UNIT – 5
Problem Of Industrialization In India
Industrialization is a process by which an economy is transformed from primarily agricultural to one based on the manufacturing goods. Individual manual labor is often replaced by mechanized mass production, and craftsmen are replaced by assembly lines. It is just the transformation away from agriculture or resource based economy, towards an economy based on mass manufacturing. Industrialization is usually associated with increases in total income and living standards in a society.
Earlier, industrialization occurred in Europe and North America during the 18th and 19th centuries and later in other parts of the world.
Why Industrialization?
For the ultimate objectives of economic development which include a faster growth of national income, reduction in poverty as well as reduction of income inequalities. These all objectives can be solved out with the help of industrialization. But the question is how industrialization expected to contribute to these goals? The experience of industrial economies as showed the co-relationship close association between development and industrial expansion. But industry is also thought to provide certain pillars which would benefit other activities: increase the skills of managers, dispersion of technology, etc.
As this section gives rough overview of the history of industrialization in India. But there are several areas will be discussed in more detail in the following section.
Colonial rule
Under colonial rule, India is a developing countries, followed a non-industrial model. But many Indians believed that progress was retarded by this. It was believed that true economic progress lay in industrialization; but it was said that Smith’s and Ricardo’s ideas of international specialization and mutually advantageous free trade were rejected, at least until India became an exporter of more sophisticated goods.
Industrialization since Independence Industrial Policy Resolution of 1948- It defined the broad contours of the policy delineating the role of the State in industrial development both as an entrepreneur and authority.
India’s first Prime Minister, Jawaharlal Nehru, from 1947 to 1964, saw industrialization as key factor to remove or reduce poverty. Industrialization not only promised self-sufficiency for the nation which as just regained political sovereignty and as also offered external economies that accruing from technical progress. As the potential of agriculture and exports was limited, Indian governments has taxed agriculture by skewing the terms of trade against it and emphasizing import substitution, thus by giving priority to heavy industry.
Nehru had believed that a powerful state with a centralized planning in economy is equally essential for the rapid of industrialization. The Industries (Development and Regulation) Act (IDRA) in 1951 laid the foundations for this administrative control on industrial capacity. But, later the licensing requirements became increasingly stringent and were accompanied by a gamut of procedures that required clearance by a number of disparate and uncoordinated ministries.
In order to pursue IS, the Import Trade Control Order of 1955 subject to all imports to quantitative restrictions in the form of import licenses. It includes the tariffs at rates that were among the highest in the developing world. Indian state intervention in industrial development has been extensive. Unlike many East Asian countries, which used state intervention to build strong private sector industries? India opted for state control over key industries included chemicals, electric power, steel, transportation, life insurance, portions of the coal and textile industries, and banking. To promote these industries the government not only levied high tariffs and imposed import restrictions, but also subsidized the nationalized firms, directed investment funds to them, and controlled both land use and many prices.
Banks were nationalized, trade was increasingly restricted, price controls were imposed on a wide range of products, and foreign investment was squeezed.
In 1973, dealings with foreign exchanges as well as foreign investment as regulated by the Foreign Exchange and Regulation Act (FERA). The act virtually shut out the inflow of new technology from abroad in the 1970s and 1980s, particularly when these involved large equity participation.
Earlier in the beginning of 1980s, a mild trend towards deregulation started. Economic reforms were introduced, starting to liberalise trade, industrial and financial policies, while subsidies, tax concessions, and the depreciation of the currency improved export incentives.
In July 1991, India launched a 2nd major economic reform program. The government committed itself to promoting a competitive economy that would be open to trade and foreign investment. Various measures were introduced to reduce the government’s influence in corporate investment decisions. Various industrial-licensing systems was dismantled, and areas once closed to the private sector were opened up. These included electricity generation, areas of the oil industry, heavy industry, air transport, roads and some telecommunications. Due to which foreign investment was suddenly welcomed. Greater global integration was encouraged with a significant reduction in the use of import licenses and tariffs (down to 150% from 400%), an elimination of subsidies for exports, and the introduction of a foreign-exchange market.
Since April 1992, there has been no need of obtain any license or permit to carry out import-export trade.
As of April 1, 1993, trade is completely free, barring only a small list of imports and exports that are either regulated or banned.
The WTO estimated an average import tariff of 71% in 1993 which has been reduced to 40% in 1995. With successive additional monetary reforms, the rupee, since 1995, can nearly be considered a fully convertible currency at market rates. India now has a much more open economy.
Characteristics of industrialization
a) Economic growth
b) Division of labor
c) Use of technology innovation to solve problems as opposed to dependency on conditions outside human control
Meaning
Government action that influence the ownership, structuring for the industry and its performance. It takes the form of paying subsidies or providing finance or of regulation which includes procedures, principles (i.e., the philosophy of a given economy), policies, rules and regulations, incentives and punishments, the tariff policy, the labor policy, government’s attitude towards foreign capital, etc.
Objectives
The main objectives of the Industrial Policy of the Government in India are:
a) To maintain a sustained growth in productivity;
b) To enhance gainful employment;
c) To achieve optimal utilization of human resources;
d) To attain international competitiveness; and
e) To transform India into a major partner and player in the global arena.
Sectors reserved for Public Sector
The numbers of industries reserved for public sector have also been reduced. During 2014, private investment in Rail Infrastructure has been permitted. Consequently, at present only two industrial sectors are reserved for public sector
Government revised its first Industrial Policy (i.e. the policy of 1948) through the Industrial Policy of 1956. The Policy emphasized the need to expand the public sector, to build up a large and growing cooperative sector and also to encourage the separation of ownership and management in private industries and to prevent the rise of private monopolies.
IPR, 1956 classified industries into three categories
a) Schedule A – an inventory of 17 industries because the exclusive responsibility of the State. Of these, four industries, namely arms and ammunition, nuclear energy , railways, and also air transportation become Central Government monopolies and therefore the rest under State Governments.
b) Schedule B – an inventory of 12 industries hospitable both the general public and personal sectors. However, these industries are progressively State-owned.
c) Schedule C – All the remaining industries. The private sector had the first initiative of development. However, they needed to suit within the economic and social priorities and policies of the government. Further, they were subject to the provisions of the Industries (Development and Regulation) Act, 1951. The IPR, 1956 also stressed the importance of small-scale and cottage industries for expanding employment opportunities.
There were some criticize in IPR 1956 were notified that the resolution has reduced the scope for the expansion of the private sector.
As per the Statement of the Parliament in December 1977 modified the economic Policy which was in favor of the small-scale sector.
Further, this was classified into three sub-sectors:
a) Household and Cottage industries which provided large-scale self-employment.
b) Tiny sector industries, if the investment amount was below a specified limit.
c) Small-scale industries, which were larger than the primary two categories but had investment within certain limits.
There were some criticize in IPR 1956 were notified that the resolution has reduced the scope for the expansion of the private sector.
Later, the Economic reforms initiated since 1991 that has a significantly bigger role for private initiatives. The policy has been progressively liberalized over years to at present which has been more for facilitating the industrial development. Industrial licensing has been abolished for most of the industries and there are only 4 industries at present related to security, strategic and environmental concerns, where an industrial license is currently required. This has made clear that India is going to have a Mixed Economic Model.
Classification of industries into four broad areas:
a) Strategic Industries (Public Sector): It included three industries in which Central Government had monopoly. These included Arms and ammunition, Atomic energy and Rail transport. Electronic aerospace and defense equipment: all types. Industrial explosives including detonating fuses, safety fuses, gunpowder, nitrocellulose and matches Specified Hazardous chemicals i.e. (i) Hydrocyanic acid and its derivatives; (ii) Phosgene and its derivatives and (iii) Isocyanides & Disocyanates of hydrocarbon, not elsewhere specified (example Methyl Isocyanine). Cigars and cigarettes of tobacco and manufactured tobacco substitutes.
b) Basic/Key Industries (Public-cum-Private Sector): 6 industries viz. Coal, iron & steel, aircraft manufacturing, ship-building, manufacture of telephone, telegraph & wireless apparatus, and mineral oil were designated as “Key Industries” or “Basic Industries”. These industries were to be set-up by the Central Government. However, the existing private sector enterprises were allowed to continue.
c) Important Industries (Controlled Private Sector): It included 18 industries including heavy chemicals, sugar, cotton textile & woolen industry, cement, paper, salt, machine tools, fertilizer, rubber, air and sea transport, motor, tractor, electricity etc.
