Rajasthan Board RBSE Class 11 Economics Notes Chapter 18 Industrial Development
→ The indicator of development of a country has been accepted by economists as the increase of contribution of industrial sector in national production.
→ Indian economy is an agricultural economy.
→ India remained an exporter of raw material during the British rule.
→ Britishers established barely a few industries in India to fulfil their self-interest.
→ Before the arrival of the Britishers, India was very popular across the world for the textile industry, jute industry, sugar industry, colored-pottery industry, etc.
→ Industrial development is the basis of any economy.
Following are the benefits of industrial development:
- Rapid growth in income.
- Contribution in employment.
- Development of infrastructure.
- Utilization of resources.
- Development of agriculture.
- Balanced development.
- Self-sustained growth.
- National Security.
→ The share of industrial sector in gross domestic product has increased from 16.6 percent in 1950-51 to 26.2 percent in 2013-14.
Problems of industrial development are as follows:
- Gaps between the fixed targets and their actual achievements.
- Under-utilization of industrial capacity.
- Performance of public sector industries.
- Industrial sickness.
- Infrastructural constraints.
- Emerging problems of Industrial development.
Steps taken in present time to encourage Industrial development:
- Ease in doing business.
- Make in India.
- E-biz project.
- Skill- Development.
- Making environmental and forest-related clearances effective.
- Labour sector reforms.
→ The first Industrial Policy of India was announced by the then minister Syama Prasad Mukheijee on April 6,1948.
→ This policy divided industries into four categories:
a. Industries on which government control was retained. Three industries were kept under this category
- Defence
- Atomic power
- Railways.
b. Six basic industries were kept in mixed category and the government had the responsibility of setting them up. Industries included in them were coal, iron & steel, aircraft manufacturing, ship building, telephone-telegraph and mineral oil.
c. 18 industries were kept under the third category, which were to be operated by industrialists under the regulations and control of the government.
d. Provision was made for the remaining industries to be established and developed by the public sector.
- Industrial Policy 1956 was framed’keeping in mind the socialist objective of constitution of India.
- This policy is also called “India’s Economic constitution” or “Magna Carta of Industrial Policy”.
→ All the industries have been divided into 3 categories under this policy:
a. Monopolistic sector industries of Government of India, were kept under Schedule ‘A’ in the industrial policy proposal.
b. Industries having the co-existence of public sector and private sector were kept in this category, which were kept in Schedule ‘B ’ in industrial policy proposal. 12 industries were kept under it, which included – chemicals, fertilizers, road transport etc.
c. The remaining industries were left for the private sector whose establishment and development would be done by the private sector. The government would not be able to participate in them directly, but if needed, it could establish ancillary industries in this sector.
→ Under the industrial licensing policy, a list of major industries was issued. This policy provided a reservation policy for small scale industries.
→ In the Industrial Policy of 1977, the decentralization of industries was emphasized upon.
→ For this purpose, district industrial centres were set up. This policy defined small-scale and cottage industries for the first time and the concept of very small scale industries was also given.
→ Industrial Policy of 1980 laid emphasis on the establishment of industries in rural areas.
→ In 1991, the new industrial policy was adopted.
→ The growing crisis of 1990-91 took India at the doors of World Bank and International Monetary Fund.
→ Under this, we had to adopt the policies of liberalization, privatization, and globalization in place of the 50-year-old policies of license, permit, quota.
→ In order to establish harmony between contemporary national and international scenario, the new economic policy was announced on July 24,1991.
→ Under the new industrial policy, except for 18 industries, all other industries were exempted from licensing. At present, only five industries require licensing. These industries are –
- Electronic related to aerospace and defence
- Gunpowder industrial explosives and detonator fuses
- Hazardous chemicals
- Tobacco, cigarettes, and other related products
- Alcoholic beverages.
→ The number of industries in public sector was 17 in the industrial policy of 1956, which was reduced to 5 under the new industrial policy. These industries are- atomic energy, atomic energy production and utilization control, the listed sector of minerals and rail transport in the directive list of 1995 (private investment was allowed under railway-based structure).
