Be unit 2 -comprehensive

MONETARY POLICY
 Monetary policy refers to the policy formulated
by the RBI to regulate the supply of money &
credit in order to achieve the socio-economic
objectives of the economy.

 Expansionary monetary policy is a policy that
increases the money supply and It tends to
increase both investment and output
 Contractionary monetary policy is a policy that
decreases the money supply, and it tends to
decrease both investment and output

Objectives of Monetary policy
 Price stability
 Rapid economic progress
 Exchange rate stability
 Balance of payments equilibrium
 Full employment
 Economic equality

Quantitative measures
a. Bank rate
b. Open market operations
c. Cash reserve requirements
d. Statutory liquidity ratio

Quantitative Instruments
Open Market Operations
By purchasing or selling
government securities, the
central bank can alter the
supply of money
Bank rate
The Central bank can also
influence reserves by
altering the interest rate
charged on loans to
commercial banks.
Reserve Requirements
Reserve Requirements
influence the ability of
banks to create new loans

Selective or Qualitative measures.
a. Regulation of margin requirement on loans.
b. Regulation of consumer credit.
c. Rationing of credit.
d. Differential interest rates
e. Credit Authorisation Scheme (CAS).
f. Moral persuasion.
g. Directives

Fiscal Policy
 Refers to changes in government
expenditures and/or taxes to achieve
particular economic goals, such as low
unemployment, price stability, and economic
growth.

Fiscal Policy
 Expansionary fiscal
policy refers to
increases in
government
expenditures and/or
decreases in taxes to
achieve macroeconomic
goals.
 Contractionary fiscal
policy attempts to
decrease government
expenditures and/or
increases in taxes to
achieve macroeconomic

Business - Economic System Interface
 The economic environment of a country
comprises of the structure of the economy, level
of income, economic policies etc. Any change in
the economic policy can have a positive or
negative impact on the working of the business.
 Business organization has to consider various
policies prevailing in the country like import policy,
industrial policy, taxation policy etc. which can
have a great impact on the business.
 Economic policies like liberalization, privatization,
and globalization had a considerable impact on
the business.

 Changes in the economic policy ultimately affect
the business. For example: change in the income
structure of the consumers will ultimately affect
their purchasing power and sale of the
organization.

Industrial Policy | Meaning
 Industrial policy means rules, regulations,
principles, policies and procedures laid down
by government for regulating, developing, and
controlling industrial undertakings in the
country.

Industrial Policy | Objectives
 Industrial policy statements have been
announced from 1948 onwards. A number of
objectives have been projected by the
Government of India while making industrial
policy declarations.
 Some of the important objectives can be
identified as follows:
1. Achieving a socialistic pattern of society and
preventing undue concentration of economic
power.
2. Achieving industrial development.
3. Reducing disparities in regional development.

Industrial Policy | Objectives
6. Providing opportunities for gainful
employment.
7. Achieving a self-sustained economy.
8. Achieving faster economic growth.
9. Alleviating poverty.
10. Protecting and developing a healthy small-
scale sector.
11. Updating technology and modernization of
industry.
12. Liberalization and globalization of economy.

Industrial Policy Resolution 1948 (6 April,
1948)
Industrial Policy Resolution (30 April, 1956)
Industrial Policy Feb 2, 1973
Industrial Policy Dec 23, 1977
Industrial Policy Statement of July, 1980
Industrial Policy, July 24, 1991
Industrial Policies from 1948
to1991

Industrial Policy Resolution
1948
 The Government of India announced its first
industrial policy resolution on 6 April,1948.
 The policy resolution laid stress on the role of
the state in the development of industry.
 The industrial activities were divided into four
broad areas:
1. Items undercentral government control –
Manufacture of arms and ammunition, The
production and control of atomic energy,
Ownership and management of railway
transport, etc.

1948
2. Items under the state government control –
Coal, Iron and Steel, Aircraft manufacture,
Shipbuilding, Manufacture of telephone,
telegraph and wireless apparatus, Mineral oils.
3. Items of basic importance (planned & regulated
by government) –
Automobiles and Tractors, Electric Engineering,
Other Heavy Machinery, Machine Tools, Heavy
Chemicals, Fertilizers and Pharmaceuticals,
Power, Cotton and Woollen Textiles, Cement,
Sugar, Paper and Newsprint, etc.

