for industrialisation. 1nal!se this statement on the basis of IndiaOs experience. Ans$ The ke! ob'ective of the economic polic! makers after independence in ;<=E, was to achieve self-reliance in all sectors of the econom!. The other main ob'ectives are reflected in the ob'ectives set out for the public sector enterprises and included promoting redistribution of income and wealth, creating emplo!ment opportunities, assist in the development of smallscale industries and protect consumers against private sector monopolies. The! decided to follow the approach of a planned econom!, along other socialist regimes such as the *oviet 5nion, and designed a regulator! framework that attempted to address these ob'ectives. To regulate the flow of investment in desired channels of industries and locations and to match suppl! of industrial commodities with demands on the lines of national priorities, the government introduced industrial licensing for entr!, in terms of Auantit! of production, b! firm and product. The ke! legislation in this field was the Industrial Gevelopment :egulation 1ct, ;<?;, 2IG:1, ;<?;3 which gave powers to the government to regulate

industr! in a number of wa!s. The main instruments were the regulation of capacit! 2and hence output3 and power to control prices. The IG:1, ;<?; specified a schedule of industries that were sub'ect to licensing. The next important polic! statement was the Industrial 9olic! :esolution, ;<?@ 2I9:, ;<?@3, which reserved certain industries 2*chedule 13 for public sector monopol! and certain other industries 2*chedule (3 for public sector dominance. 1fter reviewing the performance of the licensing regime, the government over the !ears made several modifications to this. (ut the Indian experience has been contrar! as far as the set ob'ectives are concerned. The s!stem of capacit! licensing continued to act as a significant barrier to entr! and growth. (! and large, licensing s!stem had discouraged potential investors, dampened the overall growth of industrial investment, and inhibited the abilit! of firms to take advantage of economies of scale, technological progress and product speciali&ation. There were no explicit economic criteria for weighing different ob'ectives for granting or re'ecting industrial licenses. This was reflected in the poor Aualit! of techno-economic examination of proposed industrial investments b! the Girectorate General of Technical Gevelopment 2GGTG3, Ministr! of Industr!. There was inordinate dela! in the processing and clearance of applications for industrial licenses. This had also deterred entr! and growth. #or example, between ;<>B and ;<>?, fewer than half of the applications for capacit! licenses were decided in stipulated three months submission, and a third reAuired more than six months. In man! instances, industrial licensing proved counter productive to its ob'ectives. Hicenses were obtained b! some industrial houses to pre-empt entr! or expansion b! competitors. *uch licenses were usuall! not converted into installed capacit!. In such cases, the most common reason for re'ecting a license application was the existence of adeAuate capacit! . This is because, it was assumed that all sanctioned capacit! was full! utili&ed when license

applications were processed. The presence of such unutili&ed licenses had onl! facilitated the creation and sustenance of sellers market. In certain industries like cement, the market demand and the periodic fluctuations in it were not anticipated and 'udged appropriatel! b! the licensing authorities. 1s a result, the efforts to balance suppl! with demand b! licensing led to alternating periods of scarcit! and excess capacit!. Hicensing restrictions on exemption and on producing a new product seemed to be more than those on entr!. Thus, licensing had functioned as a barrier to growth, limiting speciali&ation and the exploitation of scale economies. Gue to the bias towards a new unit, existing units tended to appl! for licenses to build a new plant and produce a new product rather than expand and specialise, resulting excessive diversification and industrial fragmentation. There were also instances where companies did not adhere to the provisions of industrial licensing. 9lans of expansion were implemented even without prior licenses. In certain cases, companies which obtained multiple licenses to produce multiple product, utili&ed less of the licensed capacit! in one product whereas produced far in the excess of the authori&ed capacit! in respect of some other products. Thus, there was considerable diversion of resources and raw materials obtained in the name of one license to the production of other licensed products. #inall!, industrial licensing did not succeed to curb or restrict over capitalisation in the organised industrial sector. 1s a result, industr! was characteri&ed b! excess capacities in certain industries coupled with shortages in the rest. 6n the whole, the ver! ob'ective of matching suppl! with demand in accordance with the national priorities remained a distant realit!. Given the Indian experience of industrial licensing, one ma! draw misleading conclusion that industrial licensing is not a good tool for rapid industrialisation. (ut a word of caution is needed here. Hicensing per se is

not bad for industrialisation. The regulator! framework had ver! sound economic ob'ectives and to an extent this was the need of the time. (ut their implementation was not satisfactor! owing to the experienced outcome. If we look at /hina and former 5**:, this framework has been successful to a great extent 'ust because of its proper implementation in con'unction with other supportive mechanism. %ence, though one ma! re'ect the industrial licensing in light of Indian experience, given the limited resources o& an econom) , industrial licensing or a regulator! framework is one of the productive wa! for industrialisation.

