MODULE – 3

EVOLUTION OF BUSINESS AND

INDUSTRY
SALIENT FEATRES OF INDIAN SOCIETY

Salient features of Indian

Society

Geographical Unity Culture

Religious Politics

Varieties of Races
VALUES IN INDIAN SOCIETY
• Duties & rights of an individual in an ideal society
• Dharma of each group ( Varna, Jati, Kula..) Also Sadharana dharma which is
DHARMA common to all.(Non-violence, self control & compassion)

• It is known as vairagya.
• Wealth & material gains are subordinate to dharama in Indian culture. In order to
reach final stage , Purushartha (Moksha), a man should be ready to disassociate
RENUCIATION himself with all his worldly possessions.

• According to it, one’s present condition of life is assumed on his deed in the
previous life & deeds in the past.
KARMA
 • Indian society has laws made a differences between higher
SOCIAL group & lower group .(Eg: Caste System)
HIERARCHY

• It is a fundamental postulate of Indian philosophy that each

& every kind of life contributes to the welfare of the people
TOLERANCE in its own way.

• Respect life and not to use violence, verbal or physical,

AHIMSA
towards human beings at home & outside.
 • Family is the place where all the members live in harmony.
• This is the cause of survival of the joint families in our country.
HARMONY

• Feeling of kinship and kin’s obligation is very strong in the Indian family
• It is expected by everyone that his kins would help him in need & it is thought
guilty of a rich member of the family who fails to hep the needy members of his
FAMILISM family, relatives & members of same caste

• It is sadharana dharma of every individual in Indian society.

RESPECT • The older people were looked upon as the repositories of knowledge.
FOR ELDERS
STRUCTURE OF INDIAN SOCIETY

Tribes

Modern
Varna
Caste
System
System

Caste System
TRIBES:
 Earliest identifiable ethnic cum social organization. Good
number of tribes are Muda,Ho, Oraon, Gaddi, Khasi, Mizo,
Naga.... They clubbed together in a group in a schedule of
the constitution of India & are known as the Schedule
Tribes. Features are:
 All members are related to each other by blood
 Equal in status
 All members have equal access to the resources
 The sense of private property is least visible
 Social differentiation exists only on the basis of age & sex
 Varna System: In place of tribe had divided society into
Brahman,( Usually functioned as priests) Kshatriya,(
Political Functions) Vaishya (Agriculturist) & Shudra (
Servile class)
 Caste System: Growth of urbanisation, craft production
and trade resulted in the rise of guilds or “shreni” which in
later times became castes. Customarily the guild (Shreni-
dharma) had the power of law. They could act as bankers,
financiers & trustees.
 Modern Caste System: The idea of “surnames” was also
added.
CLASS STRUCTURE OF INDIAN SOCIETY

Upper – • Wealthy, aristocratic, landed class. Its size

is very small, it is not a major number
Upper class segment.

• Novel rich consisting of those who have attained

Lower-Upper success & earned wealth
• Doctors, lawyers, first generation successful
class entrepreneurs belong here. These provide market
for specialized luxury goods.

• Moderately successful. It consist of the

Upper- professionally educated managers,
intellectual elite, doctors, lawyers,
Middle Class professors, owners of medium sized
business.
 • Common Man & highly paid individual
Lower- worker. It includes the small business
owners and non-managerial workers.
Middle They have high school & some college
education but do not reach high level in
Class the organization

• It composed of skilled & semi-skilled

Working workers. They are the blue (Khaki)
collar workers but have sufficient
money for consumer products.
Class
HISTORY OF ECONOMIC ACTIVITY IN INDIA

 Glimpse of economic activity in ancient times

 British Raj

 Swadeshi movement

 Post – Independence Scenario

 LPG era

 Economic reforms India

GLIMPSE OF ECONOMIC ACTIVITY IN ANCIENT
TIMES
Glimpse of Economic
Activity in Ancient Times

