Brief Contents

1. Indian Industry in the Pre-Independence Period 1-11

2. Post-Independence Industrial Policy: A General Review 12-31

3. Industrial Policy in India's Five Year Plans (I to XII Plan) 32-58

4. Legal and Institutional Framework for Industrialisation 59-77

5. Public Sector Enterprises 78-95

6. Micro, Small, and Medium Enterprises (MSMEs): 96-139General Profiling

7. Micro, Small, and Medium Enterprises (MSMEs): 140-170Sectoral Profiling

8. Industrial Finance and Development Finance Institutions (DFIs) 171-187

9. Foreign Direct Investment (FDI) for Industrial Development 188-200

10. Infrastructure for Industrial Development 201 -218

11. Tax Incentives for Industrialisation 219-226

12. Industrial Sickness and Labour 227-230

13. Industrial Relations and Labour Laws 231 -252

14. Industrial Development and Environment 253-277

15. Indian Industry and World Trade Organization (WTO) 278-294

Appendix 1: Industrial Policy Resolution, 1956 295-304Appendix 2: Statement on Industrial Policy (July 24,1991) 305-317Appendix 3: Year-wise Review of Industrial Developments in 318-390

India: 1947-48 to 2011-12

viii Industrial Policy and Economic Development in India: 1947-2012

Appendix 4: Edited Extracts from India's Five Year Plans on 391-528Industry (I to XII Plan)

Appendix 5: Glossary of Industrial Terms 529-564

Bibliography 565-574

Index . 575-586

Detailed Contents

About the Book vAbout the Author viBrief Contents vii-viiiDetailed Contents ix-xxiPreface xxiUxlAbbreviations/Acronyms xli-xlii

1. Indian Industry in the Pre-1 ndependence Period 1-111.1 Indian Economy at the Advent of British Rule

1.1.1 Self-sufficient Village Economy1.1.2 Well-knit Urban Economy

1.2 Consequences of British Rule1.2.1 Commercialisation of Agriculture1.2.2 Introduction of Feudal Land System1.2.3 Decline of Handicrafts1.2.4 Occurrence of Famines and Scarcities1.2.5 Unbalanced Occupational Structure

1.3 Modern Factory System1.4 Introduction of Railways1.5 Other Developments1.6 Critical Appraisal

2. Post-Independence Industrial Policy: A General Review 12-312.1 Industrial Policy Resolution, 19482.2lndustrial Policy Resolution, 1956

2.2.1 Categorisation of Industries2.2.2 Other Features

2.3 Devaluation of the Rupee and Industrial Liberalization, 19662.4 Industrial Licensing Policy Inquiry Committee (ILPIC), 19692.5 Secretariat for Industrial Approvals (SIA), 19732.6 Industrial Policy Statements 1973,1977 and 19802.7 Industrial Policy, 1950-80: A Critique

2.7.1 Expansion of Public Sector2.7.2 Regulation and Controls of Private Sector2.7.3 Absence of Internal Competition2.7.4 Absence of Foreign Competition

x Industrial Policy and Economic Development in India: 1947-2012

2.8 Disillusionment and Rethinking2.9 Pressure for Industrial Liberalisation

2.9.1 Internal Factors2.9.2 External Factors

2.10 New Economic Policy and Industrial Liberalisation, 19852.11 Industrial Policy Statement, 1991: The Great U-turn2.12 Liberalization of the Locational Policy2.13 National Manufacturing Policy (NMP), 2011

2.13.1 National Investment and ManufacturingZones (NIMZs)

2.14 Eleventh Five Year Plan (2007-12) on Industrial Policy2.15 Share of Industry in Gross Domestic Product (GDP)2.16 Industrial Progress of India2.17 Corporate Accountability

3. Industrial Policy in India's Five Year Plans (I to XII Plan) 32-583.1 First Five Year Plan: 1951-52 to 1955-563.2 Second Five Year Plan: 1956-57 to 1960-613.3 Third Five Year Plan: 1961-62 to 1965-663.4 Annual Plans

3.4.1 Annual Plan: 1966-673.4.2 Annual Plan: 1967-683.4.3 Annual Plan: 1968-69

3.5 Fourth Five Year Plan: 1969-70 to 1973-743.6 Fifth Five Year Plan: 1974-75 to 1978-793.7 Sixth Five Year Plan: 1980-81 to 1984-853.8 Seventh Five Year Plan: 1985-86 to 1989-903.9 Eighth Five Year Plan: 1992-93 to 1996-973.10 Ninth Five Year Plan: 1997-98 to 2001-023.11 Tenth Five Year Plan: 2002-03 to 2006-073.12 Eleventh Five Year Plan: 2007-08 to 2011-123.13 Twelfth Five Year Plan: 2012-13 to 2016-17