These industries continue to remain under private sector however, the central government, in consultation with the state government, had general control over them.
d) Other Industries (Private and Cooperative Sector): All other industries which were not included in the above mentioned three categories were left open for the private sector.
Policy for Micro, Small & Medium Enterprises Sector
Government has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 entering up the investment limit in Plant & Machinery to Rs.5 crores for small enterprises and Rs.10 crores for medium enterprises, so to reduce the regulatory interface with the majority of the industrial units. At present remaining 20 items which were earlier reserved for exclusive manufacture by MSE Sector has been de-reserved. Presently no item is reserved for exclusive manufacture by MSE Sector.
The government has introduced the new industrial licensing policy in 1970 on recommendation of Dutt Committee. The policy includes a sector called heavy investment sector. It consisted of industries involving investment of more than Rs 5 crore. All such industries were opened for private sector except those reserved for public sector in IPR, 1956.
Industries involving investment between Rs 1 crore and 5 crore were included in middle sector. Licensing policy was considerably liberalized and simplified for these industries
The Industries involving investment of less than Rs 1 crore does not require any license.
- Industrial licensing in India
Since the liberalization and deregulation of the Indian economy in 1991, most of the industries have been exempt from obtaining an industrial license to start manufacturing in India. Government paid attention is only for those industries that may impact public health, safety, and national security.
In India, industrial licenses are regulated by the IDRA, 1951 Act, and are approved by the Secretarial of Industrial Assistance (SIA) on the recommendation of the licensing committee.
The provisions of the Act restrict a licensed industrial undertaking from manufacturing a new article unless the license has been renewed or a new license has been obtained to include the new article.
Industries that require industrial licensing for manufacturing in India include:
Industries under compulsory licensing and Industrial undertakings attracting locational restrictions. The licensing provision also applies to the expansion of the existing industrial units.
Earlier, large industries that manufactured items that were exclusively reserved for Micro, Small, and Medium Enterprises (MSME) also needed to obtain an industrial license. MSMEs were previously known as Small Scale Industry (SSI). The provision was aimed at protecting indigenous manufacturers from unequal competition with large scale industries.
However, in April 2015, the government de-reserved these items to encourage greater investment, incorporate for better technologies, and for enhancing competition in the Indian and global market for the products.
Large industries are now permitted to manufacture items such as – bread, wood, firework, pickles and chutneys, mustard oil, groundnut oil, steel chairs and tables, padlocks, stainless steel and aluminum utensils, without obtaining an industrial license.
- Industries subject to compulsory licensing in India
Businesses planning to establish industries to produce any of the following items in India must obtain a compulsory license:
a) Distillation and brewing of alcoholic drinks;
b) Cigars and cigarettes of tobacco and manufactured tobacco substitutes;
c) Electronics and aerospace and defense equipment;
d) Industrial explosives including detonating fuses, safety fuses, gun powder, nitrocellulose and matches; and
e) Hazardous chemicals including items hazardous to human safety and health and thus fall for mandatory licensing.
These industries are under compulsory licensing mainly because of environmental, safety and strategic considerations. Compulsory licensing is regulated by the Ministry of Industrial Development.
- Locational restrictions for industries in India
Under this provision, industries located within 25 kilometers of the boundaries of cities having a population of at least one million, must obtain an industrial license from the federal government.
- License registration for industries
The application for registration must be made to the SIA, Department of Industrial Policy & Promotion (DIPP) along with a fee. The government issues the certificate only after due consideration.
Once the license is obtained, an industrial undertaking is eligible for the allotment of controlled commodities and for the issuance of an import license for goods required for its construction and operation.
Businesses can opt to register for an industrial license and IEM online at the government’s eBiz website. They can also use the single window portal to obtain clearance from various governments and government agencies.
- De-licensed industries in India
There is no exhaustive list of de-licensed industries specified by the DIPP.
However, industries exempted from the provisions of industrial license must file an Industrial Entrepreneur’s Memorandum (IEM) with the SIA, DIPP, and Ministry of Commerce & Industry.
- Criticism/problems of licensing policy:
The industrial Policy 1977 was subjected to serious criticism as there was an absence of effective measures that dominant position of large scale units and the policy did not envisage any socioeconomic transformation of the economy for curbing the role of big business houses and multinationals.
- New Industrial Policy during Economic Reforms of 1991
The new Industrial Policy was announced in July, 1991. The objective of the policy was to raise efficiency and accelerate economic growth.
Features of New Industrial Policy
- De-reservation of Public sector: Sectors that were earlier exclusively reserved for public sector were reduced. However, pre-eminent place of public sector in 5 core areas like arms and ammunition, atomic energy, mineral oils, rail transport and mining was continued. Presently, only two sectors- Atomic Energy and Railway operations- are reserved exclusively for the public sector.
b. De-licensing: Abolition of Industrial Licensing for all projects except for a short list of industries.
c. Strengthening of Private Sector
d. Abolition of licensing system for large number of industries
e. Dismantling of controls
f. Policy to shift industries away from big crowded cities to rural and backward areas
g. Incentives were brought to attract industries to village and backward regions
h. Limiting role of public sector Outcomes of New Industrial Policies
i. Limited role of Public sector reduced the burden of the Government.
j. All this resulted in increased competition that led to lower prices in many goods such as electronics prices. This brought domestic as well as foreign investment in almost every sector opened to private sector.
k. The policy was followed by special efforts to increase exports. Concepts like Export Oriented Units, Export Processing Zones, Agri-Export Zones, Special Economic Zones and lately National Investment and Manufacturing Zones emerged. All these have benefitted the export sector of the country.
- Limitations of Industrial Policies in India Current problems regarding industrialization
After evaluating important indicators for industrialization and giving a summary of industrialization since independence, now we will take a look into the limitations or problem in industrialization.
1. Infrastructure
Perhaps the biggest problem for doing business in India is the infrastructure. Poor infrastructure is acting as a drag on the Indian economy, and the Indian government is now attracting private domestic and foreign investment to build the backbone of a modern economy.
A recent report estimated that investment in infrastructure would rise from 5.5% of GDP in 1997, to about 7% in 2000/01. This includes massive improvements in telecommunications, power, energy, and transport.
India has recognized the important role in telecommunications that has played in the growth of the economy. The Indian telecom sector was wholly under government ownership and control until recently and was characterized by under-investment and outdated equipment. There is vast potential for extending these services in India, which has one of the world’s smallest telephone densities of 1.3 per 100 people, compared with the world average of 10 per 100. Advanced communication services such as fax, data transmission, and leased circuits are becoming increasingly common.
The power problems are severe in India with three-hour-a-day power cuts and damaging voltage fluctuations that require companies to generate their own power. Investment in energy is a sound way of increasing manufacturing activity. If all 49 proposed private sector power projects are implemented, these would add a total of 20,000 megawatts to India’s current capacity of 66,000mW. However it should be noted that India’s energy demand is growing at 8-10% a year.
As part of India’s liberalisation efforts, the transportation sector has been opened to private investment. The government is offering incentives to invest $4.7 billion to construct and operate bypass roads, highways, bridges, railways, and ports.
2. Health and Education
HIV/AIDS is a newly emerging threat to India’s public health. About 3 million people in India may be affected. Malnutrition also continues to impede India’s development. Prejudices against women and girls are reflected in the demographic ratio of 929 females for every 1,000 males.