→ Under the Monopolistic and Restrictive Trade Practices, government clearance was needed to establish new units, merger, expansion etc.
→ MRTP Act was abolished in 2002 and the Competition Act was formed. Now, it is not required to obtain prior permission of the government for all works.
→ Industries were categorized on the basis of investment under the new industrial policy, and industries which required high investments were listed and 51 percent foreign investment was permitted without governmental clearance in them.
→ For industries in service sector, the limit for foreign investment was raised from 51 percent to 74 percent and then 100 percent.
→ In order to empower small scale industries, an independent small scale industrial policy was announced on August 6,1991.
→ The rate of industrial development increased after adopting the new industrial policy. In the decade prior to economic reforms (1980-1990), this was 7.8 percent, which increased to 13.0 percent in 1995-96. It remained at to 11.5 percent in 2006-2007.
→ The foreign capital investment increased as a result of the new industrial policy. Both, Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) increased.
→ According to UNCTAD investment report of 2010, this was 34.6 billion dollars in 2009.
→ Due to excess of foreign exchanges reserve, India was included in the list of creditor nations by the IMF.
→ There were many failures of the new industrial policy-like- unemployment, not arranging enough funds, Indian industries could not compete with foreign industries, small scale industries could not compete with foreign industries and monopolistic tendencies were encouraged.
→ Small scale industries were firstly defined in the Industrial Policy Proposal of 1977, on the basis of their investment limit.
→ Those units were included in small scale industries in which the investment on plant and machinery was less than 10 lakh. The investment for Ancillary industrial units was kept at a maximum upper limit of 15 lakh and the maximum investment limit for Tiny units was 1 lakh.
→ These were redefined in 1991 and the investment for small scale units was increased to 60 lakh rupees, ancillary units to 75 lakh rupees and for tiny units to 25 lakh rupees.
→ After the enactment of Micro, Small and Medium Enterprises Development Regulation (MSME) in 2006, small scale and cottage industries were redefined.
→ The MSME related to manufacturing and service sector both were defined separately— a. Manufacturing Sector Enterprises—
- The maximum investment for micro-units be kept at 25 lakh rupees.
- Units, in which investment on plant and machinery was more than 25 lakh and less than 5 crore rupees, were included under small scale units.
- The maximum investment limit for medium-scale industries was fixed at 10 crore rupees, while minimum investment was kept at 5 crore rupees.
b. Service Sector Enterprises
- For micro units – The maximum limit was fixed at 10 lakh rupees.
- For small-scale units – The maximum investment limit was 2 crore rupees, while the minimum investment was kept at 10 lakh rupees.
- For medium scale enterprises – The investment limit was more than 2 crore rupees, but less than 5 crore rupees.
→ Small scale enterprise units generally include- industrial units of small scale sector, Ancillary industrial units, Tiny units, small scale service enterprises, craftsmanship, rural and cottage industries, and women-centric industries etc.
→ According to census of India 2011,68.8 per cent of India’s total population lives in rural areas even today.
→ Small-scale and cottage industries have an important contribution in Indian economy, which can be understood on the basis of following points-
- Share in industrial production.
- Expansion of small scale sector.
- Contribution in employment.
- Efficiency of small scale industries.
- Decentralization of national income.
- Contribution in exports.
- Regional dispersal of industries.
- Lessening the industrial disputes.
- Utilization of local resources.
- Conservation of traditional and artistic goods.
- Less dependence on imports.
Small scale sector has to face the following problems-
- Problem of raw material.
- Lack of capital.
- Lack of modem technology.
- Problem of marketing and standardization.
- Problem of sickness.
- Lack of infrastructure.
- Lack of availability of data.
- Delay in Payment.
- Lack of economic reforms.
→ In order to identify markets for minor products and to procure orders, the government established National Small Industries Corporation (NSIC) in 1955.
→Two institutes provide data related to small and micro scale industries-
- Small industries Development Organization,
- Central Statistical Organization.
→ In order to encourage development of micro, small and medium industries, the government announced a new policy in August, 1991.