4. Legal and Institutional Framework for Industrialisation 59-774.1 Constitutional Provisions4.2 Select Legislations Regulating Industrial Activities

4.2.1 Industrial (Development and Regulation) Act, 19514.2.2 Companies Act, 1956

Contents xi

4.2.3 Securities and Exchange Board of India (SEBI) Act, 19924.2.4 Depositories Act, 19964.2.5 Securities Contracts (Regulation) Act, (SCRA) 19564.2.6 Banking Regulation Act, 19494.2.7 Insurance Regulatory and Development

Authority (IRDA) Act, 19994.2.8 Monopolies and Restrictive Trade Practices

(MRTP) Act, 19694.2.9 Competition Act, 20024.2.10 Consumer Protection Act, 19864.2.11 Foreign Exchange Management Act (FEMA), 1999

4.3 Competition Policy4.3.1 Positive Effects of Competition4.3.2 Economic Reforms and Competition4.3.3 Eleventh Five Year Plan (2007-12) on Competition

4.4 Consumer Protection in India4.4.1 Need for Consumer Protection4.4.2 United Nations and Consumer Protection4.4.3 Role of Standards4.4.4 Quality Council of India

4.5 Department of Industrial Policy and Promotion (DIPP)4.5.1 Functions4.5.2 Key Focus Areas

4.6 Select Institutions for Industrial Development4.6.1 National Productivity Council (NPC)4.6.2 Quality Council of India (QCI)4.6.3 National Institute of Design (NID)4.6.4 Central Manufacturing Technology

Institute (CMTI), Bangalore4.6.5 National Council for Cement and Building

Materials (NCCBM)4.6.6 Indian Rubber Manufacturers Research

Association (IRMRA)4.6.7 Central Pulp and Paper Research Institute,

(CPPRI), Saharanpur4.7 Corporate Governance in India

4.7.1 Meaning of Corporate Governance4.7.2 Models of Corporate Governance4.7.3 History of Corporate Governance in India

xii Industrial Policy and Economic Development in India: 1947-2012

4.7.4 Studies on Corporate Governance4.7.5 Measures Needed to Strengthen Corporate Governance

5. Public Sector Enterprises 78-955.1 Department of Public Enterprises (DPEs)5.2 Objectives of Public Sector Enterprises

5.2.1 Development of Infrastructure5.2.2 Balanced Regional Development5.2.3 Employment Generation5.2.4 Promotion of Competitive Conditions5.2.5 Check on Concentration of Economic Power

5.3 Organisation of Public Sector5.3.1 Departmental Undertakings5.3.2 Government Companies^5.3.3 Public Corporations5.3.4 Holding Companies

5.4 Poor Performance and Rethinking5.5 Industrial Policy Statement, 1991 on Public Sector5.6 Public Sector Disinvestment Commission

5.6.1 Classification of Industry Groups5.6.2 Objectives and Strategy5.6.3 Loss-making PSUs5.6.4 Profit-making PSUs5.6.5 Criteria for Disinvestment5.6.6 Use of Disinvestment Proceeds5.6.7 National Investment Fund

5.7 Disinvestment/Privatisation in Action5.8 Supreme Court Judgement, September 16,20035.9 Public Sector at the State Level5.10 Future of Public Sector

6. Micro, Small, and Medium Enterprises (MSMEs): 96-139General Profiling

6.1 Micro, Small and Medium Enterprises Development(MSMED) Act, 20066.1.1 Background6.1.2 Classification and Definitions of MSMEs6.1.3 Main Provisions of the MSMED Act, 2006

Contents xiii

6.1.4 Implementation of MSMED Act, 20066.1.5 National Board for Micro, Small and Medium

Enterprises (NBMSMEs) .6.2 Ministry of Micro, Small and Medium Enterprises

(MoMSMEs)6.3 Advantages of Micro, Small and Medium Enterprises

(MSMEs)6.3.1 High Employment Potential6.3.2 Widely Dispersed Entrepreneurial Base6.3.3 Relatively Low Capital Investment6.3.4 Regional Balanced Development6.3.5 Export Potential