To support India’s goal of achieving universal primary education, the World Bank is supplementing increased state government expenditure. This has boosted school enrolment, particularly among girls and disadvantaged children, and is improving the quality of instruction and learning achievement. Amartya Sen reckons that India could enroll all its children in primary school by spending an additional 0.5-1% of GDP. Providing basic health and education is not expensive where labour is cheap. But health and education indicators, while showing some progress, still remain among the world’s lowest.
3. Corruption
An immediate threat to India’s governance is not the tottering coalition governments but corruption. The combination of a state-run economy and weak political institutions created all too many opportunities for crooked politicians and bureaucrats.
Worse still for the business community is that the government itself is the fountain-head of corruption. This is particularly serious in view of the huge importance of the government sector in India’s economy.
4. Tax Problems
Tax reforms have been seeking to transform India’s tax system from one with high differential tax rates falling on a narrow base, into one with tax rates at moderate levels falling on a broad base. The 1995 fiscal budget reduced taxes on corporate income, and a major reform of excise taxes has been implemented to make it resemble a value-added tax more closely.
But the government’s income is also constricted by an inefficient taxation system Rural areas are not taxed because they contain such a large pool of voters and no government has had the political will to change this. Income tax is skillfully dodged. This leaves the government with excise and customs duties, which represent two thirds of all taxes.
5. Labor market
India needs greater labor market flexibility to make its companies more competitive and its economy more productive. Politically powerful labor unions have stifled most efforts at serious reform or privatization of India’s largest public sector enterprises, including most banks, all insurance companies, and many major industries, even though privatization would probably cost the jobs of no more than 1.1% of the urban labor market. India’s labor laws hinder efficiency and growth.
6. Stagnation of Manufacturing Sector
Industrial policies in India have failed to push manufacturing sector whose contribution to GDP is stagnated at about 16% since 1991.
7. Distortions in industrial pattern owing to selective inflow of investments:
In the current phase of investment following liberalization, while substantial investments have been flowing into a few industries, there is concern over the slow pace of investments in many basic and strategic industries such as engineering, power, machine tools, etc.
8. Displacement of labor
Restructuring and modernization of industries as a sequel to the new industrial policy led to displacement of labor.
9. Absence of incentives for raising efficiency
Focusing attention on internal liberalization without adequate emphasis on trade policy reforms resulted in ‘consumption-led growth’ rather than ‘investment’ or ‘export-led growth’.
10. Vaguely defined industrial location policy:
The New Industrial Policy, while emphasized the detrimental effects of damage to the environment, failed to define a proper industrial location policy, which could ensure a pollution free development of industrial climate.
1 Iron and steel Industry
Introduction
At global level in 2018, the planet crude production reached 1789 million tons (mt) and showed a growth of 4.94% over 2017.
China remained world’s largest crude steel producer in 2018 (928 mt) followed by India (106 mt), Japan (104 mt) and therefore the USA (87 mt).
Per capita finished steel consumption in 2017 is placed at 212 kg for world and 523 kg for China and for India it had been 69 kg as published by World Steel Association.
India is that the largest producer of sponge iron within the world and therefore the 3rd largest finished steel consumer within the world after China & USA.
The Government has taken various steps to spice up the world including the introduction of National Steel Policy 2017 and allowing 100 per cent Foreign Direct Investment (FDI) within the steel sector under the automated route.
The growth within the Indian steel sector has been driven by domestic availability of raw materials like ore and cost-effective labour. Consequently, the steel sector has been a serious contributor to India’s manufacturing output.
Development of Steel Sector
The economic reforms initiated by the govt since 1991 added new dimensions to industrial growth generally and therefore the industry especially .
Licensing requirement for capacity creation was abolished, apart from certain locational restrictions and therefore the industry was faraway from the list of industries reserved for the general public sector.
Automatic approval of foreign equity investment up to 100% was granted. Price and distribution controls were removed with a view to form the industry efficient and competitive.
Restrictions on external trade, both in import and export, were removed with drastic reductions in duty .
General policy measures like reduction in duty on capital goods, convertibility of rupee on trade account, permission to mobilise resources from overseas financial markets among others, also benefited the Indian industry .
The Growth Profile
The liberalization of commercial policy and other initiatives taken by the govt have given a particular impetus for entry, participation and growth of the private sector within the industry .
While the prevailing units are being modernized/expanded, an outsized number of latest steel plants have also come up in several parts of the country supported modern, cost effective, state of-the-art technologies.
In the previous couple of years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to line up fresh green field projects in several states of the country.
Today, because the 2nd largest crude steel producer globally and with a capacity of over 100 million tonne, the Indian industry has come an extended way.
Pig Iron: India is additionally a crucial producer of iron . Post-liberalization, with fixing several units within the private sector, not only imports have drastically reduced but also India has clothed to be a net exporter of iron . The private sector accounted for 94% of total production of iron within the country. Pig iron, crude iron obtained directly from the furnace and cast in molds.
Sponge Iron: India, world’s largest producer of sponge iron (2018), features a host of coal based units located within the mineral-rich states of the country. Over the years, the coal based route has emerged as a key contributor and accounted for 79% of total sponge iron production within the country.
Sponge iron may be a metallic product produced through direct reduction of ore within the solid state. The method of sponge iron making aims to get rid of the oxygen from ore . The standard of sponge iron is primarily ascertained by the share of metallization (removal of oxygen), which is that the ratio of metallic iron to the entire iron present within the product.
Import and Export of Iron & Steel
Although India started exporting steel way back in 1964, exports weren't regulated and depended largely on domestic surpluses. However, within the years following economic liberalisation, export of steel recorded a quantum jump.
Subsequently, the rapid climb of domestic steel demand has led to a decline within the rate of growth of steel exports from India to make sure that domestic requirements are adequately met. India is currently a net importer of total finished steel.
Iron & steel are freely importable and freely exportable.
Additional Capacity Creation privately Sector
Since 1991 with further opening from the Indian economy, a focused reform process in situ and a rapid but stable growth of the Indian economy, investments have flown significantly into the industry of the country with major investment plans announced within the states of Odisha, Jharkhand, Karnataka, Chhattisgarh and West Bengal .
Crude steel capacity within the country stood at 138 million tonnes in 2017-18 as per data released by the JPC while the National Steel Policy 2017 envisions domestic crude steel capacity reaching 300 million tones once a year by 2030-31.
Demand – Availability
Demand and availability of iron and steel within the country are largely determined by economic process and gaps in demand-availability are met mostly through imports.
Interface with consumers exists by way of meeting of the Steel Consumers’ Council, which is conducted on regular basis.
Interface helps in redressing availability problems, complaints associated with quality.
Steel Prices
Price regulation of iron & steel was abolished on January 16, 1992. Since then steel prices are determined by the interplay of economic process .
Domestic steel prices are influenced by trends in staple prices, demand – supply, conditions within the market, and international price trends among others.
As a facilitator, the govt monitors the steel market conditions and adopts fiscal and other policy measures supported its assessment. Currently, GST of 18% is applicable on steel and there's no duty on steel items.
A Steel Price Monitoring Committee has been constituted by the govt with the aim to watch price rationalization, analyze price fluctuations and advise all concerned regarding any irrational price behavior of steel commodity.
To avoid any distortion in prices in sight of ad-hoc and rising imports, the govt had taken several steps including raising duty and imposed a gamut of measures including anti-dumping and safeguard duties on a number of applicable iron and steel items.
In a further move, to curb steel imports, the Indian government banned the assembly and sale of steel products that doesn't meet BIS approval.
To check the sale of defective and sub-standard chrome steel products used for creating utensils and various kitchen appliances, the chrome steel (Quality Control) Order, 2016, released for products utilized in making utensils and kitchen appliances which will help filter imports of the metal.
Government Initiatives
An duty of 30 per cent has been levied on ore to make sure supply to domestic industry .