→ Under this policy, limit for Tiny sector has been raised from 2 lakh rupees to 5 lakh rupees. (This was increased to 25 lakh rupees in 1997).
→ According to the new policy, other industrial units were also allowed to invest upto 24 percent of equity in small scale units.
→ The limit for investment in small scale industries was increased to 5 crore rupees in 2006 from 1 crore rupees.
→ Credit linked capital subsidy scheme was launched for technology enhancement.
→ To accelerate the industrial development and transform India into a “manufacturing hub”, the ‘Make in India’ programme was inaugurated by Indian Prime Minister Mr. Narendra Modi on September 25,2014.
→ According to the Reserve Bank of India, “that unit will be termed as a sick unit only when the unit has suffered cash loss in an year, and has clear indications of facing the same condition in the upcoming 2 years, so that its financial structure has disbalanced significantly.”
Industrial Development Class 11 RBSE Notes Important Terms
1. Developing economy- A developing economy is one where people have a lower standard of living and lesser-developed industries are present there as compared to than other countries. Example- India, China, Pakistan, Bangladesh etc.
2. Developed economy- A developed economy is typically characteristic of a developed country with a relatively high level of economic growth and security. Like- America, Japan etc.
3. Industrialization- The development of industries in a country or region on a wide scale.
4. Infrastructure- The basic physical and organizational structure and facilities (e.g. buildings, roads, power supplies) needed for the operation of a society or enterprise. Like- Buildings, roads, light arrangement.
5. Public sector- The sector of an economy that is controlled by the state. Like- public parks, library, museum, etc. which can be used by everyone.
6. Private sector- That sector of the national economy that is not under the direct control of the state. Example- TCS, Infosys, ICICI Limited.
7. Industrial sickness- An industrial company which has, at the end of any financial year, accumulated losses equal to, or exceeding, its entire net worth, and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year.
8. Consumer goods- Goods bought and used by consumers, rather than by manufacturers for producing other goods. Example- milk, curd, car, TV etc.
9. Make in India- The Make in India initiative was launched by Prime Minister in September 2014 as part of a wider set of nation-building initiatives. It has been devised to transform India into a global design and manufacturing hub.
10. E-Biz Project—The project which established the portal of G2B (Government to Business). This would act as a ‘one-stop-shop’ to provide services to the investors.
11. Skill Development- The plan formed to fix associated crieteria of skill training in various central and state departments and to promote skill development and entrepreneurial activities.
12. Fiscal deficit- A fiscal deficit occurs when a government’s total expenditures exceed the revenue that it generates, excluding money from borrowings.
13. Inflation- Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time and devaluation of currency.
14. Balance of payment- The balance of payments is the record of all international financial transactions made by a country with other countries within an year.
15. Liberalization- Liberalization is a general term for any process whereby a state lifts or lessens restrictions on some private individual activities.
16. Privatization- Privatization is the purchase of all outstanding shares of a publicly-traded company by private investors, or the sale of a state-owned enterprise to private investors.
17. Globalization- The process by which businesses or other organizations of a country develop international influence or start operating on an international scale.
18. Foreign Direct Investment- Foreign direct investment (FDI) is an investment made by a company or individual of one country in the business interests in another country. Like- drinking water, road, light etc.
19. Foreign Institutional Investment- A foreign institutional investor (FII) is an investor or investment fund registered in a country outside of the one in which it is investing. Example- Investment in banking sector, insurance, share market etc.
20. Small scale industries- The industries where investment is less. Like- making parts of sewing machine, making parts of bicycle etc.
.21. Cottage industry- A business or manufacturing activity carried on in people’s homes by family members. Example- weaving, textile, handicraft goods, etc.
22. Dumping- It is the export by a country or company of a product at a price that is lower in the foreign importing market than the price charged in the exporter’s domestic market.
23. Credit Linked Capital Subsidy Scheme- The revised scheme aims at facilitating technology up-gradation by providing 15% upfront capital subsidy to MSMEs for loans up to 1 crore rupees.