6.4 Social Face of MSMLi6.5 Factors Determining Performance of MSMEs6.6 National Level Organisations for MSMEs

6.6.1 National Small Industries Corporation (NSIC)6.6.2 National Entrepreneurship Development Institutes6.6.3 Khadi and Village Industries Commission (KVIC)6.6.4 Mahatma Gandhi Institute for Rural Industrialisation

(MGIRI)6.6.5 Coir Board

6.7 Other Development Institutes for MSMEs6.7.1 MSME Development Institutes (MSME-DIs)6.7.2 MSME Tool Rooms (MSME-TRs)6.7.3 MSME Technology Development Centres

(MSME-TDCs)6.7.4 MSME Testing Centres (MSME-TCs)6.7.5 MSME Testing Stations (MSME-TSs)6.7.6 MSME Technology Development Centres (Central

Footwear Training Institutes) (MSME-TDCs-CFTI)6.8 Problems of MSMEs

6.8.1 Inadequate Availability of Finance and Credit6.8.2 Inadequate and Irregular Supply of Raw Material6.8.3 Technological Obsolescence6.8.4 Lack of Infrastructural Facilities6.8.5 Deficient Managerial and Technical Skills6.8.6 Imperfect Knowledge of Market Conditions6.8.7 Challenges of Globalisation

xiv Industrial Policy and Economic Development in India: 1947-2012

6.9 Policy Measures to Help MSMEs6.9.1 Reservation of Items for Exclusive Production by Small-

scale Industries (SSI)6.9.2 Excise Duty Concessions6.9.3 Priority in the Disbursement of Loans by the Financial

Institutions6.9.4 National Manufacturing Competitiveness Programme

(NMCP)6.9.5 Rajiv Gandhi Udyami Mitra Yojana (RGUMY)6.9.6 Scheme of Fund for Regeneration of Traditional

Industries (SFURTI)6.9.7 Credit Linked Capital Subsidy Scheme for Technology

Upgradation6.9.8 Credit Guarantee Fund Scheme for Micro and Small

Enterprises (CGFSMSE)6.9.9 Legally Recognized, Haats and Shandies6.9.10 Other Concessions

6.10 Prime Minister's Task Force on Micro, Small and MediumEnterprises6.10.1 Measures that Need Immediate Action6.10.2 Medium-term Institutional Measures6.10.3 Legal and Regulatory Structures

6.11 Fourth All India Census of MSMEs6.11.1 Size of the Registered MSME Sector6.11.2 Nature of Activity6.11.3 Type of Organization6.11.4 Type of Management/Ownership

6.12 Credit Flow to Micro, Small, and Medium Enterprises(MSMEs)6.12.1 Working Group on Flow of Credit to the Small and

Medium Enterprises (SMEs), 20046.12.2 Group to Review Guidelines on Credit Flow to SME

Sector, 20056.12.3 Policy Package for Credit to Small and Medium

Enterprises6.12.4 Working Group on Credit Delivery to the Micro and

Small Enterprises Sector, 2008

Contents xv

7. Micro, Small, and Medium Enterprises (MSMEs): 140-170Sectoral Profiling

7.1 Handlooms7.1.1 Availability of Working Capital7.1.2 Availability of Quality Raw Materials7.1.3 Training and Technology7.1.4 Marketing and Publicity7.1.5 Infrastructure Development7.1.6 Encouraging Organisation of Weavers7.1.7 Social Security7.1.8 Other Measures

7.2 Powerlooms7.3 Handicrafts7.4 Silk and Sericulture7.5 Unorganised Wool Sector7.6 Coir Industry

7.6.1 Coir Board7.7 Food Processing Industry

7.7.1 Importance of Food Processing Industry7.7.2 Ministry of Food Processing Industries (MoFPI)7.7.3 Constraints/Problems of Food Processing Industry7.7.4 Solutions and Policy Options7.7.5 Food Safety and Standards Authority of India (FSSAI)

7.8 Khadi and Village Industries (KVI)7.8.1 Khadi and Village Industries Commission (KVIC)

7.9 Cluster-oriented Approach to MSMEs7.9.1 What is an Industrial Cluster7.9.2 Potential Benefits of a Cluster7.9.3 Importance of Clustered Micro and Small Enterprises7.9.4 Determinants of Cluster Development7.9.5 Role of Government7.9.6 Role of Non-government Agencies7.9.7 MSMEs Clusters in India