1948
4. Items forPrivate Sector–
The rest of the industrial field will be open to
private enterprise.
 It also emphasised on securing a continuous
increase in production and its equitable
distribution.
 Importance was given to small scale and
cottage industries.

(1956)
 Industrial Policy Resolution (30 April, 1956)
was also regarded as the “Economic
Constitution of India”.
 Major Objectives of Industrial Policy
Resolution (1956) are as follows:
1. Improving living standards and working
conditions for the mass of the people.
2. To reduce disparities in income and wealth.
3. To prevent private monopolies and
concentration of economic power.

Industrial Policy Resolution (30
April, 1956)
4. Development of transport facilities.
5. The State will progressively assume a
predominant and direct responsibility for setting
up new industrial undertakings.
6. Planned and rapid development.
7. Expand public sector.
8. Disparities in levels of development between
different regions should be progressively
reduced.

Salient features of industrial policy
1956
 The Industrial Policy Resolution - 1956 classified
industries into three categories. The first category
comprised 17 industries (included in Schedule A of the
Resolution) exclusively under the domain of the
Government. These included railways, air transpo rt,
arm s and am m unitio n, iro n and ste e l and atomic energy,
etc.
 The second category comprised 12 industries (included
in Schedule B of the Resolution ), which were envisaged
to be progressively State owned but private sector was
expected to supplement the efforts of the State. These
included fertilizers, machine tools, rubber, essential
drugs, etc.)
 The third category contained all the remaining industries

 Emphasis on heavy industries.
 Widened the scope of the public sector.
 To provide all sorts of assistance to small and
cottage industries for wider dispersal of the
industrial base and more equitable distribution
of income.
 Centered around self sufficiency in industrial
production
 Accelerate the rate of economic growth and to
speed up industrialization

 Reduce disparities in income and wealth, to
prevent private monopolies and concentration
of economic power in different fields in the
hands of small numbers of individuals.
 The Government of India stressed the role of
cottage and small scale industries in the
development of the national economy.

 In order that industrialization may benefit the
economy of the country as a whole, it is
important that disparities in levels of
development between different regions should
be progressively reduced.
 Proper managerial and technical cadres in the
public services are established.
 Proper amenities and incentives should be
provided for all those engaged in industry.

 The Industrial Policy statement of 1973, inter
alia, identified high-priority industries where
investment from large industrial houses and
foreign companies would be permitted.
 The Industrial Policy Statement of 1977 laid
emphasis on decentralisation and on the role
of small-scale, tiny and cottage industries

Industrial Policy 1977
 The Industrial Policy Resolution of 1956 still
remained valid, but certain structural
distortions had crept in the system. The new
policies were hence directed towards
removing these distortions.
 It provided for a closer interaction between the
agricultural and industrial sectors.
 Accorded the highest priority to the generation
and transmission of power.
 Special legislation to protect cottage and
household industries was also proposed to be

 The list of industries exclusively reserved for
the small scale sector was expanded from 180
items to more than 500 items.
 Industrial Policy Dec 23, 1977 highlighted on
producing inputs needed by a large number of
smaller units and making adequate marketing
arrangements.

 Within the sm all scale se cto r spe cial atte ntio n
will be g ive n to units in the tiny se cto r nam e ly
tho se with inve stm e nt in m achine ry and
e q uipm e nt upto Rs O ne lakh and situate d in
to wns with a po pulatio n o f le ss than 50 , 0 0 0
acco rding to 1 9 7 1 ce nsus fig ure s, and
villag e s.
 Sche m e s will be drawn up fo r m aking
available assistance e spe cially to tiny units in
the sm all scale se cto r as we ll as to co ttag e
and ho use ho ld industrie s.

 A District Industries Centre would be set up to
provide, under a single roof, all the services and
support required by small and village
entrepreneurs.
 In order to secure balanced regional
development
it was decided that industrial licences would
not be
issued to new industrial units for location
within

 In order to provide effective financial support
for promotion of small village and cottage
industries, the Industrial Development Bank of
India has taken steps to set up a separate
wing to deal exclusively with the credit
requirements of this sector.