Harappan Civilization Vedic Period

Buddhism and Jainism Mauryan Empire

Post-Mauryan Guptas and their Successors

Developments (AD 300 – 750)
Pace of technological Medieval India
change
HARAPPAN CIVILISATION
HARAPPAN CIVILISATION
 It is also referred to as Indus Valley Civilization because in the beginning majority of its settlements
discovered were in & around the plains of the river Indus & its tributaries.
 But today it is termed as Harappan civilisation because Harappa was the first site , which brought to
light the presence of this civilization.
 One of the oldest civilization of the world.
 Economic Activities:
 Agriculture: Pastoralism (cattle raring) was the base of this economy. The irrigation was carried on a
small scale by drawing water from the wells or diverting river water into channels. The chief food crops
are wheat, barley, mustard.... Cotton was another important crop. A piece of woven cloth has been
found. Apart from cereals, fish, meat were also found in this civilization

 Industries & Crafts: People were aware about all the metals except iron. They manufacture gold &
silver objects. But use of silver was more common than gold. A number of copper tools & weapons
have also been discovered. The common tools like axe, saws, spearheads, arrowheads... Copper was
brought mainly from Rajastan, gold from Himalayan river-beds & south India, silver from
mesopotamia. Pottery making was also an important industry.

 Trade: Both internal ( within country) & external ( foreign) was a significant feature of the urban
economy of this civilization. As the urban people had to depend on the surrounding countryside for the
supply of food, so they emerged a village-town relationship. The traders also established contacts with
foreign lands particularly in mesopotamia where these goods were in demand.
The Indus Valley Civilisation, or Harappan
Civilisation, was a Bronze Age civilisation mainly
in the north western regions of South Asia. Along
with Ancient Egypt and Mesopotamia, it was one
of three early cradles of civilisations of the Old
World, and of the three, the most widespread.
VEDIC PERIOD
 VEDIC PERIOD
 In 19th century, Aryans were considered as a race.
 Now it is thought of as a linguistic group of people who spoke Indo-
European language & later emerged Sanskrit, latin, greek...
 Cattle raring was their main occupation.
 They rare cattle, sheep, goats & horses for milk & meat purposes.
 A wealthy person was known as “ Gomat” & the daughter called “ Duhitri”
one who milks the cow.
 The word “ Gaveshana” literally means search of cows, but it also means
battle since many battle were fought over cattle.
 The cows were thought of as provider of everything. Prayers were offered
for increase in the number of cattle.
 However, this is not suggest that the early Vedic people had no knowledge
of agriculture. A few references show that they had knowledge of
agriculture & practiced it to supplement their food requirements.
 Apart from cattle raring & small scale cultivation, people were engaged in
hunting, carpentry, tanning, waving, chariot making,...
 The products were exchanged through barter.
 The priests received cows, horses & gold ornaments as fees for performing
sacrifices.
The Vedic Period (or Vedic Age) (c. 1500 –
c. 500 B.C.E.) is the period in the history of India
during which the Vedas, the oldest sacred texts
of Hinduism, were being composed. Based on
literary evidence, scholars place the Vedic period in
the second and first millennia B.C.E. continuing up to
the sixth century B.C.E. The associated culture,
sometimes referred to as Vedic civilization, was
centred in the northern and north western parts of
the Indian subcontinent.
BUDDHISM & JAINISM
 BUDDHISM & JAINISM
 In the 5th century BC, Siddhartha Gauthama founded the religion of
Buddhism.
 Jainism was founded by Mahavira.
 Around 500 BC, when the Persian kings ( Cyrus & Darius) pushing
their empire eastward, conquered the Indus valley.
 The Perians were in turn conquered by the Greeks under Alexander
the great. The conqueror wanted to extend his empire even further
eastward but his own troops refused to continue. Alexander
returned home, leaving behind garrisons to keep the trade routes
open.
 During 5th & 6th centuries BC commerce & cash became
increasingly important in an economy previously dominated by self-
sufficient production & bartered exchange.
 Buddhism was prominent in communities of merchants, who found
it well suited to their needs & who increasingly established
commercial links throughout the Mauryan empire.
Buddhism and Jainism are two ancient Indian
religions that developed in Magadha (Bihar
region) and continue to thrive in the modern
times. Mahavira and GautamaBuddha are
generally accepted as contemporaries (circa 5th
century BCE).
MAURYAN EMPIRE
 MAURYAN EMPIRE
 Established by Chandragupta Maurya in 321 BC marks a turning point in the history of India.
 The founder inherited a large army of the nandas, which was used to conquer whole of north,
the north- west & large part of the peninsular India.
 Mauryan promoted trade & cultural interaction with Greeks by chandragupta maurya’s son
Bindusara.
 Ashoka ( 269-232 BC) succeeded his father Bindusara . The main economy in this period was
agriculture.
 Trade & urban economy received great impetus under this empire & influenced almost all parts
of the empire.
 The main centres of textile manufacturing were Varanasi, Mathura, Bengal, Ujjain..,..
 Mining was another economic activity.
 Trade was conducted through land & river routes.
 Craft activities were also a major sources of revenue .
 Artesian living in town had to pay taxes either in cash or kind or work free for the king.
 Traders & artisans were organised in associations called Srenis or Guilds.
 The Mauryans were responsible for introduction of Iron on a large scale. They maintained a
monopoly over production of Iron, which was in great demand by the army, industry &
agriculture.
 It was done through the official called “ Loha-Adyaksha”
POST-MAURYAN DEVELOPMENTS
POST-MAURYAN DEVELOPMENTS
 In around 187 BC, the mauryan Empire met its
end
 The political & cultural developments in the
Indian sub-continent from the end of the
Mauryas to the rise of the Guptas.
 This not only includes the rise of multiple
political powers in different parts of the sub-
continent but also the introduction of new
features in art, architecture & religion.
ECONOMIC ACTIVITIES OF POST-MAURYAN ERA