8. Industrial Finance and Development Finance 171-187Institutions (DFIs)

8.1 Need for Industrial Finance8.2 Sources of Industrial Finance

xvi Industrial Policy and Economic Development in India: 1947-2012

8.2.1 Internal Sources8.2.2 External Sources

8.3 Development Finance Institutions (DFIs)8.4 All-India Financial Institutions (AIFIs)

8.4.1 All-India Development Banks8.4.2 Specialised Financial Institutions8.4.3 Investment Institutions8.4.4 Refinance Institutions

8.5 State Level Institutions8.5.1 State Financial Corporations (SFCs)8.5.2 State Industrial Development Corporations (SlDCs)

8.6 Regulation and Supervision of Financial Institutions8.7 Development Finance Institutions (DFIs)8.8 Recent Policy Initiatives Regarding DFIs8.9 Working Group for Harmonising the Role and Operations of

Development Finance Institutions and Banks, 19988.9.1 Role, Structure and Operations8.9.2 Regulatory and Legal Framework8.9.3 Supervisory Practices8.9.4 Statutory Obligations8.9.5 State Level Institutions (SLIs)8.9.6 Harmonising the Role, Operations and Regulatory

Framework

9. Foreign Direct Investment (FDI) for Industrial 188-200Development

9.1 Prohibited Sectors for FDI9.2 Entry Routes for FDI

9.2.1 Automatic Route9.2.2 Government Approval

9.3 Foreign Investment Promotion Board (FIPB)9.3.1 Levels of Approvals for Cases under Government Route9.3.2 Cases Which do not Require Fresh Approval

9.4 Caps and Conditions on FDI in Strategic Sectors9.5 Post-approval Procedures

9.5.1 Project Clearances9.5.2 Registration and Inspection9.5.3 Foreign Exchange Management Act (FEMA), 2000

Contents xvii

9.6 Entry Options for Foreign Investors9.6.1 Incorporation of a Company9.6.2 Liaison Office/Representative Office9.6.3 Project Office9.6.4 Branch Office9.6.5 Branch Office on Stand-Alone Basis in Special Economic

Zones (SEZs)9.6.6 Investment in a Firm or a Proprietary Concern by NRIs9.6.7 Investment in a Firm or a Proprietary Concern by Other

than NRIs9.7 Foreign Technology Agreements

9.7.1 Automatic Approval9.7.2 FIPB Route

10. Infrastructure for Industrial Development 201-21810.1 Economic and Social Infrastructure

10.1.1 Economic Infrastructure10.1.2 Social Infrastructure

10.2 Role of Infrastructure in Economic Development10.3 Inadequacy of Infrastructural Facilities in India

10.3.1 Eleventh Five Year Plan (2007-12) on Infrastructure10.4 Traditional Approach to Infrastructure10.5 Commercialisation of Infrastructure Services:

The New Approach10.6 Allocation of Risks: The Key Problem

10.6.1 Build-Operate-Transfer (BOT)10.6.2 Public-Private Partnership (PPP)10.6.3 Value Guarantees

10.7 Public-Private Partnership (PPP)10.7.1 Meaning of PPP10.7.2 Projects Amenable to PPP10.7.3 Essential Features of a PPP Arrangement10.7.4 Annuity Contracts10.7.5 User Charge Based Concessions10.7.6 PPP Policy in India

10.8 Infrastructure Finance: Nature and Options10.8.1 Role of Financial Institutions10.8.2 Debt Market10.8.3 External Sources

xviii Industrial Policy and Economic Development in India: 1947-2012

10.8.4 India Infrastructure Finance Company Limited (IIFCL)10.8.5 Infrastructure Debt Funds (IDFs)

11. Tax Incentives for Industrialisation 219-22611.1 Meaning of Tax Incentives11.2 Forms of Tax Incentives

11.2.1 Deductions11.2.2 Tax Credit

11.3 Rationale for Tax Incentives11.3.1 Individuals11.3.2 Business Organisations11.3.3 General Purpose Incentives

11.4 Problems Created by Tax Incentives11.5 Alternatives to Tax Incentives11.6 Tax Holiday Schemes

11.6.1 Tax Holiday for Newly Established IndustrialUndertakings in Free Trade Zones, Electronic HardwareTechnology Parks, or Software Technology Parks