In future, expansion of Large House will be
guided by the following principles:-
 The expansion of existing undertakings and
establishments of new undertakings will
continue to be subject to the provisions of the
Monopolies and Restrictive Trade Practices
Act.
 Except in the case of industries eligible for
automatic growth of capacity, the expansion of
existing undertakings into new lines and
establishments of new undertakings by large

 Equity participation together with an active
association of workers in decision making from
the shop floor level to the Broad level will
provide the necessary environment for a
meaningful participation by workers in the
management of industry.

Industrial Policy Statement of July,
1980
 Industrial Policy Statement of July, 1980 was
based on Industrial Policy Resolution (30 April,
1956).
1. The major objectives are as follows:
1. Optimum utilisation of installed capacity.
2. Maximum production and achieving higher
productivity.
3. Higher employment generation.
4. Promotion of export-oriented industries.

Industrial Policy Statement of July,
1980
5. Consumer protection against high prices and
bad quality.
6. Correction of regional imbalances.
7. Promoting competition in the domestic market
8. Technological up gradation and modernization.
9. Strengthening of the agricultural base through
agro based industries and promotion of
optimum inter-sectoral relationship.

 Government can build a modern, democratic,
socialist, prosperous and forward-
looking India. if India grows as part of the
world economy and not in isolation.
 While Government will continue to follow the
policy of self-reliance, there would be greater
emphasis placed on building up our ability to
pay for imports through our own foreign
exchange earnings.

 Government is also committed to development
and utilisation of indigenous capabilities in
technology and manufacturing as well as its up
gradation to world standards.
 Government will continue to pursue a sound
policy framework encompassing encouragement
of entrepreneurship, development of indigenous
technology through investment in research and
development, bringing in new technology,
dismantling of the regulatory system and
increasing competitiveness for the benefit of the
common man.

 The spread of industrialisation to backward areas
of the country will be actively promoted through
appropriate incentives, institutions and
infrastructure investments.
 Foreign investment and technology collaboration
will be welcomed to obtain higher technology, to
increase exports and to expand the production
base.
 Labour will be made an equal partner in progress
and prosperity.
 Workers’ participation in management will be
promoted.

 Need to preserve the environment and ensure the
efficient use of available resources.
 Maintain sustained growth in productivity and
gainful employment and attain international
competitiveness.
 In pursuit of the above objectives, Government
have decided to take a series of initiatives in
respect of the policies relating to the following
areas:
1. Industrial Licensing.
2. Foreign Investment.
3. Foreign Technology Agreements.
4. Public Sector Policy.
5. MRTP Act.

NATIONAL MANUFACTURING
POLICY
 Manufacturing to contribute at least 25% of the
National GDP by 2022.
 Increase the rate of job creation in manufacturing to
create 100 million additional jobs by 2022
 Creation of appropriate skill sets among the rural
migrant and urban poor to make growth inclusive.
 Increase technological depth in manufacturing
 Enhance global competitiveness of Indian
manufacturing through appropriate policy support.
 Ensure sustainability of growth, particularly with
regard to the environment including energy

Highlights
 i. Rationalization and simplification of business
regulations
 ii. Simple and expeditious exit mechanism for
closure of sick units while protecting labour
interests
 iii. Financial and institutional mechanisms for
technology development
 iv. Industrial training and skill up gradation
measures
 v. Incentives for SMEs


 Vi. Manufacturing management will be given a
focused attention as it will facilitate
improvement of productivity, quality and
competitiveness of manufacturing enterprise.
 vii. Clustering and aggregation : National
Investment and Manufacturing Zones (NIMZs)
 viii. Greening of manufacturing operations
 ix. To ensure access for Indian companies to
foreign technologies as well as development
of advanced indigenous technologies
 X. Trade Policy

Public sectorpolicy and disinvestment
The Government announced on 24th July 1991
the ‘Statement on Industrial Policy’ which
inter-alia included Statement on Public Sector
Policy.
 to fo cus the public se cto r o n strate g ic, hig h-
te ch and e sse ntialinfrastructure .
 Public e nte rprise s which are chro nically sick
and which are unlike ly to be turne d aro und
will, fo r the fo rm ulatio n o f re vival/re habilitatio n
sche m e s, be re fe rre d to the Bo ard fo r
Industrialand FinancialRe co nstructio n (BIFR)

 Bo ards o f public se cto r co m panie s wo uld be
m ade m o re pro fe ssio naland g ive n g re ate r
po we rs.