Government’s specialise in infrastructure and restarting road projects is aiding the boost in demand for steel. Also, further likely acceleration in rural economy and infrastructure is predicted to steer to growth in demand for steel.
The Union Cabinet has approved the National Steel Policy (NSP) 2017, because it seeks to make a globally competitive industry in India.
2 Sugar Industry
.Background
A major player within the worldwide sugar trade, India produced 33 million metric tons in 2017/2018. The state is seeing record levels of sugar production and is about to overtake Brazil because the highest sugar producer.
India’s sugar production rose 11.5% during the 2014 to 2015 season on bumper cane production. This increase in production led to an in depth surplus in Indian sugar with mills struggling to pay fair wages to workers.
Sugar Industry’s Location in India
Sugar industry is broadly distributed over two major areas of production- Uttar Pradesh , Bihar, Haryana and Punjab within the north and Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh within the south.
South India has tropical climate which is suitable for higher sucrose content giving higher yield per unit area as compared to north India.
Significance
Multiple linkages: Sugar may be a labour-intensive industry, up the whole value-chain from cane-growing to sugar and alcohol production. Across multiple districts of Uttar Pradesh , Maharashtra, Tamil Nadu, Karnataka, and a number of other other states, it's the most source of employment.
Source of employment: A sugar industry is source of livelihood for 50 million farmers and their families. It provides direct employment to over 5 lakh skilled laborers but also to semi-skilled laborers in sugar mills and allied industries across the state.
Byproducts: the varied byproducts of sugar industry also contribute to the economic process and promote variety of allied industries. Sugarcane has emerged as a multi-product crop used as a basic staple for the assembly of sugar, ethanol, paper, electricity and besides a cogeneration of ancillary product.
For livestock feeding: Molasses from sugar cane is employed for alcohol production and livestock feeding since it's highly nutritious.
Biofuel: In India, the overwhelming majority of ethanol is produced from sugarcane molasses, a by-product of sugar. Ethanol blended fuel can help in reducing petroleum imports.
Bagasse: Basic utilization of bagasse continues to be as a fuel. But it's also suitable staple for paper industry. 30% of cellulose requirement comes from agricultural residues. However, since the mills are scattered everywhere the country, collection of surplus bagasse poses a drag and makes paper units uneconomical.
Problems of Sugar Industry
Uncertain Production Output
Sugarcane has got to compete with several other food and cash crops like cotton, oil seeds, rice, etc. This affects the availability of sugarcane to the mills and therefore the production of sugar also varies from year to year causing fluctuations in prices resulting in losses in times of excess production thanks to low prices.
Low Yield of Sugarcane
India yield per hectare is extremely low as compared to a number of the main sugarcane producing countries of the planet . For instance , India’s yield is merely 64.5 tonnes/hectare as compared to 90 tonnes in Java and 121 tonnes in Hawaii.
Short crushing season
Sugar production may be a seasonal industry with a brief crushing season varying normally from 4 to 7 months during a year.
It causes loss and seasonal employment for workers and lack of full utilization of sugar mills.
Low Sugar recovery rate
The average rate of recovery of sugar from sugarcane in India is a smaller amount than ten per cent which is sort of low as compared to other major sugar producing countries.
High cost
High cost of sugarcane, inefficient technology, uneconomic process of production and heavy excise duty end in high cost of producing .
Most of the sugar mills in India are of small size with a capacity of 1,000 to 1,500 tonnes per day thus fail to require advantage of economies of scale.
Government policy and control
Government has been controlling sugar prices through various policy interventions like duty , imposition of stock limit on sugar mills, change in meteorology rule etc., to balance supply demand mismatch.
But these controls have resulted in unremunerative sugar prices, increasing arrears for sugar mills and dues to be paid to sugarcane farmers.
Government Initiative
Rangarajan committee (2012) was found out to offer recommendations on regulation of sugar industry. Its major recommendations:
Abolition of the quantitative controls on export and import of sugar, these should get replaced by appropriate tariffs.
Committee recommended no more outright bans on sugar exports.
The central government has prescribed a minimum radial distance of 15 km between any two sugar mills, this criterion often causes virtual monopoly over an outsized area can give the mills power over farmers. The Committee recommended that the space norm be reviewed.
There should be no restrictions on sale of by-products and costs should be market determined. States should also undertake policy reform to permit mills to harness power generated from bagasse.
Remove the regulations on release of non-levy sugar. Removal of those controls will improve the financial health of the sugar mills. This, in turn, will cause timely payments to farmers and a discount in cane arrears.
Based on the report, Commission for Agricultural Costs and costs (CACP) recommended a hybrid approach of fixing sugarcane prices, which involved fair and remunerative price (FRP).
The year 2013-14 was a water-shed for the sugar industry. The Central Government considered the recommendations of the committee headed by Dr. C. Rangarajan on de-regulation of sugar sector and decided to discontinue the system of levy obligations on mills for sugar produced after September, 2012 and abolished the regulated release mechanism on open market sale of sugar.
The de-regulation of the sugar sector was undertaken to enhance the financial health of sugar mills, enhance cash flows, reduce inventory costs and also end in timely payments of cane price to sugarcane farmers.
The recommendations of the Committee concerning Minimum Distance Criteria and adoption of the Cane Price Formula are left to State Governments for adoption and implementation, as considered appropriate by them.
With the aim of benefitting Sugar farmers and so as to clear their arrears/cane dues, the Union Government has decided to extend the Minimum asking price (MSP) of Sugar from Rs. 29 to Rs. 31 for the year 2019-20.
Fair and Renumerative Price
FRP is that the minimum price that the sugar mills need to pay to farmers.
It is determined on basis of recommendations of Commission for Agricultural Costs and costs (CACP) and after consultation with State Governments and other stake-holders.
State Advised Price (SAP)
In other key growing states of Uttar Pradesh , Punjab, Haryana, Tamil Nadu and Uttarakhand, farmers get the State Advised Price (SAP) fixed by state governments which is typically above FRP.
Apart from this, the govt has also provided incentives on producing ethanol from B-heavy molasses and cane juice to divert the sugar surpluses towards biofuel, thus indirectly supporting sugar prices. The new Biofuel Policy 2018 has fixed a target of achieving 20 per cent ethanol blending with petrol by 2030.
Way Forward
The sector needs infusion of capital, but also policy measures and structural changes. Technological upgradation in age old mills especially in Uttar Pradesh and Bihar to enhance efficiency in production.
Major sugar producing States like Maharashtra and Karnataka have migrated to the progressive revenue-sharing formula other states should also introduce revenue-sharing formula to make sure farmers receive a share within the profits.
When domestic production is probably going to be in more than domestic consumption government should encourage exports through policy changes.
Mills should be allowed to supply more alcohol (a higher value product with massive industrial demand). Exports of sugar and alcohol should even be decontrolled. It'll improve financial situation of mills and will afford to pay farmers a price supported the market prices of sugar.
The production cost of sugar in India is one among the very best within the world. Intense research is required to extend the sugarcane production within the agricultural field and to introduce new technology of production efficiency within the sugar mills.
Production cost also can be reduced through proper utilization of by- products of the industry.
Government should encourage ethanol production. It'll bring down the country’s oil import bill and help in diversion of sucrose to ethanol and to balance out the surplus production of sugar.
3 Cotton Textile Industry
Textile industry includes cotton, jute, wool, silk and artificial fiber textiles. India is one among the leading producers of textile goods. It's one among most vital |the biggest" the most important and most important sector within the economy in terms of output, exchange earning, and employment in India. Its contribution forms 20 per cent of the economic production, 10 per cent of the excise collection, 18 per cent of employment within the industrial sector, 20 per cent of the country’s total exports earnings and 4 per cent of the GDP. At the present , India is that the third largest producer of silk, fifth largest producer of synthetic fibers, and has the most important loom age and spindles within the world.