#$ No$ " /ollect data on the origin of ma'or sources of IndiaOs foreign investment for two different points, before and after <FOs. Gevelop a case to prove that IndiaOs foreign investment polic! in the <FOs is a ma'or departure from the past. Ans$ India was one of the lowest recipients of #GI among developing countries until ;<EFs. Guring ;<EFs cumulative inflows of #GI was about 5*R=?= million or F.BFS of gross domestic investment 2GGI3. Man! factors contributed to a lower level of #GI. 6ne obvious factor was the restriction in foreign shareholdings of eAuit!, which was limited to the maximum of =FS under the #":1. Hength! approval process and restrictions in foreign participation in man! areas also appear to have discouraged foreign investment. 1lthough the absolute value of #GI rose sharpl! in ;<>Fs in comparison with the earlier decade its share in GGI remained constant. It was onl! in ;<<Fs India experienced a significant inflow of foreign capital in the form of both #GI and portfolio capital. $hile India is not !et an!where near 1*"1- countries and far too behind /hina in attracting #GI, it has done remarkabl! well in recent !ears compared with its own past performance. #or instance, #GI inflows reached 5*R <.> billion during ;<<F-BFF; periods from 'ust over a billion 5*R during ;<>Fs. (! BFF; India became the < th largest recipient of such investment among developing countries. The share of #GI in both total foreign capital 2T#/3 and Gross Gomestic Investment 2GGI3 reached over DS b! BFF; from about one-fifth of a percent during ;<EFs and ;<>Fs.

This abrupt increase in #GI inflows appears to be due to the opening up of the Indian econom! since ;<<;. %owever, investment climate in India is far less than satisfactor! as reflected b! a huge difference between the approved and actual inflows of #GI. #or example, as of 8anuar! ;<<< the cumulative #GI approval was 5*R?= billion but the actual inflows were onl! 5*R;@ billion- less than DFS. This is even lower in the infrastructure sector where onl! ;@S of cumulative approvals translated into actual investmenttelecommunications ;?S and oil refining ;;S. #GI was heavil! concentrated in manufacturing. This appears to be due to a bias in favor of I* industriali&ation, which ma! have encouraged tariff'umping t!pe investment to capture protected domestic market. #ollowing the ;<<; liberali&ation program, however, there has been a sharp rise in foreign investment in tertiar! sector that encompasses critical elements of the modern econom! namel! telecommunication, power generation, consulting services, and hotel L tourism. The share of tertiar! sector in total #GI inflows rose significantl! from ?S b! ;<<F to about ?<S during ;<<;BFF;. Increased #GI inflows to tertiar! sector, especiall! in infrastructure and power generation, is a welcome development because this areas had long been reserved for the public sector enterprises which were inefficient in managing these services, making IndiaOs trade and industrial sector least competitive in international context. #ollowing the tertiar! sector, the second largest concentration of #GI has been in manufacturing attracting about =;S of such investment during ;<<;-BFF;. $ithin manufacturing chemical and chemical products, machiner! and machine tools, transport eAuipment, and food and beverages are the ma'or recipients of foreign investment.

F=I to India A ,e&ore !''! 2:s. /rores3 -rigin Countr) 5.0. 5.*.1. German! 8apan *weden *wit&erland /anada The -etherlands !'2/ =DD.F >B.D @.= -+1 E.> ;D.@ >.E -+1 !'(0 ?FD.D ;<@.= @?.F =.D BF.; ?=.E D=.; -+1 !''0 ;DB; ?;> B@E ;DB EE >@ E@ D@

F=I to India A !''! to "00! :s. 2million3

4ear ;<<; ;<<B ;<<D ;<<= ;<<? ;<<@ ;<<E ;<<> ;<<< BFFF BFF; Total ?D=;.; D>>E?.= >>?<D.D ;=;>E;.< DBFE;E.B D@;=@>.F ?=><;D.? ;?F?E>F.= ;BB?<E?.@ ;?F;BE=.= ;<?D??>.> 5.*.1 ;>?>.? ;BD;?.F D=@;>.? D=>>F.< EF?=D.E ;FF??>.E ;D?@<>.B D<F=ED.? @D<=DE.E >E>?@<.D ;B=FFE>.< Mauritius F.F F.F ;B=B.= ?D=E.= ;>F>=.< BDD=F.B ;F=BE>.< ;?BB<D.> ;@BD?;.D ;>?F;E.> ;><<[email protected] 5.0. DB;.F ;;E@.? @BBE.D ;B<<;.? ;EB?>.@ ;[email protected] ==<FE.B <>;B>.D <<;<>.@ ;;<@<>.> ;=D@E<.> 8apan ?BE.; @;FB.D B?E=.D =FF<.F ;?;=B.@ ;=>>B.? ;<F@D.? @BDF;.D >E???.< <D@=<.D ;DE<@?.E German! =;>.F >@B.E ;E?<.D ?@<D.@ ;DD<=.< ;?DE>.< B;??>.; ?<F@?.? EEB>E.< E>@<D.; >B<FE.@ *. 0orea @;.? D<=.F B<D.D ;F@>.? D;=;.< DBBF<.B ;<??<.> ?@EB>.B EB;<;.D E@=DD.> EE@;>.? -:I ;<E.F =D<;.D ;F=DD.B =<F>.> EF<E.; B;<FE.F ;>;E;.> @E;[email protected] >E<?B.< @<B;B.D >;DDB.;