Disinvestment
 “Investment refers to the conversion of money
or cash into securities or any other claims on
money. As follows, disinvestment involves the
conversion of money claims or securities into
money or cash.”
 Disinvestment can also be defined as the
action of an organization (or government)
selling or liquidating an asset or subsidiary. It
is also referred to as ‘divestment’ or
‘divestiture

 The new economic policy initiated in July 1991
clearly indicated that PSUs had shown a very
negative rate of return on capital employed.
Problems of public sectorenterprises:
 Under–utilisation of capacity
 Problems related to planning and construction
of projects
 Problems of labour and management
 Lack of autonomy

The following main objectives of disinvestment
were outlined:
 To reduce the financial burden on the
Government
 To improve public finances
 To introduce competition and market discipline
 To fund growth
 To encourage wider share of ownership

Importance of Disinvestment
Importance of disinvestment lies in utilization of
funds for:
 Financing the increasing fiscal deficit
 Financing large-scale infrastructure
development
 For investing in the economy to encourage
spending
 For retiring Government debt- Almost 40-45%
of the Centre’s revenue receipts go towards
repaying public debt/interest


Approaches to Disinvestment
 Minority disinvestment
 Majority disinvestment
 Complete Privatization

 The Govt. of India constituted the National
Investment Fund (NIF) on 3rd November,
2005, into which the proceeds from
disinvestment of Central Public Sector
Enterprises were to be channelized. The
corpus of the fund was to be of permanent
nature and the same was to be professionally
managed in order to provide sustainable
returns to the Govt.

North East Industrial and Investment
Promotion Policy (NEIIPP), 2007
 Coverage: The North East Industrial Policy
(NEIP) , covers the States of Arunachal
Pradesh , Assam , Manipur , Meghalaya ,
Mizoram , Nagaland Tripura and Sikkim.
 Duration: All new units as well as existing
units which go in for substantial expansion and
commence commercial production within the
10 year period from the date of notification of
NEIIPP, 2007 will be eligible for incentives for
a period of ten years from the date of
commencement of commercial production.

 Excise Duty Exemption: 100% Excise Duty
exemption will be continued , on finished
products made in the North Eastern Region
 Income Tax Exemption: 100% Income Tax
exemption
 Capital Investment Subsidy from the 1 st April,
20 0 7 and re m ain in fo rce upto and inclusive of
31 . 3. 20 1 7 and will be enhanced from 15% of
the investment in plant and machinery to 30%

 Interest Subsidy:
Interest Subsidy will be made available @ 3%
on working capital loan
 Comprehensive Insurance:
New industrial units as well as the existing
units on their substantial expansion will be
eligible for reimbursement of 100% insurance
premium
Negative List :
 tobacco and manufactured tobacco

 A transport subsidy will be given to the
industrial units located in the areas in respect
of raw materials which are brought into and
finished goods which are taken out of such
areas

Incentives forService/otherSectorIndustries:
 Hotels (not below Two Star category),
adventure and leisure sports including
ropeways
 (ii) Medical and health services in the nature of
nursing homes and old-age homes
 (iii) Vocational training institutes such as
institutes for hotel management, catering,
entrepreneurship development, nursing,
fashion, design and industrial training

Incentives forBio-technology industry
 The biotechnology industry will be eligible for
benefits under NEIIPP, 2007 as applicable to
other industries
Incentives forPowerGenerating Industries:
 Power Generating plants will continue to get
incentives
Establishment of a monitoring mechanism for
implementation of the NEIIPP, 2007

Nodal agency
The North East Industrial Development Finance
Corporation will continue to act as the nodal
agency for disbursal of subsidies

EXIM policy / Foreign trade
policy
Objectives
 To facilitate sustained growth in exports from
India.
 To stimulate sustained economic growth by
providing access to essential raw materials,
intermediates, components and capital
goods required for augmenting production and
providing services.