 Internal & external trade routes: There were two major

internal land routes in ancient India:
 Uttarapatha: conected northern & eastern parts of India(
present day pakistan)
 Dakshinapatha: connected the peninsular India
(western & northen parts of India)
 External routes: After discovery of Monsoons by
Hippatus a Greek navigator in 45 AD, more & more sea
voyages were used for trading purposes.
 Some of the ports on the east coast of India were
Tamralipti(west bengal), Arikamedu (tamil Nadu coast....
 Trade with West & Central Asia: Initially this trade was carried out through
land, but owing to frequent obstructions created by the Persians who ruled
the areas through which these trade routes passed, the focus was shifted to
sea routes. Now ships could move directly from India ports to the ports on
Red Sea & Persian gulf.
 Crafts & Industries: It started growing tremendously, as trade & commerce,
both internal & foreign. The level of specialisation was very high & there
were separate artisans working in gold, silver, precious stones. Textile is
also another prominent industry. Mathura & Vanga were famous for cotton
& silk textiles.
 Guilds: The communities of merchants were organised in groups know as “
shreni” or guilds under the head called “Sreshthi”. Like merchants almost
all craft vocations were also organised into guilds, each under the head of “
Jyeshta”, includes weavers, bamboo, corn dealers, oil manufacturers,
potters... They elected their own head & framed their own rules &
regulations regarding prices & quality. They also served as banks & received
deposits from the public on a fixed rate of interest.
GUPTA AND THEIR SUCCESSORS (AD 300-750)
GUPTA AND THEIR SUCCESSORS (AD 300-750)

 After the decline of kushanas, north India

witnessed the rise of the Gupta dyansty.
 The Gupta and Post Gupta period witnessed a
comparative decline in country’s trade and
commerce.
 The distruption of north-western route by the
Hunas was another successive Gupta ruler,
after Chandragupta II, contain less of gold and
more of alloy.
INDIA BETWEEN AD 750-1200
 It is referred as an early medieval period of Indian history.
 It was earlier treated by historians as a “ dark phase” . It
was so because during this time the whole country was
divided into numerous regional states which were busy
fighting with each other.
 Though politically divided, India witnessed a growth of new &
rich cultural activities in the field of art, literature &
language.
 The best specimens of temple architecture & Indian
literature belongs to this period. Thus far from being “dark” it
may be treated as a bright & vibrant phase of Indian history.
MEDIEVAL INDIA
 The people in medieval India pursued diverse
range of economic activities to earn their basic
livelihood.
 Agriculture formed the occupation of the bulk of
people
 A powerful group of revenue intermediaries existed
in between the state and the peasantry
 In the field of commerce India had trade links with
contemporary central Asia, china, south-east asia
and europe.
II. BRITISH RAJ
II. BRITISH RAJ