India enjoyed monopoly within the production of textile goods from 1500 BC to 1500 AD. Indian cotton and silk textiles were in great demand everywhere the planet . It had been the arrival of British in India and therefore the technological revolution in Britain in 1779 which led to the downfall of the Indian manufacturing. British after the consolidation of their rule out India encouraged the export of staple from India to Britain and import of manufactured goods from Britain to India. The primary factory was established in 1854 in Mumbai by C.N. Dewar. The fast growth of cotton textile occurred in 1870 when there was much demand of Indian goods within the wake of yank war . Before the primary war the amount of Indian textile mills rose to 271. The demand for cloth during the Second war led to further progress of the textile industry.
The industry suffered a setback in 1947 nearly as good quality cotton growing area visited Pakistan. Consequently, India had to import cotton from the African countries.
Cotton being a pure staple provides an opportunity to determine factory either within the areas of staple or within the market. In India, most of the textile mills are within the cotton growing areas or within the neighboring cities and towns. The situation of cotton textile industry is additionally affected by: (i) staple , (ii) proximity to plug , (iii) moist weather, (iv) capital, (v) skilled and cheap labour, (vi) transport, (vii) sea-port, (viii) export facility and therefore the domestic and international markets.
State-wise Production of cotton in India(In sq metres)
Maharashtra 400,550
Gujarat 355,745
Tamil Nadu 65,850
Punjab 56,850
Madhya Pradesh 48,500
Uttar Pradesh 32,850
Rajasthan 28,880
Pondicherry 25,250
Karnataka 8,500
Kerala 6,850
Cotton Industry And Exports
Introduction
Cotton plays a crucial role within the Indian economy because the country's textile industry is predominantly cotton based. India is one among the most important producers also as exporters of cotton yarn. The textile industry is additionally expected to succeed in US$ 223 billion by the year 2021.
The states of Gujarat, Maharashtra, Telangana, Andhra Pradesh , Karnataka, Madhya Pradesh, Haryana, Rajasthan, and Punjab are the main cotton producers in India.
Key Markets and Export Destinations
• Cotton yarn and fabrics exports accounts for about 23 per cent of India’s total textiles and apparel exports.
• In 2017-18, India’s cotton production was 34.86 million bales of 170 Kgs. Each
• Between Apr-Oct 2018, total textile and clothing exports stood at Rs 1.52 trillion (US$ 21.95 billion).
• Between Apr-Oct 2018, exports of cotton raw including waste, cotton yarn, cotton fabrics and cotton made-ups grew by 26.01 per cent year-on-year to US$ 6,893.05 million from US$ 5,470.20 million during an equivalent period last year.
Various reputed foreign retailers and makes like Carrefour, Gap, H&M, JC Penney, Levi Strauss, Macy's, Marks & Spencer, Metro Group, Nike, Reebok, Tommy Hilfiger and WaI-Mart import Indian textile products.
Cotton Textile Export Promotion Council
The Cotton Textile Export Promotion Council (TEXPROCIL) takes part in national and international events to reinforce the visibility of Indian products, advertises and promotes Indian products in various media vehicles like fashion magazines, event-related pull-outs, India reports and leading trade magazines, and organizes buyer-seller meets (BSM) and trade delegation visits.
4 Cement Industry
Introduction
India is that the second largest producer of cement within the world. No wonder, India's cement industry may be a vital a part of its economy, providing employment to quite 1,000,000 people, directly or indirectly. Ever since it had been deregulated in 1982, the Indian cement industry has attracted huge investments, both from Indian also as foreign investors.
India features a lot of potential for development within the infrastructure and construction sector and therefore the cement sector is predicted to largely enjoy it. a number of the recent major initiatives like development of 98 smart cities are expected to supply a serious boost to the world .
Expecting such developments within the country and aided by suitable government foreign policies, several foreign players like Lafarge-Holcim, Heidelberg Cement, and Vicat have invested within the country within the recent past. a big factor which aids the expansion of this sector is that the ready availability of the raw materials for creating cement, like limestone and coal.
Market Size
Cement production capacity stood at 502 million tones per annum (mph) in 2018. Capacity addition of 20 million tones once a year (MTPA) is predicted in FY19- FY 21.
The Indian cement industry is dominated by a couple of companies. The highest 20 cement companies account for nearly 70 per cent of the entire cement production of the country. a complete of 210 large cement plants account for a cumulative installed capacity of over 410 million tones, with 350 small plants accounting for the remainder . Of those 210 large cement plants, 77 are located within the states of Andhra Pradesh , Rajasthan and Tamil Nadu .
Investments
According to data released by the Department of commercial Policy and Promotion (DIPP), cement and gypsum products attracted Foreign Direct Investment (FDI) worth US$ 5.28 billion between April 2000 and March 2018.
Some of the main investments in Indian cement industry are as follows:
• As of December 2018, Raysut Cement Company is getting to invest US$ 700 million in India by 2022.
• During 2017-18, Ultratech commissioned a green field clinker plant with a capacity of two .5 MTPA and a cement grinding facility with 1.75 MTPA capacity in Dhar, Madhya Pradesh. The corporate is expecting to finish a 1.75 MTPA cement grinding facility and a 13 MW waste heat recovery system by September 2018 at an equivalent location.
• JK Cement is getting to invest Rs 1,500 crore (US$ 231.7 million) over subsequent 3 to 4 years to extend its production capacity at its Mangrol plant from 10.5 MTPA to 14 MTPA.
Government Initiatives
In order to assist the private sector companies thrive within the industry, the govt has been approving their investment schemes. Some such initiatives by the govt within the recent past are as follows:
In Budget 2018-19, Government of India announced fixing of a reasonable Housing Fund of Rs 25,000 crore (US$ 3.86 billion) under the National Housing Bank (NHB) which can be utilized for alleviating credit to homebuyers. The move is predicted to spice up the demand of cement from the housing segment.
Road Ahead
The eastern states of India are likely to be the newer and virgin markets for cement companies and will contribute to their bottom line in future. Within the next 10 years, India could become the most exporter of clinker and grey cement to the center East, Africa, and other developing nations of the planet . Cement plants near the ports, as an example the plants in Gujarat and Visakhapatnam, will have another advantage for exports and can logistically be armed to face stiff competition from cement plants within the interior of the country.Cement-June-2019
Due to the increasing demand in various sectors like housing, commercial construction and industrial construction, cement industry is predicted to succeed in 550-600 Million Tonnes once a year (MTPA) by the year 2025.
A large number of foreign players also are expected to enter the cement sector, due to the profit margins and steady demand.
1 Small scale Industry
Small scale industries are important because it helps in increasing employment and economic development of India. It improves the expansion of the country by increasing urban and rural growth. Role of Small and medium scale enterprises are to assist the government in increasing infrastructures and manufacturing industries, reducing issues like pollution, slums, poverty, and lots of development acts. Small scale manufacturing industries and cottage industries play a really important role within the economic development of India. If any amount of capital is invested in small scale industries it'll help in reducing unemployment in India and increasing self-employment. The industry may be a sector during which the assembly of products may be a segment of the economy. Allow us to learn more about the importance of Small scale industries and the way SSI helps in developing the country.
Previously, the definition of small scale industries depended upon the business’s capital and labor. This definition remains wont to demarcate between small, medium and large-scale industries.
The Central Government has the authority to work out capital investment requirements for small-scale industries. These requirements are listed under the Industries (Development and Regulation) Act, 1951.
A small enterprise during which investment in plant & machinery ranges between Rs. 25 lakhs to Rs. 5 crores may be a small-scale industry.
Similarly, for industries that provide services, the investment requirement is between Rs. 10 lakhs and Rs. 2 crores.
Role and Importance of Small Scale Industries
• Increases production
• Increases total exports
• Improves the utilization rate
• Opens new opportunities
• Advances welfare
Every small-scale industry plays an enormous role within the Indian economy. Aside from providing employment to crores of individuals , it's the additional advantage of minimum capital requirements. The govt also offers several tax benefits to SSI for this purpose.