 To enhance the technological strength and
efficiency of Industry, Agriculture and
services, thereby improving their competitive
strength while generating new employment
opportunities
 To encourage the attainment of internationally
accepted standards of quality.

Special focus initiatives
 Market diversification
 Technological upgradation
 Agriculture and village industry, Handloom and
handicraft, Gems and jewellery, Leather and
footwear, Electronics and IT Hardware
Manufacturing Industries
 Green products and technologies
 Incentives for Exports from the North Eastern
Region
 EXPORT PROMOTION CAPITAL GOODS
(EPCG) SCHEME

 Board of Trade
 Assistance to States for developing Export
infrastructure and other allied activities
 Market Access Initiative and Market
Development Assistance
 Towns of export excellence
 India Brand Equity Foundation
 Test houses
 Quality complaints

Investor protection
 Investor protection includes the various
measures taken by Government and SEBI to
protect the investors from malpractices of
companies, brokers, etc. Government and
SEBI are working as watchdog through rules,
regulations and control mechanisms.

Need of Investor Protection
 Uncertainty of Returns
 Importance of investment
 Protection from insider trading issues

CORPORATE GOVERNANCE
 Corporate governance can be defined as a set
of systems and processes which ensure that a
company is managed to the best interests of all
stakeholders.
 Corporate governance is a system by which the
companies are run, and the means by which
they are responsive to their shareholders,
employees and society.

Principles of Corporate Governance
 Fairness
 Transparency and Disclosure
 Accountability

GOOD CORPORATE GOVERNANCE
 Obligation towards shareholders
 Reasonable dividend
 Soundness
 Information
 Protection of assets
Obligation towards Employees
 Fair wages
 Good working conditions
 Adequate benefits
 Co-operation
 Opportunity for growth

 Obligation towards customers
 Need satisfaction
 Quality products and services
 Right information
 Fair trade practices
Obligation towards Government
 Abide by the laws
 Pay taxes
 Avoid corrupting Govt. employees

 Obligation towards society
 Socio-economic objectives
 Employment opportunities
 Efficient use of resources
 Welfare activities
 Business ethics.

CORPORATE GOVERNANCE
AND BoD
 It is the responsibility of the Board to ensure that
management works in the best interests of the
company and the shareholders to enhance
corporate economic value

SEBI
 SEBI was established by The Government of
India on 12 April 1988 and given statutory
powers in 1992 with SEBI Act 1992 being
passed by the Indian Parliament.

The Primary function of Securities and
Exchange Board of India under the SEBI Act,
1992 is the protection of the investors’ interest
and the healthy development of Indian
financial markets.
SEBI had issued guidelines for the protection
of the investors through the Securities and
Exchange Board of India (Disclosure and
Investor Protection) Guidelines, 2000.

INVESTORPROTECTION MEASURES BY
SEBI
 regulating the business in Stock Exchanges
 registering and regulating the working of
intermediaries like stock brokers
 prohibiting fraudulent and unfair trade
practices relating to securities markets
 prohibiting insider trading in securities
 regulating substantial acquisition of shares
and takeover of companies
 promoting investors’ education and training of
intermediaries of securities markets

 Carry out inspection/ audits of the SEs
 call for information from any bank / any
authority / corporation / agencies in respect of
any transaction in securities which is under
investigation or inquiry by SEBI
 Established code of ethics for directors

SEBI and Investor protection
 SEBI has a comprehensive grievance
processing mechanism
 SEBI issues guidelines to the companies and
stock exchanges
 SEBI publishes the names of the top twenty
defaulting companies
 SEBI has the power to recommend the suitable
legal action against the defaulters to the
Department of company Affairs and for
suspension of trading of their shares to various

WTO (The World Trade Organization) and Trade
liberalization
 “Its main function is to ensure that trade flows as
smoothly, predictably and freely as possible.”
 Created in 1995 by 120 nations to supersede
and extend the GATT.
 Now:
 160 member nations

GATT/WTO: Main Objective
To provide a legal framework for incorporating the
results of negotiations directed toward
“reciprocal and mutually advantageous
exchange of market access commitments on
a non-discriminatory basis.”
 Typically, such an outcome is obtained through
reductions of tariffs and other barriers to trade.