(efore ;<<;, foreign investment in India was mostl! from 5.0. 1 greater proportion of this foreign investment was concentrated in export-oriented raw materials, extractive and service sectors. Tea plantation and 'ute accounted for more than B? per cent the total foreign investment, about DB per cent in trading and other services, < per cent in petroleum and onl! about BF percent in manufacturing. (! ;<<F, the stock of foreign investment has increased b! more than ten times, to :s. BEF? crores. Guring this period, not onl! the magnitude but the sectoral composition as well as the sources of foreign investment have undergone considerable changes. (efore ;<<Fs, there has been geographical diversification in the sources of foreign investment in India. 1t the time of independence and almost for the subseAuent two to three decades the bulk of foreign investment originated from 5.0. In ;<@=, more than three Auarters of the foreign investment in India were from the 5.0. 1nother significant contribution came from the 5.*.1. whereas other industriali&ed countries had onl! a negligible presence. (! ;<>F, the relative share of 5.0. declined to about ?= per cent

whereas the share of 5.*.1., German!, *weden, /anada, *wit&erland increased significantl!. (! ;<<F,though still the most prominent source of foreign investment, the share of 5.0. in foreign investment in India had fallen below the one-half mark and German!, 8apan and other industriali&ed countries had emerged as the other prominent sources of foreign investment for India. 1fter ;<<F, there has been much more geographical diversification as far as the origin of foreign investment is concerned. Though the 5.*. is the ma'or source of foreign investment, man! more industriali&ed as well as industriali&ing countries are increasingl! turning towards India for investment. Toda! India attracts foreign investments from as man! as >F countries across the world, these include countries from 1merica, "urope, Middle "ast 1frica, 1ustralia, and different parts of 1sia. Thus, India has been experiencing a significant increase in the magnitude, wider dispersion in terms of origin and direction of foreign investment after ;<<F. 8apanOs total direct investment in India between ;<<; 2when economic liberali&ation began3 and BFF; was :s. E? billion on approval basis. This was = per cent of the total #GI, making 8apan the =th largest investor in India after the 5*, Mauritius and "ngland. 8apanese investments in India account for onl! F.; per cent of 8apanOs total global investment and F.E per cent of its investment in 1sia for the period ;<<; to BFF;. %owever, with the opening up of the Indian econom!, 8apanese investments in India have been steadil! increasing. Total investment b! 8apan in India between ;<<; and 8une BFF; on approval basis was :s. =<.? billion. Geregulation of foreign capital b! India has been progressing smoothl! and despite a lot of bottlenecks in putting investments into execution, India has emerged as an attractive investment destination for 8apanese investors. 1ccording to a surve! b! the "TIM (ank of 8apan on promising #GI destination figured b! the industries in BFF;, India ranked =th on the medium term 2next three !ears3 and Drd on the long term 2next ;F !ears3.

If we see investment b! industr!, on the whole it is Auite brisk in sectors like energ!, communications, service industr! and chemicals. %owever, 8apanese investments have been concentrated mainl! in the fields like automobiles, home electronics and chemicals. *o far, the large industries have been Auite active. $ith the entr! of 8apanese automobile manufacturers, small and medium enterprises such as automobile component manufacturers have been making their presence in the Indian market. #GI inflows into India, according to the latest available data for 8anuar!*eptember BFF; amounted to 5* R [email protected] million 2R D.@ billion3 as against 5* R B?>=.< million 2R B.@ billion3 during the corresponding period of !ear BFFF. In rupee terms, #GI inflows were valued at :s.;@DF@.=E crore during 8anuar!-*eptember BFF;, indicating an increase of [email protected];S over the figure of :s.;;;;=.<D crore recorded during the !ear BFFF. The 5* continues to account for the largest amount of #GI approved, while the largest #GI inflows are from Mauritius, 5*1, German!, 8apan, 50 and the -etherlands. The top five states in India attracting #GI approvals areC Maharashtra 2with a share of ;E.FES of total #GI approved3, Gelhi 2;B.B>S3, Tamil -adu 2>.D?S3, 0arnataka 2E.>FS3 and Gu'arat 2@.=?S3. The !ear BFF; also witnessed some ma'or polic! initiatives taken b! the government to further ease the countr! s #GI regime, notabl! the followingC permitting #GI upto ;FFS with prior approval of the government for development of integrated townships, including housing, commercial premises, hotels, resorts, cit! and regional level urban infrastructure facilities in all metros, permitting #GI upto ;FFS on the automatic route for Mass :apid Transport *!stems in all metropolitan cities including associated commercial development of real estate, placing on the automatic route #GI upto ;FFS in drugs L pharmaceuticals 2with some exceptions3, opening up of the defence industr! sector upto ;FFS for Indian private sector participation with #GI permitted upto B@S, both

sub'ect to licensing, allowing on automatic route #GI upto ;FFS in all manufacturing activities in *pecial "conomic Uones 2*"Us3 except for some activities, permitting #GI upto E=S for telecom services such as Internet services providers with gatewa!s, radio paging and end-to-end bandwidth sub'ect to licensing and securit! reAuirements and several initiatives relating to the non-banking financial companies 2-(#/s3. *ome of the ma'or #GI polic! initiatives taken during the !ear BFFF including the easing of norms for pa!ment of ro!alt! have contributed to the recent upward trend in #GI inflows. %ence, in the light of above facts we ma! conclude that IndiaOs foreign investment polic! in the <FOs is a ma'or departure from the past.