Furthermore, they will exist in urban also as rural areas. Small Scale Industries are ready to compete with large-scale industries and multinational corporations due to this. Thanks to reasons like these, they're of great importance.
Learn more about Characteristics samples of Small Scale Industries here.
The following are some specific roles that SSIs play within the Indian economy:
1. SSI Increases Production
India is one among the world’s fastest growing economies within the world. Consequently, its production output is very large . It's pertinent to notice that SSIs contribute almost 40% of India’s gross industrial value.
These industries produce goods and services worth over Rs. 40 lakhs for each investment of Rs. 10 lakhs. Furthermore, the worth addition during this output increases by over 10%.
Here is another interesting statistic about Small scale industries. The amount of Small Scale Industries in India increased from around 8 lakhs in 1980 to over 30 lakhs in 2000.
This figure has grown even more in recent years due to the government’s ‘Ease of Doing Business’ policies.
As a results of this, the entire industrial production output rose tremendously within the previous couple of years. SSIs are, therefore, strongly liable for the expansion of India’s economy.
2. SSI Increases Export
Apart from producing more goods and services, SSIs are ready to export them in large numbers also .
Almost half India’s total exports lately come from small-scale businesses.
35% of the entire exports account for direct exports by SSIs, while indirect exports amount to fifteen .
Even trading houses and merchants help SSIs export their goods and services to foreign countries.
3. SSI Improves Employment Rate
It is important to notice firstly that tiny Scale Industries employs more people than all industries after agriculture.
Almost four persons can get financial condition if Rs. 10 lakhs are invested in fixed assets of small-scale sectors.
Furthermore, SSIs employ people in urban also as rural areas.
Consequently, this distributes employment patterns altogether parts of the country and prevents unemployment crisis.
4. SSI Open New Opportunities
Small-scale industries offer several advantages and opportunities for investments.
For example, they receive many tax benefits and rebates from the govt . The chance to earn profits from SSIs are big thanks to many reasons.
Firstly, SSIs are less capital intensive. They even receive support and funding easily.
Secondly, procuring manpower and raw materials is additionally relatively easier for them. Even the government’s export policies favour them heavily.
5. SSI Advances Welfare
Apart from providing profitable opportunities, Small Scale Industries play an outsized role in advancing welfare measures within the Indian economy also .
A large number of poor and marginalized sections of the population depend upon them for his or her sustenance.
These industries not only reduce poverty and income inequality but they also raise standards of living of poor people. Furthermore, they allow people to form a living with dignity.
Role of Small-Scale Industries during a Developing Economy
The case for the event of small-scale industries is especially strong in under-developed but developing countries like India.
These small-scale industries satisfy many of the investment criteria that one often prescribes for the planned development of the country.
Labour-intensive:
Firstly, small-scale industries are labour-intensive, i.e., labour-investment ratio in their case is sort of high. A given amount of capital invested in small-scale industrial undertakings is probably going to supply more employment, a minimum of within the short run, than an equivalent amount of capital invested in large-scale undertakings.
This is a really important matter for our country where many people are either unemployed or under-employed. Further, the encouragement of small-scale industry would serve to counteract the seasonal unemployment in agriculture and thus to utilise labour which could otherwise attend waste.
Capital-light:
Secondly, small-scale industries are capital-light, i.e., they have relatively smaller amount of capital than that required by large-scale industries, since the capital-output ratio is far smaller within the case of the previous . Thus, one among the good advantages of small-scale industries is that they create possible economies within the use of capital. Capital is already scarce in an under-developed country like India.
Capital Formation:
Thirdly, besides making possible economies within the use of Ike existing stock of capital, small-scale industry may call into being capital that might not otherwise have inherit existence. The spreading of industries over the countryside would encourage the habits of thrift and investment within the rural areas. Moreover, the enterprising Small manufacturer has got to scrape together capital where he can find it. He often manages to urge it from relatives and friends. This capital probably would never have inherit existence as productive capital, had it not been for the tiny enterpriser.
Skill-light:
Fourthly, the peculiar attraction of small-scale industries lies in their being skill-light. A large-scale industry involves an excellent deal of management and supervising skill—foremen, engineers, accountants, and so on. Like capital, these skills also are in very short supply in our country, and it's important to economies the maximum amount as possible in their use. Small-scale industry provides how of doing this and, at an equivalent time, provides industrial experience and is a training ground for an outsized number of small-scale managers.
In India, with an extended tradition of highly artistic products of industry , there exists a substantial ‘fund’ of local and traditional skill. Small industry could also be better able than large industry to require advantage of those existing traditional skills with minor adaptations.
Import-light:
Fifthly, small-scale industries are import-light, i.e., they use a comparatively low proportion of imported equipment and materials as compared with the entire amount utilized in them. A low-import intensity within the capital structure of the small-scale industries reduces the necessity for foreign capital or exchange , and thus obviates the balance of payments difficulties later, and currently retains within the country an outsized a part of whatever induced effects may materialize.
Quick Investment:
Sixthly, small-scale industries are of the “quick- Investment type”, i.e., those during which the time-lag between the execution of the investment project and therefore the start of flow of consumable goods is comparatively short. During a developing economy, with a high inflationary potential and wish for a rapid rise within the living standards, the importance of such quick-investment type industries can hardly be exaggerated. The small-scale industries have a high fruition co-efficient (i.e., a high ratio between planned output and investment) and also a brief fruition lag.
Decentralisation:
Seventhly, the event of small-scale industries will cause dispersion or decentralisation of industries, and can thus promote the thing of balanced regional development. a serious drawback within the industrial structure of an under-developed country is that regional distribution of industries is exceedingly uneven.
On the one hand, there's a disproportionate growth of large-scale industries during a few areas, and on the opposite , a virtual absence of such industries within the greater a part of the country. The event of small-scale industries will tend to correct this uneven distribution of industries within the country.
Equal Distribution of Income and Wealth:
Eighthly, small-scale and cottage industries have the extra advantage that, with decentralized industries, they secure a more even distribution of income and wealth. The event of large-scale industries tends to concentrate large incomes and wealth during a few hands. This is often undesirable from the social point view, because it leads to the exploitation of man by man. If also creates vested interests which put obstacles within the way of the economy marching towards its got’ of socialistic pattern of society.
Overcoming Territorial Immobility:
Lastly, by carrying the work to the worker, small-scale industries can overcome the difficulties of territorial immobility. Moreover, unlike large industries, small-scale industries don't create problems of slum housing, health and sanitation, etc., and therefore the attendant disease, misery and squalor. Thus, there's a robust case for encouraging small-scale industries in under-developed countries like India.
The crafts or the rural artisan’s value chain is fragmented. At present in this sector can be broadly categorized into five verticals or steps. It aims to demonstrate the different stages in craft production from producers to markets and inputs required at each stage.
It must be noted that each craft will have a slightly different set of processes.
1. Organization: Artisans are usually structured into groups through informal contracts between traders, master artisans and low-skilled artisans. More formal systems of artisan organization involve four main types of entities:
● Self Help Groups (SHGs) are set up with the help of external technical intermediaries such as nonprofits or through government schemes, and typically comprise 10-20 artisans, usually women.
SHGs serve as a form of social collateral, enabling artisans to establish linkages with input providers such as raw material suppliers, microfinance institutions and banks, and downstream players such as aggregators and retailers.
● Mutually Aided Co-operatives(MACs) are created to provide rural artisans with a platform for equitable participation. Legislated at the state government level, MACs enable artisans to pool funds as equity and own their production units. However, due to strong government influence, this structure has failed to gain popularity in most states other than Andhra Pradesh and Kerala.
2. Procuring and processing raw materials: Traditionally, raw materials used by rural artisans were widely available due to the close linkages between evolution of crafts and locally available materials. Further, the jajmani system, which consisted of a reciprocal relationship between artisanal castes and the wider village community for the supply of goods and services, provided artisans with access to community resources.