British Raj

Colonial Policy of the British Drain of Wealth

Land Revenue Policy and De-Industrialization

Land Settlements
Realization of Indian Railways
Economy

Growth of Landless
Labour
COLONIAL POLICY OF BRITISH
 India became a victim of British imperialism & primary motive is
to economic exploitation of the country.
 The history of colonialism in India can be studied under the
three heads:
 Era of mercantilism: The very idea was to conserve the
resources of its own country & fulfil the needs & requirements
of the people through the import of the resources of the
colonies.
 The East India Co., began its trade with India with a view to
exchange their goods with Indian goods & set-up various trading
centres at various places.
 Many other European co., also involved in this trade activities.
 Various co., used to buy Indian products at very cheap rates &
sell them in world market at high prices.
 Another issue was directly appropriates & take over the
revenues of the state through political control.
 Era of Free Trade(1813-1858): At this stage
India became a subordinate trading partner of
Britain, both as a dependent colony to produce
& supply the raw materials & foodstuffs to
Britain & as a market for finished
products(produced in Britain)
 Era of Foreign Investment & International
Competition for Colonies (1858-1947): After
1858 saw foreign investment on a large scale in
India & international competition for controlling
the colonies started.
 Britain now concentrated heavily on India so
that the process of exploitation was not
hampered.
DRAIN OF WEALTH
 The British drained off the economic resources of
India continuously in a systematic way during their
rule & poured the wealth of India into Britain.
 In the mercantilist concept, an economic drain takes
place if gold & silver flow out of the country as a
consequences of an adverse balance of trade.
 The East India Co., used two terms for Indian
revenues:
 Territorial Revenues: Revenue Surplus
 Commercial Revenue: Profit of Business
 After 1813, when the co., monopoly of the trade was
abolished, the business of the co., declined sharply &
“territorial Revenue” became their mainstay.
LAND REVENUE & LAND SETTLEMENTS
 LAND REVENUE & LAND SETTLEMENTS

 Since ancient times, the main sources of livelihood for the people
were agriculture.
 Here the land tax had formed a principal source of revenue for all
the emperors all over the world.
 In 18th century the main occupation of India was agriculture.
 During British rule , the revenues from the land kept on
increasing.
 British had come to India to do trade but later they started
conquering it.
 They also need a money for trade, projects, administration,... &
British carried out number of land revenues which caused
hardship to cultivators.
 They extract taxes from the formers to finance their policies & war
efforts.
 This affected the lives of the people & local administration failed
to provide relief & natural justice to the rural poor.
 Lord Cornwallis introduced the “Permanent Settlement” in Bengal & Bihar in
1793.
 It made a land lord deposits a fixed amount of money in the state treasury. In
return they were recognised as hereditary owners of land. This made the
zamindar the owner of the land.
 The amount of revenue to be paid to the co., was fixed & made British
financially secured.
 Now they knew as to how revenue was coming & zamidar also knew how much
revenue was to be paid.
 To get surplus revenue for themselves they asked the peasants to increase
production, but if the zamindar failed to pay the fixed revenue on time his land
was sold off to another zamindar.

 In 1822, the British introduced the “ Mahalwari Settlement” in the part of

central India, Punjab & others. Here the basis of assessment was the products
of a mahal or estate, which may be a village or group of villages & all the
proprietors of mahal were jointly responsible for paying the sum of revenue.

