Industrial Policy, Fiscal Policy and Licensing Policy

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Information about Industrial Policy, Fiscal Policy and Licensing Policy

Published on November 16, 2016



1. Presentation on Industrial Policy Fiscal Policy and Licensing Policy of Government of India Presented By Prasoon Verma

2. Industrial Policy Of Government

3. New Industrial Policy of the Government:  Liberalization  Deregulation and  Privatisation

4. Main features Objectives of the Industrial Policy of the Government are –  To maintain a sustained growth in productivity;  To enhance gainful employment;  To achieve optimal utilisation of human resources;  To attain international competitiveness  To transform India into a major partner and player in the global arena.  Lessened Government control and freelance to private Enterprises.  Capital Markets opened for private Entrepreneurs.  Simplification of licensing policy.  Opportunity to purchase foreign exchange at market prices.  Right to take independent decisions regarding the market.  Widened liberty in the field of business and trade.

5. Policy focus is on – • Deregulating Indian industry; • Allowing the industry freedom and flexibility in responding to market forces and • Providing a policy regime that facilitates and fosters growth of Indian industry.

6. Impact of Liberalization on Indian Economy:  Increase in Employment.  Arrival of New Technology or Development of Technology.  Development of Infrastructure.  Identity at World Level.  Increase Our Currency Value (INR).  GDP Growth.  Increase Consumption and Adaptation of New Lifestyle.  Increment in Competition.  Increment in Foreign Investor.

7. Advantages of Deregulisation  Deregulation offers the consumer in the form of lower prices, more providers and better products.  When the company faces fewer restrictions, it might be able to explore opportunities that the government had previously not allowed or severely restricted.  The businesses are left to themselves to determine their operational processes and strategic imperatives without the government interfering in their working.  The businesses interact and interface with the customers directly without the state setting the agenda or the action plan.  Deregulation in an emergent market economy means that the state is giving full play to market forces as opposed to centralized planning those results in greater efficiencies for the businesses and more profits as well.  Entry of Private Players  Businesses can focus on their core competencies without having to submit themselves to constant scrutiny and constant pressure from the government.

8. Advantages of privatization: 1. Efficiency, Absences of political interference, Quality service, Systematic marketing Use of freedom technology. 2. Accountability. 3. Innovation. 4. Research and development. 5. Infrastructure.

9. Fiscal Policy Of Government

10. Meaning of Fiscal Policy The fiscal policy is concerned with the raising of government revenue and incurring of government expenditure. To generate revenue and to incur expenditure, the government frames a policy called budgetary policy or fiscal policy. So, the fiscal policy is concerned with government expenditure and government revenue. Fiscal policy has to decide on the size and pattern of flow of expenditure from the government to the economy and from the economy back to the government.

11. Objectives of fiscal policy adopted by the Government of India: 1. To mobilise adequate resources for financing various programmes and projects adopted for economic development. 2. To raise the rate of savings and investment for increasing the rate of capital formation; 3. To promote necessary development in the private sector through fiscal incentive; 4. To arrange an optimum utilisation of resources; 5. To control the inflationary pressures in economy in order to attain economic stability;

12. 6. To remove poverty and unemployment; 7. To attain the growth of public sector for attaining the objective of socialistic pattern of society; 8. To reduce regional disparities; and 9. To reduce the degree of inequality in the distribution of income and wealth. In order to attain all these aforesaid objectives, the Government of India has been formulating its fiscal policy incorporating the revenue, expenditure and public debt components in a comprehensive manner. Fiscal Policy and Economic Development: One of the important goals of fiscal policy formulated by the Government of India is to attain rapid economic development of the country. To attain such economic development in the country, the fiscal policy of the country has adopted the following two objectives: 1. To raise the rate of productive investment of both public and private sector of the country. 2. To enhance the marginal and average rates of savings for mobilizing adequate financial resources for making investment in public and private sectors of the economy. The fiscal policy of the country is trying to attain both these two objectives during the plan periods.