Principles of GATT/WTO
 Trade liberalization
 Non-discrimination
 Reciprocity
 Safeguards

GATT-Sponsored Trade Liberalization
– Negotiating Rounds: The First Seven –
Round Period Participants
 Geneva 1947 23
 Annecy 1949 13
 Torquay 1951 38
 Geneva 1956 26
 Dillon 1960-61 26
 Kennedy 1964-67 62
 Tokyo 1973-79 102

 123 participating countries.
 Most difficult—and most ambitious—among
all rounds of negotiation.
 Created the WTO in 1995.
 Ultimately, very successful.
Uruguay Round—the 8th
Round

 Manufactured goods’ further liberalization:
 Cap on developed countries’ average tariff: not higher
than 4%.
 Overall, tariffs reduced by more than 30%.
 Extended GATT scope to many new areas:
 Agriculture.
 Textiles.
 Services (banking, insurance, telecommunications,
transportation etc.): GATS.
 Intellectual property (copyrights, patents, trademarks):
TRIPS.
 Strengthened GATT dispute settlement
procedures.
Uruguay Round—Outcomes

TRIPS
 Agreement to provide enhanced protection
to intellectual property.
GATS
 Extension of GATT rules to services.

Doha round
 The Doha Development Round or Doha
Development Agenda (DDA) is the current
trade-negotiation round of the World Trade
Organization (WTO) which commenced
in November 2001 under then director-
general Mike Moore. Its objective is to
lower trade barriers around the world, and
thus facilitate increased global trade. Major
issues dealt are, such as agriculture,
industrial tariffs and non-tariff barriers,
services, and trade remedies.

Industrial Development under
different Plan Periods
First five yearplan (1951-56):
 The main thrust of the First Five-Year Plan
was on agricultural development. Therefore,
the emphasis was on increasing capacity of
the then existing industries rather than the
establishment of new industries. Cotton,
woollen and jute textiles, cement, paper,
newsprint, power-looms, medicine, paints,
sugar, vanaspaa (vegetable oil), chemical and
engineering goods, and transport equipments
showed some progress.

Second Five YearPlan (1956-
61):
 Great emphasis was laid on the establishment
of heavy industries during the Second Five-Year
Plan. The second industrial policy was
announced in 1956. The main thrust of industrial
development was on iron and steel, heavy
engineering and fertiliser industries. Moreover,
there was emphasis on the expansion of
existing steel plants, like Jamshedpur and
Bhadravati. Three new iron and steel plants
were located at Bhilai, Durgapur, and Raurkela.

Third five year plan (1961-66)
 The target growth rate was 5.6%, but the
actual growth rate was 2.4%.
 Due to miserable failure of the Third Plan the
government was forced to declare "plan
holidays" (from 1966–67, 1967–68, and 1968–
69). Three annual plans were drawn during
this intervening period. The main reasons for
plan holidays were the war, lack of resources,
and increase in inflation.

Fourth five year plan (1969-74)
 The growth rate of industrial production
declined from 6.8 per cent in 1969-70 to 3.7
per cent in 1970-71 but increased to 4.5 per
cent in 1971-72 and at about 5 per cent during
1972-73.
 The target growth rate was 5.6%, but the
actual growth rate was 3.3%.

Fifth five year plan (1974-79)
 Impressive and considerable advancement
has been made in the field of industry, though
its growth rate has not been uniform.
 There were many reasons for fluctuations as
early period was largely based on import
substitution and the development of the capital
market.

Sixth five year plan (1980-85)
 The Sixth Five-Year Plan was relatively
successful to the Indian economy. The target
growth rate was 5.2% and the actual growth
rate was 5.4%.[

Seventh five year plan (1985-
90)
 The plan laid stress on improving the
productivity level of industries by upgrading of
technology.
 The significant growth in industrial sector was
recorded i.e. 5.6 percent. Among the major
industry groups, were the annual growth rates
of textile products, basic metals, alloys and
metal products, electrical machinery and
appliances.