 The Ryotwari Settlement: was introduced in the beginning of the 19th century in
many part of Bombay & Madras Presidencies. Here the land revenue was
directly imposed on ryots, the individual cultivators, who actually works in the
land. The peasant was recognised as the owner of the land but exploitation
continued with high revenue demands.
RAILWAYS
RAILWAYS
 One of the major efforts on the part of British
towards infrastructural development in India.
 Britain developed railways, ports & irrigation
facilities since it suited the economic interests
of Britain & growth of modern industry within
India.
 The Railways were instrumental in speeding up
commercialisation in India & encouraged
export of commercial crops.
GROWTH OF LANDLESS LABOUR
GROWTH OF LANDLESS LABOUR
 Many factors were responsible for the high number of landless
labourers:
 Raised rent to unbearable limits
 Peasants failed to pay land revenues & govt put up his land for
sale to collect the dues.
 Moneylenders also played an important role in the growth of
landless labours by charging high rates of interest, cunning &
deceitful measures such as false accounting, forged signature &
making a debtors sign for larger amounts than he had
borrowed....
 The new revenue policies & legal system also contributed to
landlessness.
 With the introduction of transferability of land, the British
revenue system enabled the moneylender or rich peasants to
take possession of the land.
 The wealthy moneylenders used the power of the purse to turn
the expensive process of litigation in their favour & they could
easily take advantages of illiterate peasants.
SWADESHI MOVEMENT
SWADESHI MOVEMENT
 It is a part of Indian independence movement was an economic
strategy aimed at removing the British Empire from power &
improving economic conditions in India.
 Strategies of the Swadeshi movement involved boycotting British
products & revival of domestic products & production processes.
 Swadeshi movement started with the partition of Bengal by the
Viceroy of India, Lord Curzon, 1905 & continued upto 1911.
 The concept of swadeshi, as per mahatma Gandhi, was to attain
self-sufficiency which included employment of unemployed
people by encouraging village industries & towards building a
non-violent society.
 The forerunners of Swadeshi movement were Bal Gangadhar
Tilak, Lala lajpat Rai, Bipin Chandra Pal, Aurobindo Ghose & Veer
Savarkar
NATURE OF SWADESHI MOVEMENT
 Economic Objective:
 British Pecuniary Loss: Bring pressure upon
British public by the monetary loss they
would suffer by the boycott of British goods.
 Revival of Native Industry:
 Leads to Idea of Non cooperation: The
economic boycott receded into background
with the passage of time & it developed into
an idea of non-cooperation with the British in
every field.
 Promotion of Indian Industries:
ECONOMIC IMPACT OF SWADESHI MOVEMENT

 Increase in demand of Indigenous goods : The

boycott of foreign goods led to the increase in
demand of Indigenous goods.
 Opportunities for Domestic Cotton Industry:
 Boycott & burning of foreign goods:
 Other Bonfires: Fines were inflicted on anyone
found using foreign sugar, cigarettes..
Brahmins refused to assist any religious
ceremonies in houses where Europeans salt &
sugar were used & Marwaris were warned of
importing foreign articles.
REASONS BEHIND THE BREAK-UP OF SAWDESHI
MOVEMENT
REASONS BEHIND THE BREAK-UP OF SAWDESHI
MOVEMENT

 Serve British Subjection: The govt used corporal

punishment for t he people participating in the
movement.
 Lack of leadership: Leaders either arrested & with
Aurbindo Ghosh & Bipin Chandra Pal retiring from the
active politics.
 Internal arguments among the leaders:
 Lack of directions to the movement
 Limited to upper-middle class: movement confined to
the upper & middle classes & zamindhars & failed to
reach masses especially peasantry.
POST-INDEPENDENCE SENARIO
POST-INDEPENDENCE SENARIO
 The first 45years after Independence, Indian
economy was divided into two distinct segment.
 Sardar patel, Nehru and others transformed
India into a secular and democratic nation.
 India adopted a five year plan to improve
infrastructure, agriculture production,
healthcare, and education, but the progress
was extremely slow because of the democratic
system.
HIGHLIGHTS OF INDIAN ECONOMY AFTER
INDEPENDENCE
Post-Independence
Scenario

Licensed Raj/Permit Raj Planning in India

Panchayati Raj and Bank Nationalization

Economic Empowerment
Abolish Poverty/Garibi Reforms in India (Post 91
Hatao Reforms)
India – A Trillion Economy
Indian Stock Market
Foreign Direct Investment in
MGNREGA India
LICENSE RAJ