13. Merits or Advantages of Fiscal Policy of India: The following are some of the important merits or advantages of fiscal policy of Government of India: 1. Capital Formation: Fiscal policy of the country has been playing an important role in raising the rate of capital formation in the country both in its public and private sectors. The gross domestic capital formation as per cent of GDP in India has increased from 10.2 per cent in 1950-51 to 22.9 per cent in 1980-81 and then to 24.8 per cent in 1997-98. Therefore, it has created a favourable impact on the public and private sector investment of the country. 2. Mobilisation of Resources: Fiscal policy of the country has been helping to mobilize considerable amount of resources through taxation, public debt etc. for financing its various developmental projects. The extent of internal resources mobilisation for financing plan has increased considerably from 70 per cent in 1965-66 to around 90 per cent in 1997- 98. 3. Incentives to Savings: The fiscal policy of the country has been providing various incentives to raise the savings rate both in household and corporate sector through various budgetary policy changes, viz., tax exemption, tax concession etc. Accordingly, the saving rate has increased from a mere 10.4 per cent in 1950-51 to 23.1 per cent in 1997-98.

14. 4. Inducement to Private Sector: Private sector of the country has been getting necessary inducement from the fiscal policy of the country to expand its activities. Tax concessions, tax exemptions, subsidies etc. incorporated in the budgets have been providing adequate incentives to the private sector units engaged in industry, infrastructure and export sector of the country. 5. Reduction of Inequality: Fiscal policy of the country has been making constant endeavor to reduce the inequality in the distribution of income and wealth. Progressive taxes on income and wealth tax exemption, subsidies, grant etc. are making a consolidated effort to reduce such inequality. Moreover, the fiscal policy is also trying to reduce the regional disparities through its various budgetary policies. 6. Export Promotion: The Fiscal policy of the government has been making constant endeavor to promote export through its various budgetary policy in the form of concessions, subsidies etc. As a result, the growth rate of export has increased from a mere 4.6 per cent in 1960-61 to 10.4 per cent in 1996-97. 7. Alleviation of Poverty and Unemployment: Another important merit of Indian fiscal policy is that it is making constant effort to alleviate poverty and unemployment problem through its various poverty eradication and employment generation programmes, like, IRDP, JRY, PMRY, SJSRY, EAS etc.

15. Licensing Policy Of Government

16. License-”An Authorization to used the licensed material” In India, there are some regulations and restrictions with regard to establishing industries in certain categories. This is done by making it mandatory to obtain licenses before setting up such an industry. Department of Industrial Policy & Promotion(DIPP) is responsible for formulation and implementation of promotional and developmental measures for the growth of the industrial sector, keeping in view the national priorities and socio-economic objectives.

17. Industrial Licensing was also abolished for all except short list of 18 industries in New Industrial Policy 1991. This number was further pruned to six industries. Currently (2016), only five industries are under compulsory licensing mainly on account of environmental, safety and strategic considerations. They are: Distillation and brewing of alcoholic drinks Cigars and cigarettes of tobacco and manufactured tobacco substitutes. Electronic Aerospace and defence equipment: all types. Industrial explosives including detonating fuses, safety fuses, gun powder, nitrocellulose and matches. Specified Hazardous chemicals i.e. (i) Hydrocyanic acid and its derivatives, (ii) Phosgene and its derivatives and (iii) Isocyanates & diisocyanates of hydrocarbon, not elsewhere specified(example Methyl isocyanate) Regarding Alcoholic products, production of rectified spirit exclusively for industrial use falls under the Centre’s purview while in the case of potable alcohol, states have last word. So, DIPP is not the licensing authority in case of potable alcohol.

18.  Zoning and Land Use Regulation and Environmental Legislation will continue to regulate industrial locations.  Appropriate incentives and the design of investments in infrastructure development will be used to promote the dispersal of industry particularly to rural and backward areas and to reduce congestion in cities.  Existing units will be provided a new broad banding facility to enable them to produce any article without additional investment.  The exemption from licensing will apply to all substantial expansions of existing units.  The mandatory convertibility clause will no longer be applicable for term loans from the financial institutions for new projects.

19. Thank You

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