#$ No$ 3 $hat is !our understanding of the basic ob'ectives of a fiscal polic! and the conflicts in its operationP 1nal!se these ob'ectives and put forward !our arguments as to which ones should be given greater priorit! in a countr! like India. Ans$ #iscal polic! refers to the polic! of the government concerned with allocation, distribution and stabili&ation function. #iscal polic! of the government affects not onl! government s own activities but also the entire econom!, either directl! or indirectl!. 1ll the ob'ectives of an! fiscal polic! can be grouped and summari&ed as follows C a$ Static e&&icienc) .s6ort run1 : This ma! further be sub-divided as 2i3

*atisfaction of private consumption wants, 2ii3 *atisfaction of public wants, 2iii3 (alance of 9a!ments eAuilibrium 2iv3 9rice stabilit! 2v3 :emoval of market imperfections. 5$ Social Bustice : This include 2i3 Increased emplo!ment, 2ii3 :educed

inter-personal income ineAualities, 2iii3 :educed inter-regional income ineAualities. c$ National Co6esion : This include 2i3 "conomic independence, 2ii3

9rovision of economic s!mbols of nationhood. d$ Economic =evelo*ment : This include 2i3 %igh savings, 2ii3

Maximum capital inflows from rest of the world, 2iii3 *tructural change or modernisation, 2iv3 :educed population growth.

If we go into details of these ob'ectives, we ma! notice that these ob'ectives are complementar! as well as conflicting. #or instance, when we divide the ob'ectives on the basis of time period i.e., short run and long run, we ma! find it difficult to integrate the short run and long run ob'ectives. If we choose to satisf! short run private consumption, we will have to forego the long run ob'ective of high savings. (ecause income is constant this can either be consumed in the present or saved and reinvested for future growth and future consumption. *imilarl!, there are conflicting ob'ectives of private and public sectors. Thus if we choose to satisf! private consumption wants, satisfaction of public wants can not be satisfied as resources are scarce. 9rivate consumption will also not allow the prices to be stable. $hile consumption creates additional demand which when exceeds suppl! causes an upsurge in price to offset the excess demand and thus destabili&es the price level. *atisfaction of private consumption ma! also put pressure on demand for imports and thereb! destabili&e the balance of pa!ments. *imilarl!, the ob'ective of satisf!ing public wants is in conflict with the ob'ective of maintaining balance of pa!ment eAuilibrium and price stabilit!. 6b'ective of maintaining (69 eAuilibrium is again in conflict with price stabilit!, ob'ective of price stabilit! is potentiall! in conflict with the ob'ective of economic development, and so on. Though polic! implementation, if full! coordinated, might permit the simultaneous achievement of the various goals outlined above, in practice it is often Auite difficult. Most polic!-makers therefore make compromises between various ob'ectives depending on economic condition from time to time. Given the scarcit! of resources and conflicting nature of the fiscal ob'ectives, it becomes logical to choose the most demanding among the

conflicting ob'ectives in the given economic condition. The principal wa! in which a fiscal polic! can influence growth in a countr! at India s stage of development is mainl! through increasing the efficienc! of mobili&ing resources for development. Given the current economic condition and the stage of development in India compared to the rest of the world and some of our adversaries like /hina, I would suggest to attach greater priorit! to the ob'ective of long run economic development, high savings, maximum capital inflows from the rest of the world, structural changes and modernisation and reduction in population growth. This is essential for building up a strong economic muscle and giving a brighter future for the generations to come. The administrative machiner! for revenue collection must be technologicall! upgraded and its efficienc! must be increased. 9ublic expenditure and debt must be curbed and similar reforms must be made so that the! sta! within limits. The government must stop expenditure in areas where the private sector can take over and work more efficientl!. 1lso the increasing volume of external debt must be curbed in order to avoid fiscal crunch. The government should take 'udicious decisions independent of its political interests. 9oliticians generall! promise more government with less tax. This polic! leads to a continuous rise in government borrowing and public debt. (ut all the debts must be paid eventuall!. This means that in future the government must either increase tax or cut public expenditure. This game therefore, can not be pla!ed forever. *ooner or later, it would lead to a fiscal crisis. There should be a general agreement to pa! for the social goods either through taxation or through pricing of public goods and services. There ought to be segregation of economic interest from the political interest. In fact, integration of the two ob'ectives and honestl! and strictl! serving for the economic interest along with educating the public b! drawing a distinction between a popular and a good economic measure can best serve the purpose in the long run. Though difficult, if practiced and

adverse effects 2in the long run3 of a popular economic measure with limited insight are exposed to the public, the proposed integration of two ob'ectives is possible and the possibilit! of a politician using such tactics is rooted out. Most of the subsidies barring a few like the subsid! on food, health and education, etc. for the poor are unwarranted and should be graduall! abolished. This would not onl! reduce the fiscal deficit but would improve the overall efficienc! of resource allocation in the econom!. India has adopted the characteristics of a mixed econom! and hence, the capitalist mode of production can be combined with the welfare state so that production and emplo!ment is provided b! the private sector and unemplo!ment benefit and social welfare are taken care of b! the state. The development experience elsewhere has shown that growth ob'ectives at such developmental stages are much more important than other short run ob'ectives. It is even more important for a poor and resource-starved econom! like India. Mismanagement of fiscal resources affects the welfare not onl! of the current generation but also of future generation.