Jawaharlal Nehru was the

architect of the system of
Licence Raj or Permit Raj. It
refers to the elaborate
licenses, regulations &
accompanying red tape that
were required to set-up &
run businesses in India
between 1947 & 1990.
PLANNING IN INDIA
There are generally two sets of
objectives:
Short – term: Its vary from plan to
plan, depending on the immediate
problems faced by the economy.
The planning commission was set up
in March 1950. the main objective of
the govt., to promote a rapid rise in
the std of living by efficient
exploitation of the resources of the
country, increasing production &
offering opportunities to all for
employment in the service of the
community. Jawaharlal Nehru was
the first chairman of the planning
commission.
PANCHAYATI RAJ & ECONOMIC
EMPOWERMENT:
Adopted by State Govt., 1958.
Panchayati Raj gave a tool for
economic empowerment for people
living in rural India wherein the
person at the lowest level of society
can feel associated with the policy
formulation as well as get a share in
the economic decisions. The
common departments in the
Panchayat Samiti has ensured that
rural India gets empowered through
the formulation of policy in finance,
public work, agriculture, health,
education & social welfare.
BANK NATIONALIZATION:

 In 1960’s a debate had

ensured about the
nationalization of the
banking industry where
Indira Gandhi was the
PM if India.
 On 19th July 1969 14
large nationalized bank
came in to existence
ABOLISH POVERTY/ GARIBI HATAO

Gharibi hatao slogan

carried out by IndiraGandhi
1971 election bid was
designed to give Gandhi an
independent national
support - based on rural
and urban agenda and was
carried out locally across
the country.
REFORMS IN INDIA (POST 91 REFORMS)

Prime Minister Narasimha Rao, along with his

Finance Minister Manmohan Singh, initiated the
economic liberalization of 1991 i.e.,
liberalization, privatization, globalization. The
reforms did away with the License Raj, reduced
tariffs and interest rates and ended many
monopolies, allowing automatic approval of
foreign direct investment in many sectors.
INDUSTRIAL POLICY
 Industrial policy comprises government efforts to alter
industrial structure to promote productivity based
growth”
 “ Industrial policy is a set of policies designed for the
development of selected industries to increase the
welfare of the country & to achieve dynamic
comparative advantages for these industries by use
of state apparatus in resource allocation”
 IP means rules, regulations, principles, policies &
procedures laid down by govt for regulating ,
developing & controlling industrial undertakings in
the country. It prescribes the respective roles of the
public, private, joint & cooperative sectors for the
development of the industries.
OBJECTIVES

Optimum
Correcting Directing Resource Control Over
utilization of
Imbalances Flow Private Industry
resources
• In development • In most desirable • Prevent wasteful • Empower govt to
of industries & areas of use of scarce regulate the
help in bringing investment in resources & establishment &
desirable balance accordance with ensure their expansion of
national priorities conservation & private industry
judicious
utilization
 Demarcating Proper Distribution Control over Foreign
Other Objectives
Industrial Areas of wealth capital
•Demarcate ( •Prevent the •Give guidelines for •Preventing undue
differentiate) areas formation of importing foreign concentration of
among public, monopolised & capital & condition economic power.
private & joint concentration of on which such •Achieving industrial
sector as well as wealth in few hands capital should be development.
large, medium & through fiscal & operate. •Achieving economic
SSI monetary policies. growth.
•Reducing
disparities in
regional
development
•Developing heavy &
capital goods
industry.
•Achieving self
sustained economy.
Providing
opportunities for
gainful employment
•Expanding the
public sector for
achieving socialism
 IMPORTANCE OF INDUSTRIAL POLICY
 Establish co-ordination ( Industry & Agricultural development,
Public & private sector, capital & physical resources & natural &
social resources)
 Directs national resources: Flow of scarce resources in most
desirable areas of investments.
 Industrial development: Brings desirable balance & diversification
in the country’s economic structure. It helps in formulating the
target& programme of industrial development.
 Prevents economic power concentration: Evils of monopoly
capitalism can be effectively curbed.
 Proper control: It empowers the state to regulate & control the
establishment & expansion of the industrial undertakings in the
private sector
 Promote exports: Helps in maintaining regional balances.
 Prevents duplication of economic resources: The country can
ensure conservation & the judicious use of the country’s limited
resources
INDUSTRIAL POLICY RESOLUTION