11.6.2 Tax Holiday for Newly Established Hundred Per CentExport-Oriented Undertakings

11.6.3 Tax Holiday for Exporters of Wood-based HandicraftItems

11.7 Incentives under Section 80IA11.7.1 Extension of Section 80IA

11.8 Incentives under Section 35-AC11.9 Tax-free Bonds

12. Industrial Sickness and Labour 227-23012.1 Causes of Industrial Sickness

12.1.1 External Causes12.1.2 Internal Causes

12.2 Extent of Sickness12.3 Government Policy on Sick Industrial Units

12.3.1 Government Policy on Nationalisation of SickIndustrial Units

12.4 Measures to Help Sick Industrial Units

13. Industrial Relations and Labour Laws 231-25213.1 Trends in Strikes and Lockouts

Contents xix

13.2 Industrial Relations: Post-Independence Trends13.2.1 From Laissez Faire to State Intervention13.2.2 First National Commission on Labour (NCL-I), 196913.2.3 Declaration of Emergency, 197513.2.4 Post-Emergency to 199013.2.5 Post-liberalisation Period (1991 onwards)13.2.6 Second National Commission on Labour

(NCL-II), 200213.3 Post-Independence Philosophy of Labour Laws in India13.4 Issues in Labour Law Reforms

13.4.1 Complexities in Labour Laws13.4.2 Inflexibility of Labour Laws13.4.3 Dualism in Labour Laws13.4.4 Industrial Disputes Act (IDA), 194713.4.5 Contract Labour13.4.6 Inspection System13.4.7 Limited Coverage and Poor Enforcement

13.5 Economic Reforms and Labour Laws

14. Industrial Development and Environment 253-27714.1 Environment-Development Interface14.2 Environmental Pollution14.3 Sustainable Development14.4 Green Growth14.5 India's Environmental Resources and Problems14.6 Causes of Environmental Degradation in India

14.6.1 Population Pressure14.6.2 Over Use of Water14.6.3 Expansion of Urbanisation14.6.4 Rapid Industrialisation

14.7 Environmental Risks Facing India14.8 Environmental Protection as Component of Growth Strategy14.9 Major Central Legislations for Environmental Protection

' 14.9.1 Environment (Protection) Act, 198614.9.2 Water (Prevention and Control of Pollution) Act, 197414.9.3 Air (Prevention and Control of Pollution) Act, 198114.9.4 Forest (Conservation) Act, 198014.9.5 Wild Life (Protection) Act, 197214.9.6 Public Liability Insurance Act, 1991

xx Industrial Policy and Economic Development in India: 1947-2012

14.9.7 National Environmental Tribunal Act, 199514.9.8 National Environment Appellate Authority Act, 199714.9.9 National Green Tribunal Act (NGTA), 2010

14.10 National Green Tribunal (NGT)14.11 Implementation of Environmental Laws14.12 Ministry of Environment and Forests (MoEF)14.13 Central Pollution Control Board (CPCB)14.14 State Pollution Control Boards (SPCBs)14.15 Recent Policy Initiatives for Environmental Protection

14.15.1 Policy for Abatement of Pollution, 199214.15.2 National Environment Policy (NEP), 200614.15.3 Environmental Impact Assessment (EIA)14.15.4 Development of Environmental Standards14.15.5 Charter on Corporate Responsibility for

Environmental Protection (CREP), 200314.15.6 Comprehensive Environmental Pollution Index

(CEPI) for Industrial Clusters14.15.7 Recognition of Environmental Laboratories under

Environment (Protection) Act, 198614.15.8 Industrial Pollution Abatement through Preventive

Strategies (Waste Minimisation for Small andMedium Industries)

14.15.9 Hazardous Waste Management

15. Indian Industry and World Trade Organization (WTO) 278-29415.1 Emergence of World Trade Organization (WTO)15.2 Non-Agricultural Market Access (NAMA)15.3 Non-tariff Barriers15.4 Services15.5 Anti-dumping and Subsidies Agreements15.6 Trade Related Aspects of Intellectual Property Rights (TRIPS)

and Public Health15.7 Agreement on Textiles and Clothing (ATC)15.8 Textile Sector in the Post-Quota Era

15.8.1 Implications for India15.8.2 Measures Taken by the Government

15.9 Revised Draft Modalities Texts on Agriculture and Non-Agricultural Market Access (NAMA), 2008

15.10 Fifth Trade Policy Review (TPR) of India

Contents xxi

15.11 Recent WTO Negotiations and India

Appendix 1: Industrial Policy Resolution, 1956 295-304Appendix 2: Statement on Industrial Policy (July 24,1991) 305-317Appendix 3: Year-wise Review of Industrial Developments in 318-390

India: 1947-48 to 2011-12Appendix 4: Edited Extracts from India's Five Year Plans on 391-528

Industry (I to XII Plan)

Appendix 5: Glossary of Industrial Terms 529-564

Bibliography 565-574

Index 575-586