T;IR= ASSIGNMENT Course Code Course Title : : MS-03 Economic and Social Environment 03 TMA-3 SEM-I "003

Assignment Code :

#uestion In an attempt to improve the socio-economic environment of India, the Government introduced a number of anti-povert! and emplo!ment schemes. $rite informative and up-to-date notes on some of the above schemes. 4ou ma! refer to the latest reports from the relevant Ministries and the #ive 4ear 9lan Gocuments. Ans9er The beginning of the new millennium has seen India emerge as the second most populous countr! in the world and the third largest econom! in 1sia. 1 strong power in the field of Information Technolog!, India is making rapid strides with the reforms carried out in the power, telecom and other economic sectors. Though there has been no scarcit! of food grains in the countr!, there is a problem of shortage of facilities to store the same. %erein lies the iron! of the situation. 1 predominantl! agricultural countr! like India has about DB crore people living below the povert! line. 1ccording to a sample surve!, about ? percent of the total population goes without two sAuare meals a da! most of the !ear as the! do not have the necessar! purchasing power to bu! food grains.

To deal effectivel! with this problem, the 9rime Minister, *hri 1tal (ihari .a'pa!ee launched the Ant)oda)a Anna CoDana on Gecember B?, BFFF. This scheme is an important milestone in providing food grains to the poor. It contemplates identification of one crore families comprising around ? crore poorest of the poor people who will be provided B? kgs of food grains ever! month at :s. B per kg. for wheat and :s. D per kg. for rice. The total subsid! involved in the implementation of the scheme will be around :s. B,DFF crore for a !ear. The Gepartment of #ood and 9ublic Gistribution has committed itself to restructuring of 9G* with focus on poor, promoting transparenc! in the s!stem b! social auditing b! Panchayati Raj and similar social institutions. *everal measures have been initiated to im*rove t6e %u5lic =istri5ution S)stem .%=S1 to serve the poor in the countr!. *teps have been undertaken to revamp the public distribution s!stem through a six-point strateg! including involvement of 9ancha!ati :a' Institutions and setting up of .igilance committees. *ocial auditing has been made an important aspect of rationing bringing transparenc! to the whole s!stem. *tate governments have been urged to translate these ob'ectives into practice while issuing licences to fair price shops and bringing them under the purview of "ssential /ommodities 1ct. The Auantit! of food grains distributed to the (elow 9overt! Hine 2(9H3 section of the population under the Targeted %u5lic =istri5ution S)stem .T%=S1 has been doubled from ;F kg. per famil! per month to BF kg. per famil! per month at ?F per cent of the economic cost. The scheme, benefits about DD crore of our people. #ood securit! has been attempted through a s!stem of procurement of food grains, their storage, movement, public distribution and maintenance o& 5u&&er stoc@. 1deAuate buffer stock is an essential element of the -ational #ood 9olic!. #ood grains in buffer is necessar! not onl! to impart

inter-seasonal stabilit! to food grains suppl! and prices but also to meet emergent situations arising out of unexpected reduction in crop area, natural disaster etc. #ood grains procurement is on the Minimum *upport 9rice 2M*93 offered b! the Government. :ice is also being procured under lev! from rice millers+dealers at prices announced separatel! for each *tate. The department has announced a national polic! on handling, storage and transportation of food grains to reduce storage losses. The ob'ective of the polic! is to harness efforts and resources of public and private sectors 2both domestic and foreign3 to build and operate infrastructure for bulk handling, storage and transportation of food grains in the countr!. The work of assessing state wise reAuirement of storage facilit! including warehouses and silos is in progress. It is expected that BFF more warehouses will be built in the countr! to meet the storage reAuirements. The issue prices of wheat and rice for distribution under T9G* will provide wheat at :upees =.;? per kg. for a (9H famil! while those 1bove 9overt! Hine 219H3 will get it at :upees >.D per kg. :ice will be sold at :upees ?.@? and at :upees ;;.D per kg. for (9H and 19H sections, respectivel!. The /entral issue prices of common rice for 19H families in 8ammu and 0ashmir, %imachal 9radesh, -orth-"astern *tates, *ikkim and hill! areas of 59 have been reduced from :upees ;,;DF per Auintal to :upees ;,F>E per Auintal. $heat prices in the 6pen Market *ales *cheme were revised for various &ones enabling *tate governments to avail of the scheme and bu! the stocks in bulk for suppl! through 9G* to 19H families at a price which is less than the prevailing 9G* rates for 19H.