IPR 1948: In the years of independence , the

govt of India was bogged down with the
immediate problems of partition of the country
leading to rehabilitation of refuges, the
integration of the states, the food problems. The
Industrial policy of 1948 was first major policy of
independent India which was launched to lay the
foundation of a mixed economy in which both
private and public organisations to work together.
 IPR 1977: The Janta party came to power &
presented a industrial policy . The govt
claimed that they had introduced this
dynamic industrial policy for removing the
distortions of the past. This policy amid at
utilising ideal resources for enhancing the
living conditions of the masses.
 Objectives:
 Preventing of monopoly & concentration of
economic power
 Maximising production of consumer goods
 Making industry responsive to social needs
 IPR 1980: After fall of Janata govt, the congress came
to power again in 1980. The union minister of the
state announced the new industrial policy. The govt
was committed to rapid & balanced industrialisation
for benefiting the common masses.
 Objectives:
 Optimum utilization of installed capacity
 Higher employment generation
 Achieving maximum production
 Development of industrial backward area
 Promotion of agro-based industries
 Faster promotion of export-oriented industries
 Consumer protection against high prices & bad quality
 Revival of the economy by overcoming infrastructural
gaps
New Industrial Policy 1991:
 A major shift in the IP was made by Congress(I)
led by Mr. P B Narasimha Rao in 1991.
 The main aim of the policy was:
 Unshackle the country’s industrial economy from
the cobwebs of unnecessary bureaucratic
control.
 Introduce liberalization to integrate the Indian
economy with the world economy
 Remove restrictions on direct foreign
investments
 Shed the load of public enterprises which have
shown a very low rate of returns or are incurring
losses over the year.
FEATURES OF INDUSTRIAL POLICY 1991
Doing away with
industrial licensing
requirements

Removal of
Diminishing role of
compulsory
public sectors
convertibility clause

Incentives &
Amendments to MRTP concessions for
act foreign investments &
technology
 Doing away with industrial licensing requirements: New
industrial policy abolished all kinds of industrial licensing irrespective of the
level of investment, except 18 industries related to security & strategic
concerns, safety & environmental issues...
 Diminishing role of public sectors : The 1956 policy reserved 17
industries in the public sectors whereas in 1991 policy reduced this to 8 and
by 2001 the number reserved for public sector is just 3. the govt decided to
open arms & ammunition industry also to the private sector. The govt made
its intention very clear to further reduce the importance of the public sector
by introducing “ divestment” wherein private sector participation is
encouraged in the important areas of the economy.
 Incentives & concessions for foreign investments &
technology : The New industrial policy made a specified list of high
technology & high investment priority industries where automatic permission
was to be made available for foreign direct investments & permitted
infrastructure industries such as electricity generation, transmission,
contraction & maintenance of road, highways, bridges, ports & harbours.
 Amendments to MRTP act : Monopolies & Restrictive Trade
Practices : There were restrictions on the size of assets of MRTP
companies. Such restrictions have now been lifted & co., operates
freely.( Foreign equity gone up to 51% in most industries & in
equipment manufacturing, drugs has provision of 100% foreign equity .

 Removal of compulsory convertibility clause : A greater part of the

industrial investments used to be made in the form of loans from banks
& financial institutions. These institutions followed compulsory practice
of including a convertibility clause in their lending & this provide the
option of converting their loans into equity . This carried a threat of
takeover of private firms by financial institutions. Hence NIP stated that
financial institutions will not impose this mandatory convertibility
clause.
IMPLICATION OF NEW INDUSTRIAL POLICY IN
INDIA
 Growth of new economy companies :
 Economy bailed out from economic crisis& degradation
 New breed of entrepreneurs
 FDI & new technology
 Greater competitive strengths: enable Indian entrepreneurs
to have international exposure
 Healthy competition: The new law “ Competitive Law” has
been enacted with the clear objectives of encouraging
competition among co., & penalising those who come to the
way of healthy competition.
 Sustained economic growth: Increased productivity,
efficiency, employment...
ECONOMIC POLICY

The process of economic reforms was started by

the government of India in 1991 for taking the
country out of economic difficulty and speeding
up the development of the country. Indian
economic policy plays a major role in determining
various government actions on the economic
field.
REGULATIONS OF ECONOMIC POLICY