3. Production: Although techniques and processes vary widely from one craft to the next, crafts production generally takes place in households, with multiple family members engaged in different aspects of the process. Production is generally seasonal, with crafts activity being suspended during harvest season, as most artisans are also engaged in agriculture to supplement their livelihoods.
4. Aggregation and intermediary trade: Aggregation involves bringing together products from decentralized production units to enable economies of scale in transportation, storage and retail. Due to the dismal status of infrastructure and communication in India, aggregating products is a challenging task, and leads to many of the problems in the crafts supply chain today. Buyers and retailers lack incentives to overcome upstream, supply-side issues, which results in a loss of opportunities for artisans to access markets. Sign up for Newsletters Check out our popular newsletters and subscribe
5. Markets: The markets for the craft products can be broadly understood as local, retail shops – high-end as well as mainstream, exhibitions and exports. The contemporary markets, domestically as well as internationally, have grown with an expanding demand for ethnic products that have a story linked to them. However, these products are in low supply due to supply chain inefficiencies.
6. Demand: With the advent of globalization and the availability of cheaper and more varied products, crafts face severe competition in contemporary markets. They are typically perceived as traditional, old-fashioned and antithetical to modern tastes. There have been limited efforts to reposition the image of crafts and build consumer appreciation of the history and cultural identity associated with handmade products. In addition, there are few instances of traditional crafts being contemporized to fit with changing consumption patterns.
1 Problems of rural artisans
While crafts received royal and aristocratic patronage during pre-Independence days and played a central role in Gandhi’s independence struggle, they have slowly lost relevance with the advent of industrialization. Currently, the sector carries the stigma of inferiority and backwardness, and is viewed as “decorative, peripheral and elitist”. This is compounded by the Government’s treatment of crafts as a sunset industry, which has resulted in a lack of well-developed policies and programs to protect and strengthen the ecosystem for artisans.
The four main challenges facing artisans in creating sustainable livelihoods in today’s economy can be described as follows:
1. Low productivity –The sector’s informal nature and the low education of most artisans create issues such as: Unorganized production – As a largely unorganized sector, handicrafts faces problems such as a paucity of professional infrastructure such as work sheds, storage space, shipping and packing facilities. Low education – Many crafts require the entire household to participate in production in some capacity. In many cases, crafts also serve as a seasonal source of income for agricultural households. This means that children miss school, resulting in low education levels for the family overall. Outdated production methods – Artisans may also lack the financial capability to upgrade technology in production, or undergo necessary training on a regular basis, as would be available to them in a formal work setting. This compromises the quality of their products and raises the cost of production.
2. Inadequate inputs – There are three main issues: Lack of quality raw materials – Rural artisans often lack access to quality raw materials. Due to the low volumes required, they have low bargaining power and are forced to buy sub-standard materials at a higher price.
3. Information asymmetry: Due to their low education, artisans often cannot identify potential new markets for their products, nor do they understand the requirements for interacting with these markets. This reduces their understanding of the market potential of their goods, the prices of their products in different markets, government schemes instituted for their welfare and diversification opportunities.
4. Fragmented value chain Lack of market linkages – While consumers of crafts products are increasingly becoming urbanized, crafts continue to be sold through local markets; artisans have few opportunities to reach new consumers through relevant retail platforms such as department stores and shopping malls. Further, due to their rural orientation, artisans are often unable to access training and technology to supply their products to online markets. Dominance of middlemen – Although middlemen are necessary to enable effective market linkages, they often, if not always, exploit artisans by paying them a fraction of their fair wages. This may be due to lack of information on the part of middlemen about true manufacturing costs, or merely due to their ability to coerce artisans, who often lack bargaining power.
5. Lack of an enabling environment Neglect by central and state governments – The Government views the sector as a sunset industry, no longer relevant in India’s technology-driven economic growth. Thus, schemes designed for artisans tend to have low priority in terms of execution and assessment.
From 1947 to 2017, the Indian economy was premised on the concept of planning. This was carried through the Five-Year Plans, developed, executed, and monitored by the Planning Commission (1951-2014) and the NITI Aayog (2015-2017).
With the prime minister as the ex-officio chairman, the commission has a nominated deputy chairman, who holds the rank of a cabinet minister. Montek Singh Ahluwalia is the last deputy chairman of the commission (resigned on 26 May 2014). The Twelfth Plan completed its term in March 2017.
India launched its First FYP in 1951, immediately after independence, under socialist influence of the first prime minister, Jawaharlal Nehru.
The First Five-Year Plan was one of the most important, because it had a great role in the launching of Indian development after Independence. Thus, it strongly supported agriculture production and also launched the industrialization of the country (but less than the Second Plan, which focused on heavy industries). It built a particular system of mixed economy, with a great role for the public sector (with an emerging welfare state), as well as a growing private sector (represented by some personalities as those who published the Bombay Plan).s
First Plan (1951-1956) |
Second Plan (1956-1961) |
Third Plan (1961-1966) |
Plan Holidays ( 1966-1969) |
Fourth Plan (1969-1974) |
Fifth Plan (1974-1979) |
Rolling Plan (1978 -1980) |
Sixth Plan (1980-1985) |
Seventh Plan (1985-1990) |
Annual Plan(1990-1992) |
Eighth Plan (1992-1997) |
Ninth Plan (1997-2002) |
Tenth Plan (2002-2007) |
Eleventh Plan (2007-2012) |
Twelfth Plan (2012-2017) |
Twelfth Plan (2012–2017)
The Twelfth Five-Year Plan of the Government of India has been decided to achieve a growth rate of 8.2% but the National Development Council (NDC) on 27 December 2012 approved a growth rate of 8% for the Twelfth Plan.
The objectives of the Twelfth Five-Year Plan were:
a) To create 50 million new work opportunities in the non agriculture sector.
b) To remove gender and social gap in school enrolment.
c) To enhance access to higher education.
d) To reduce malnutrition among children aged 0–3 years.
e) To provide electricity to all villages.
f) To ensure that 50% of the rural population have accesses to proper drinking water.
g) To increase green cover by 1 million hectare every year.
h) To provide access to banking services to 90% of households.
Major current trends in foreign trade are as follows:
Current trends are towards the increasing foreign trade and interdependence of firms, markets and countries.
Intense competition among countries, industries, and firms on a global level is a recent development owed to the confluence of several major trends. Among these trends are:
1) Forced Dynamism:
International trade is forced to succumb to trends that shape the global political, cultural, and economic environment. International trade is a complex topic, because the environment it operates in is constantly changing. First, businesses are constantly pushing the frontiers of economic growth, technology, culture, and politics which also change the surrounding global society and global economic context. Secondly, factors external to international trade (e.g., developments in science and information technology) are constantly forcing international trade to change how they operate.
2) Cooperation among Countries:
Countries cooperate with each other in thousands of ways through international organisations, treaties, and consultations. Such cooperation generally encourages the globalization of business by eliminating restrictions on it and by outlining frameworks that reduce uncertainties about what companies will and will not be allowed to do. Countries cooperate:
i) To gain reciprocal advantages,
Ii) To attack problems they cannot solve alone, and
Iii) To deal with concerns that lie outside anyone’s territory.
Agreements on a variety of commercially related activities, such as transportation and trade, allow nations to gain reciprocal advantages. For example, groups of countries have agreed to allow foreign airlines to land in and fly over their territories, such as Canada’s and Russia’s agreements commencing in 2001 to allow polar over flights that will save five hours between New York and Hong Kong.
Groups of countries have also agreed to protect the property of foreign-owned companies and to permit foreign-made goods and services to enter their territories with fewer restrictions. In addition, countries cooperate on problems they cannot solve alone, such as by coordinating national economic programs (including interest rates) so that global economic conditions are minimally disrupted, and by restricting imports of certain products to protect endangered species.