The Government has also introduced a scheme called the Sarv*ri)a Sc6eme, under which ;; items of dail! use are regularl! distributed to the public through =.? lakhs fair price outlets in the countr!. This scheme would result in a monthl! saving of about rupees ?F to @F for families on the purchase of such items. Annapurna Scheme The 1nnapurna *cheme was announced b! the #inance Minister in his (udget *peech for the !ear ;<<<-BFFF to provide food securit! to those indigent senior citi&ens who are not covered under the targeted 9ublic Gistribution *!stem 29G*3 and who have no income of their own. Through this scheme, launched in 1pril;,BFFF, it is intended to provide ;F kgs. of food grains per month free of cost to all such persons who are though eligible for old age pension under the National -ld Age %ension Sc6eme .N-A%S1E are presentl! not receiving it. The Gram Panchayat would identif!, prepare and displa! a list of such persons after giving wide publicit! to the *cheme. The -619*, which was launched in ;<<?, provides pension at the rate of :s.E? per month to destitutes aged @? !ears and above. %owever, all indigent senior citi&ens are not covered under the scheme. The total number of beneficiaries during BFFF-BFF; for -ational 6ld 1ge 9ension *cheme in the countr! is worked out at approximatel! @>.>; lakhs. This would impl! that ;D.E@ lakhs beneficiaries would be eligible for coverage under the 1nnapurna *cheme. 1n amount of :s.;FF crore has been provided in the (udget for BFFF-BFF; for the *cheme. 6ut of :s.;FF crore :s.<<,F=,E@,;<F has been allocated to the *tates+5Ts. 6ut of this allocation, :s.=<,E>,=D,@<@ has alread! been released to

1ndhra 9radesh, 1ssam, Gu'arat, %imachal 9radesh, Madh!a 9radesh, -agaland, 6rissa, :a'asthan, Tripura, 5ttar 9radesh and 9ondicherr!. These measures to provide food securit! will not onl! tide over the present problem of rising stocks but will be the stepping stones for a long-term grains polic!. +nem*lo)ment : 1s regards unemplo!ment, before we mention some of the emplo!ment schemes, it would be better to have a look at some of the facts about the unemplo!ment in India.

IndiaOs -inth #ive-4ear 9lan pro'ected generation of ?= million new 'obs during the 9lan period 2;<<E-BFFB3. (ut performance has alwa!s fallen short of target in the past, and the current 9lan also did not meet its target.

IndiaOs labour force is growing at a rate of B.? per cent annuall!, but emplo!ment is growing at onl! B.D per cent. Thus, the countr! is faced with the challenge of not onl! absorbing new entrants to the 'ob market 2estimated at seven million people ever! !ear3, but also clearing the backlog.

*ixt! per cent of IndiaOs workforce is self-emplo!ed, man! of whom remain ver! poor. -earl! DF per cent are casual workers 2i.e. the! work onl! when the! are able to get 'obs and remain unpaid for the rest of the da!s3. 6nl! about ;F per cent are regular emplo!ees, of which two-fifths are emplo!ed b! the public sector.

More than <F per cent of the labour force is emplo!ed in the 7unorganised sector7, i.e. sectors which donOt provide with the social securit! and other benefits of emplo!ment in the 7organised sector.7

In the rural areas, agricultural workers form the bulk of the unorganised sector. In urban India, contract and sub-contract as well as migrator! agricultural labourers make up most of the unorganised labour force.

5norganised sector is made up of 'obs in which the Minimum $age 1ct is either not, or onl! marginall!, implemented. The absence of unions in the unorganised sector does not provide an! opportunit! for collective bargaining.

6ver EF per cent of the labour force in all sector combined 2organised and unorganised3 is either illiterate or educated below the primar! level.

The Tenth 9lan pro'ects a decline in the population growth rate to ;.?< per cent per annum b! the end of the 9lan, from over B per cent in the last three decades. %owever, it expects the growth rate of the labour force to reach a peak level of B.?= per cent per annum over this period, the highest it has ever been and is ever likel! to attain. This is because of the change in age structure, with the highest growth occurring in the ;?-;< !ears age group in the -inth 9lan period.

The addition to the labour force during the 9lan period is estimated to be ?D millions on the 7usual status7 concept. The acceleration in the econom!Os growth rate to E per cent per annum, with special emphasis on the agriculture sector, is expected to help in creating ?= million work opportunities over the period. This would lead to a

reduction in the open unemplo!ment rate from ;.< per cent in ;<<@<E to ;.=E per cent in the 9lanOs terminal !ear, that is, b! about a million persons - from E.? million to @.@D million.

In other words, if the econom! maintains an annual growth of E per cent, it would be 'ust sufficient to absorb the new additions to the labour force. If the econom! could grow at around > per cent per annum during the 9lan period, the incidence of open unemplo!ment could be brought down b! two million persons, thus attaining near full emplo!ment b! the end of the 9lan period, according to the 9lan.

%owever, there appears to be some confusion about the figure of open unemplo!ment. The unemplo!ment figure given in the executive summar! of the Tenth 9lan, gives the figure of open unemplo!ment at E.? million while the annual report of the Habour Ministr!, for ;<<?-<@, puts the figure for ;<<? at ;>.E million. 1n internal government paper prepared in ;<<E put the unemplo!ment figure at the beginning of the -inth 9lan at ;E millions and at ;>.E million at the end of ;<<=-<?. 9erhaps the 9lanning /ommission referred to the current figure while the Habour Ministr! figure referred to the accumulated unemplo!ment backlog.

+nderem*lo)ment

6pen unemplo!ment is not a true indicator of the gravit! of the unemplo!ment problem in an econom! such as India, characterised as it is b! large-scale underemplo!ment and poor emplo!ment Aualit! in the unorganised sector, which accounts for over <F per cent of the total emplo!ment. The organised sector contributes onl! about < per cent to the total emplo!ment.