 Industrial licensing
 Foreign investment

 Foreign Technology Agreement

 Public sector policy

 Monopolies and Restrictive Trade Practice Act

(MRTP Act)
IMPACT OF ECONOMIC POLICY ON BUSINESS

1. Positive impact:
 Improvement in performance of the economy
 Growth in employment opportunities and better
emoluments
 Large reserves of foreign exchanges
 Easier access of foreign technology
 Significant fall in poverty ratio
 Fall in inflation rate
 Better performance after privatization
 Regulated capital market

 Regulated capital market

 Increasing foreign direct investment

 Growth in tax revenue of central government

NEGATIVE IMPACT

 Fiscal deficits continue to soar as the root

cause remains
 Problem of unemployment

 Growth of monopoly houses

 Ruination of agriculture and public distribution

LPG ERA

 Liberalisation: It refers to the relaxation of the

govt restrictions usually in the area of social &
economic policies.
 When govt liberalised trade, it means it has
removed the tariff, subsidies, & other
restriction on the flow of goods / services b/w
the countries.
NATURE OF LIBERALISATION

Freedom
in fixing
prices

Increase
in foreign Reduction
in
investme restrictions
nts

Reform of
Increase
the
Competiti
Banking
veness
systems
POSITIVE IMPACT OF LIBERALISATION

 Improvement in health care

 Growth of Agriculture

 Liberalisation & employment

 Liberalisation & economic growth

 Liberalisation & mergers in India

NEGATIVE IMPACT OF LIBERALISATION
 Reduced profit : Liberalisation is often opposed
by domestic industries that they would have
their profits & market share reduced.
 Exploitation of workers
 Short term-adjustment: Availability of imports
causes a local co., to lose its market shares &
impact in term s of layoffs of workers.
 Effects on Capital: The sudden withdrawal of
capital causes a financial crisis.
PRIVATISATION:
 It is the process of involving the private sector in
the ownership or operation of a state owned or
public sector undertaking.
 Transfer of ownership & management of an
enterprise from the public sector to the private
sector.
 “ The transfer of govt, assets or functions to the
private sector”
 “Any process which reduces the involvement of the
state or the govt., sector in the nation’s economic
affairs is a privatisation process”
NATURE OF PRIVATISATION

Transfer of Increased
Increased efficiency
Ownership Competition

Effectiveness of deal
depends on Host
Increased
country (condition of
opportunities
the privatisation
process )
POSITIVE IMPACT OF PRIVATISATION
 Provides necessary impetus to the
underperforming PSUs
 Provides momentum in the competitive sector
 Fosters sustainable competitive advantages
 Improve financial health by reducing the deficits &
debts
 Escalates the performance benchmarks of the
industries
 Beneficial for the growth & prosperity of employees
 Better services to the customers
NEGATIVE IMPACT
 Ignore social objectives ( in case of emergencies &
criticalities)
 Lack of transparency
 Support of unfair practices (corruption, ways of
accomplishment of licenses, business deals with govt &
private bidders...)
 High employee turnover (latest business practises,
investment required to train the lesser qualified staff...)
 Conflict of Interest among stakeholders, management, initial
resistance to change can hamper the performance ...)
 Price Inflations: Privatised enterprises do not enjoy
government subsidies after the deal & burden of this
inflation affects the common man
GLOBALIZATION

“Globalization is the shift towards a more

integrated and interdependent world economy.
Globalization has two major components – the
globalization of market and globalization of
production”.
NATURE OF GLOBALIZATION

 Improved technology in transportation and

telecommunication
 Movement of people and capital

 Diffusion of knowledge

 Non-government organization (NGO’s) and

multinational corporation
 Growing world wide inter-connections
 Rapid, discontinuous change
 Increased number and diversity of participants

 Growing complexity
IMPACT OF GLOBALIZATION IN INDIA

1. Positive impact
 Huge amounts of foreign investments

 Provides employment

 Updated technology

 Goods and services

 Free flow of capital

 Increase in industrilization
 Balanced development of world economy
 Lower prices with high quality

 Cultural exchange and demand for variety of

products
 Balanced human development
NEGATIVE IMPACT

 Reduced jobs and incomes

 Poor labour practices and environmental
policies
 Globalization and the world’s poor

 Heterogeneity of problems

 Reluctance of developed countries

 Reluctance of developing countries

 Short term gains
 Factor mobility

 Social security

 Risks and uncertainties

THANK YOU