Eighth Five YearPlan (1992-1997)
 Modernization of industries was a major
highlight of the Eighth Plan. Under this plan,
the gradual opening of the Indian economy
was undertaken to correct the
burgeoning deficitand foreign debt. Meanwhile
India became a member of the World Trade
Organization on 1 January 1995. This plan
can be termed as, the Rao and Manmohan
model of economic development.
 During eighth plan, the percentage investment
in public sector was more on industries as
compared to agriculture.
 Private sector has been allocated more

Ninth five year plan (1997-
2002)
 The industrial growth in the country was 4.5%
which was higher than that of the target of 3%
 The service industry had a growth rate of
7.8%.
 An average annual growth rate of 6.7% was
reached.
 The main emphasis during this plan was on
cement, coal, crude oil, consumer goods,
electricity, infrastructures, refinery, and quality
steel products

Tenth five year plan(2002-2007)
 Target growth: 8.1% - growth achieved: 7.7%
 (i) the modernisation, technology upgrading,
reducing transaction costs, and increased
export;
(ii) to enhance export and to increase global
competitiveness; and (iii) to achieve balanced
regional development.

Eleventh plan (2007-2012)
 Rapid and inclusive growth.(Poverty reduction)
 Emphasis on social sector and delivery of
service therein.
 Empowerment through education and skill
development.
 Reduction of gender inequality.
 Environmental sustainability.

Twelfth plan (2012-2017)
 Target growth rate is 8%
 Poverty reduction
 Reduction in inflation

Foreign investment policy in
India
Economic reforms embarked upon by the
Government of India since mid-1991
FDI policy liberalized progressively, through:
permitting FDI in more industries under the
automatic route
more sectors opened up for foreign
investment
For India to maintain its momentum of GDP
growth, it is vital to ensure that the robustness
of its FDI inflows is also maintained.
India rated as one of the most attractive

Investing in India – Entry Routes
Automatic Route
Prior Permission
(FIPB)
Investing in India
General rule
No prior permission
required
Only information to the
Reserve Bank of India
within 30 days of inflow/
Issue of shares
By exception
Prior Government
Approval needed
Decision generally
Within 4-6 weeks
Investing in India – Entry Routes

Manufacturing
• 100% FDI permitted in all activities under automatic route
except:
– Cigar and cigarettes of tobacco - FIPB
– Products reserved for Small Scale Sector
• FDI less than 26% under automatic route
• FDI beyond 26% - FIPB subject to export obligation
– Defence products
• FDI up to 26% - FIPB
FDI Policy for Industry SectorFDI Policy for Industry Sector

FDI Policy for Industry SectoFDI Policy for Industry Sector….
Mining
• Coal – FDI up to 100%
• Diamond, Gold, Silver , Minerals – up to 100% under
automatic route
Electricity
• FDI up to 100% under automatic route in Generation,
Transmission, Distribution and Power Trading

• Shipping and Ports -100% FDI under automatic
route
• Industrial Parks- 100% FDI under automatic route
• Hospitals- 100% FDI under automatic route
• Hotels & Tourism (include restaurants, beach
resorts, and other tourist complexes providing
accommodation and/or catering and food facilities
to tourists. Tourism related industry include travel
agencies, tour operating agencies and tourist
transport operating agencies)- 100% FDI under
automatic route

 Private sector banks - Automatic
• Publishing scientific magazines - FIPB
• Courier services - FIPB
Upto 74%
Upto 100%
• Retail allowed up to 51% with
FIPB approval

Foreign collaborations
 “Foreign collaboration is an alliance
incorporated to carry on the agreed task
collectively with the participation (role) of
resident and non-resident entities.”
 Alliance is a union or association formed for
mutual benefit of parties.

Types of collaboration
 Technical collaboration
 Financial collboration
 Marketing collaboration
 Consultancy collaboration

 Biocon - Pfizer
 Adidas – Sennheiser
 Microsoft - Toyota
 Coco-cola with Eco plastics
 Mercedes Benz and facebook
 Harvard and MIT

 Foreign collaboration is very useful in meeting
out the deficiencies of the resources and in
getting advanced technology with competitive
price. Foreign collaboration in Indian market is
increasing at a great speed due to the effects
of liberalization; privatisation and globalisation.

Be unit 2 -comprehensive

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