5nderemplo!ment in various segments of the labour force is Auite high.

#or instance, though open unemplo!ment was onl! B per cent in ;<<D-<=, the incidence of under-emplo!ment and unemplo!ment taken together was as much as ;F per cent that !ear. This, in spite of the fact that the incidence of underemplo!ment was reduced substantiall! in the decade ending ;<<D-<=. 1ccording to the 9lanning /ommission, the *tates which face the prospect of increased unemplo!ment in the post--inth 9lan period 2BFFB- BFFE3 are (ihar, :a'asthan, 5ttar 9radesh, 0erala and 9un'ab. *ector-wise absorption of labour 1griculture @B per cent Manufacturing L construction ;@ per cent *ervices ;F per cent *undr! + miscellaneous 'obs ;B per cent

SC;EMES %rime Minister RoFgar CoDana .%MRC1 is being implemented since ;<<D. The *cheme is designed to create and provide sustainable selfemplo!ment opportunities to one million educated unemplo!ed !outh in the countr!. Guring the last ? !ears of its implementation, it was felt that certain parameters of the 9M:4 *cheme needed modification. #or example condition of eligibilit! such as age, educational Aualifications were coming in the wa! of expanding the coverage of the scheme in some cases. *imilarl! the total financial assistance per case was found to be insufficient in case of certain viable activities.

Modi&ications Government, therefore, has decided to modif! some of these parameters of the *cheme. The upper age limit has been relaxed be!ond D? !ears b! ;F !ears for */s+*Ts and women and the educational Aualifications for eligibilit! under the *cheme has been relaxed from matric 2passed or failed3 to .IIIth passed. *imilarl!, the upper limit of pro'ect cost has been increased from :s. ; lakh to :s. B lakhs 2:s. ; lakh for business sector and :s. B lakhs for other activities3. The 9M:4 scheme would now cover all economicall! viable activities including agriculture and allied activities but excluding direct agricultural operations like raising crop, purchase of manure etc.The details of the changes made in the parameters of the 9M:4 *cheme are given below. The modified financial parameter of increase in the upper limit of the pro'ect cost from :s. ; lakh to :s. B lakhs has been effective from ;.=.;<<<. Rela:ation o& norms &or Nort6 Eastern Region The 9M:4 would be expanded in scope to cover areas of horticulture, pigger!, poultr!, fishing, small tea gardens, etc. so as to cover all economicall! viable activities. 9M:4 would have a famil! income ceiling of :s. =F,FFF per annum for each beneficiar! along with his+her spouse and upper age limit will be relaxed to =F !ears. 9ro'ect costing upto :s. B lakhs in other than business sectors will be eligible for assistance.

%arameters -& %MRC

S$No$ %arameters ;. 1ge Revised #or all educated unemplo!ed ;>-D? !ears in general with a ;F !ears relaxation for */+*Ts, ex-servicemen, ph!sicall! B. "ducational Qualification D. #amil! Income handicapped and women. .IIIth passed. 9reference will be given to those who have been trained for an! trade in Goverment recognised approved institutions for a duration of at least six moths. -either the income of the beneficiar! along with the spouse nor the income of parents of the beneficiaries shall exceed =. ?. :esidence Gefaulter :s. =F,FFF+- p.a. 9ermanent resident of the area for at least D !ears. *hould not be a defaulter to an! nationalised bank+financial institution+ cooperative bank. #urther, a person alread! assisted under other subsid! linked Government schemes @. would not be eligible under this *cheme. 1ctivities covered 1ll economicall! viable activities including agriculture and allied activities but excluding direct agricultural operations E. 9ro'ect /ost like raising /rop, purchase of manure etc. :s.;.FF lakh for business sector. :s. B.FF lakhs for other activities, loan to be of composite nature. If two or more eligible persons 'oins together in a partnership pro'ect upto :s. ;F.FF lakhs are covered. 1ssistance shall be limited to >. individual admissibilit!. *ubsid! L Margin *ubsid! will be limited to ;?S of the pro'ect cost sub'ect to mone! ceiling of :s. E,?FF+- per entrepreneur. (anks will be allowed to take margin mone! from the entrepreneur var!ing from ?S to ;@.B?S of the pro'ect cost so as to make the total of the subsid! and the margin mone! eAual to BFS of the <. /ollateral pro'ect cost. -o collateral for pro'ect upto :s.; lakh. "xemption from collateral in case of partnership pro'ect will also be limited to an amount of :s. ;.FF lakh per person participating in the ;F. pro'ect. :ate of interest L -ormal rate of interest shall be charged. :epa!ment :epa!ment ;;. schedule ma! range between D to E !ears after an initial *chedule moratorium as ma! be prescribed. Training L other The training expenses and operational expenditure to be

assistance.

covered within the ceiling of :s. B,FFF+- per case. The existing s!stem of revising the scale of expenditure in consultation with the #inance for various activities and flexibilit! would be available to the implementing agencies of the *tate and /entral levels sub'ect to condition that over all training and operating expenses remain within the ceiling of :s. B,FFF+- per case sanctioned. The Gistrict Industr! /entres and the Girectorates of Industries shall mainl! be responsible for scheme implementation along with banks. of (asic minimum targets based on the population and the with number of educated unemplo!ed. 1dditional targets would be linked to the recover! of loans sanctioned, past performance of sanctions or special circumstances prevailing in the *tate+5T. 9reference should be given to weaker sections including women. The scheme envisages BB.?S reservation for */+*T and BES for 6ther (ackward /lass 26(/s3. In case */+*T+6(/ candidates are not available, *tate+5Ts Govt. will be competent to consider other categories of candidates under 9M:4.

;B.

Implementing 1genc!

;D.

Hinkages targets recover!

;=.

:eservation

Sel&-em*lo)ment to Educated +nem*lo)ed Cout6 .SEE+C1 : The scheme for providing *elf-emplo!ment to "ducated 5nemplo!ed 4outh was started in ;<>D with an annual target of B.? lakh beneficiaries. 5nemplo!ed 4outh in the age group of ;<-D? !ears who are Matriculates and above are eligible for assistance under this scheme. ITI passed, women, technicall! trained persons are given due weightage training plus two level are given preference. 1 ceiling of income of :s. ;F,FFF per annum, per famil!, has been fixed for eligibilit! under the scheme. 1 minimum of ?FS ventures should be through industr!-route and not more than DFS of the ventures should relate to business sector, except in hill! areas of the countr!. 1 composite loan not exceeding and :s.;?,FFF+- for business sector is provided. B?S subsid! is provided b! the Govt. on the loans. (anks do not reAuire collateral guarantee or margin mone! for such loads. DFS of the total beneficiaries are reserved for */+*T persons. %lan Sc6eme o& Small Industries =evelo*ment -rganisation .SI=-1 : The 9lan *cheme of *mall Industries Gevelopment 6rganisation 2*IG63 are promotional in nature and are mainl! intended to prove a wide range of services and facilities reAuired for accelerating the growth of small scale industries in the countr!. The ma'or activities, in this regard, include identification and motivation of prospective entrepreneurs, training of entrepreneurs and their workers with a view to improve their skills in the management and production, providing consultanc! services in technical, managerial, economic and their aspects of managing the industries, providing facilities for tooling, common processing and testing, and assistance b! giving information and intelligence in the marketing and other spheres of activities. *pecial efforts have also been made to induce greater motivation and encouragement to */+*T persons for availing the

benefit, of these programmes in larger proportion. The steps taken, in this regard, include the following. "ntrepreneurship Gevelopment 9rogrammes are being organised b! the *I*Is exclusivel! for weaker sections including the persons belonging to */+*T communities to motivate and eAuip them to set up small scale industrial units. The! have also been given special performance in the selection of of candidates for training in various programmes organised b! *I*Is. The *IG6 provides comprehensive consultanc! services in technical, managerial, economic and other disciplines. *uch services are provided mostl! free of cost. $herever, charges are leviable, the */+*T entrepreneurs are given ?FS concession. :egular and adhoc training programmes are being organised b! the /entral #ootwear and Training /entres for improving the skills of traditional artisans engaged in the leather Industr!. 5nder the :ural 1rtisans 9rogramme guidelines were issued for the organisation of promotional schemes and training programme for rural */+*T 1rtisans with a view to improving techniAues and tools and setting them in their respective trades to enable them to upgrade level of skills and earnings.

Rural Sc6emes

V 8awahar Gram *amridhi 4o'ana V *warn'a!anti Gram *waro&gar 4o'ana 2*G*43 V 8awahar :o&gar 4o'ana V Integrated :ural Gevelopment 9rogramme 2I:G93 V "mplo!ment 1ssurance *cheme 2"1*3 V Indira 1waas 4o'ana V Ganga 0al!an 4o'ana V *uppl! of Improved Toolkits to :ural 1rtisans 2*IT:13 V :ural *anitation 9rogramme V 1ccelerated :ural $ater *uppl! 9rogramme 21:$*93 V Grought 9rone 1reas 9rogramme 2G9193 V Gesert Gevelopment 9rogramme 2GG93 V Integrated $astelands Gevelopment 9rogramme 2I$G93 V :ural $ater *uppl! 9rogramme V Million $ells *cheme V -ational $atershed Gevelopment V (hoodan Movement V 9radhan Mantri Gramoda!a 4o'ana 29MG43 V *cheme for Hand Gevelopment V 9radhan Mantri Gram *adak 4o'ana 29MG*43 V *trengthening of :evenue 1dministration L 5pdating of Hand :ecords 2*:1 L 5H:3 V Training of :ural 4outh for *elf-"mplo!ment 2T:4*"M3 V 1nti 9overt! 9rogrammes V 1gricultural and :ural Gebt :elief *cheme V :ural Infrastructure Gevelopment #und 2:IG#3

V #ood for $ork 9rogramme V *elf %elp Groups V Gistrict :ural Gevelopment 1gencies 2G:G13 V *ampoorna Grameen :o&gar 4o'ana 2*G:43 V /redit-cum-*ubsid! *cheme

Though not exclusive, these are some of the important povert! eradication and emplo!ment schemes popular in India.