Finally, countries set agreements on how to commercially exploit areas outside any of their territories. These include outer space (such as on the transmission of television programs), non-coastal areas of oceans and seas (such as on exploitation of minerals), and Antarctica (for example, limits on fishing within its coastal waters).
3) Liberalization of Cross-border Movements:
Every country restricts the movement across its borders of goods and services as well as of the resources, such as workers and capital, to produce them. Such restrictions make international trade cumbersome; further, because the restrictions may change at any time, the ability to sustain international trade is always uncertain. However, governments today impose fewer restrictions on cross-border movements than they did a decade or two ago, allowing companies to better take advantage of international opportunities. Governments have decreased restrictions because they believe that:
i) So-called open economies (having very few international restrictions) will give consumers better access to a greater variety of goods and services at lower prices,
Ii) Producers will become more efficient by competing against foreign companies, and
Iii) If they reduce their own restrictions, other countries will do the same.
4) Transfer of Technology:
Technology transfer is the process by which commercial technology is disseminated. This will take the form of a technology transfer transaction, which may or may not be a legally binding contract, but which will involve the communication, by the transferor, of the relevant knowledge to the recipient. It also includes non-commercial technology transfers, such as those found in international cooperation agreements between developed and developing states. Such agreements may relate to infrastructure or agricultural development, or to international; cooperation in the fields of research, education, employment or transport.
5) Growth in Emerging Markets:
The growth of emerging markets (e.g., India, China, Brazil, and other parts of Asia and South America especially) has impacted international trade in every way. The emerging markets have simultaneously increased the potential size and worth of current major international trade while also facilitating the emergence of a whole new generation of innovative companies. According to “A special report on innovation in emerging markets” by The Economist magazine, “The emerging world, long a source of cheap la, now rivals the rich countries for business innovation”.
The policy of protection can be employed through the use of various methods. A few of these are as follows:
(1) Tariffs (custom duties):
These are taxes on imports. These are usually ad-valorem, i.e. these are levied as a percentage of the price of the import.
Other features of tariff are:
(a) Tariffs that are used to restrict imports will be most effective if demand is elastic.
(b) Tariffs can also be used as a means of raising revenue. They will be more effective if demand is inelastic.
(c) Tariffs can also be used to raise the price of imported goods – to prevent ‘unfair’ competition for domestic producers.
(2) Quotas:
It implies fixing of a maximum limit on the quantity of a good that can be imported.
(3) Exchange Controls:
These include limits on the amount of foreign exchange made available to the residents for effecting transactions with rest of the world.
(4) Import Licensing:
Imports may be required to obtain prior permission from the government in the form of a licence, which may state the quantity of a good that can be imported.
(5) Embargoes:
This is a measure used by the government to completely ban certain imports or exports to certain countries.
(6) Export Taxes:
These can be used to increase the price of exports when the country has monopoly power in their supply.
(7) Subsidies:
These can take two forms. One, subsidies can be given to domestic goods to prevent competition from otherwise lower- priced imports. Two, subsidies on exportable goods are expected to increase the competitiveness of the subsidised exports in the international markets.
(8) Administrative Barriers:
Regulations may be designed in such a way as to target imports. Taxes may be exempted for local products or ingredients favouring domestic production.
(9) Procurement Policies:
This refers to government purchases to favour domestic producers.
(10) Support for Investment:
Domestic production and investments may be encouraged through different measures like lower interest rates, export credit facilities and import credit facilities, etc.
The development of transportation systems is embedded within the size and context during which they take place; from the local to the worldwide and from environmental, historical, technological and economic perspectives.
The Economic Importance of Transportation
Development is often defined as improving the welfare of a society through appropriate social, political and economic conditions. The expected outcomes are quantitative and qualitative improvements in human capital (e.g. Income and education levels) also as physical capital like infrastructures (utilities, transport, telecommunications).
The development of transportation systems takes place during a socioeconomic context. While development policies and methods tend to specialize in physical capital, recent years has seen a far better balance by including human capital issues. Regardless of the relative importance of physical versus human capital, development cannot occur without both interacting as infrastructures cannot remain effective without proper operations and maintenance while economic activities cannot happen without an infrastructure base. The highly transactional and service-oriented functions of the many transport activities underline the complex relationship between its physical and human capital needs. As an example , effective logistics both relies on infrastructures and managerial expertise.
Because of its intensive use of infrastructures, the transport sector is a crucial component of the economy and a standard tool used for development. This is often even more so during a global economy where economic opportunities are increasingly associated with the mobility of individuals and freight, including information and communication technologies.
Core. The foremost fundamental impacts of transportation relate to the physical capacity to convey passengers and goods and therefore the associated costs to support this mobility. This involves the setting of routes enabling new or existing interactions between economic entities.
Operational. Improvement within the time performance, notably in terms of reliability, also as reduced loss or damage. This suggests a far better utilization level of existing transportation assets benefiting its users as passengers and freight are conveyed sooner and with less delays.
Geographical. Access to a wider market base where economies of scale in production, distribution and consumption are often improved. Increases in productivity from the access to a bigger and more diverse base of inputs (raw materials, parts, energy or labor) and broader markets for diverse outputs (intermediate and finished goods). Another important geographical impact concerns the influence of transport on the situation of activities and its impacts ashore values.
The economic importance of the transportation industry can thus be assessed from a macroeconomic and microeconomic perspective:
At the macroeconomic level (the importance of transportation for an entire economy), transportation and therefore the mobility it confers are linked to A level of output, employment and income within a economy. In many developed countries, transportation accounts between 6% and 12% of the GDP. Watching a more comprehensive level to incorporate logistics costs, such costs can account between 6% and 25% of the GDP. Further, the worth of all transportation assets, including infrastructures and vehicles, can easily account for half the GDP of a complicated economy.
At the microeconomic level (the importance of transportation for specific parts of the economy) transportation is linked to producer, consumer and production costs. The importance of specific transport activities and infrastructure can thus be assessed for every sector of the economy. Usually, higher income levels are related to a greater share of transportation in consumption expenses. Transportation accounts on the average between 10% and 15% of household expenditures, while it accounts around 4% of the prices of every unit of output in manufacturing, but this figure varies greatly consistent with sub sectors.
FACTORS BEHIND THE EVENT OF TRANSPORT SYSTEMS
a) Services and their Associated Infrastructures
b) Economic Impacts of Transportation Infrastructure
c) Basic Location Factors
d) Share of Transport Costs in Product Prices and Average Haul Length
e) Employment in Transportation, us , 1990-2018
f) Share of Consumption by Sector and Income, Developing Countries, 2010
g) Transport Infrastructure Investment and Maintenance Spending as Share of GDP, 2015
Socioeconomic Benefits of Transportation
The added value and employment effects of transport services usually extend beyond those generated by that activity; indirect effects are salient. As an example , transportation companies purchase a neighborhood of their inputs (fuel, supplies, maintenance) from local suppliers. The assembly of those inputs generates additional value-added and employment within the local economy. The suppliers successively purchase goods and services from other local firms. There are further rounds of local re-spending which generate additional value-added and employment.
Similarly, households that receive income from employment in transport activities spend a number of their income on local goods and services. These purchases end in additional local jobs and added value. a number of the household income from these additional jobs is successively spent on local goods and services, thereby creating further jobs and income for local households.
As results of these successive rounds of re-spending within the framework of local purchases, the general impact on the economy exceeds the initial round of output, income and employment generated by passenger and freight transport activities. Thus, from a general standpoint the economic impacts of transportation are often direct, indirect and induced:
Direct impacts. The result of improved capacity and efficiency where transport provides employment, added value, larger markets also as time and costs improvements. The general demand of an economy is increasing.
Indirect impacts. The result of improved accessibility and economies of scale. Indirect value-added and jobs are the results of local purchases by companies directly dependent upon transport activity. Transport activities are liable for a good range of indirect value-added and employment effects, through the linkages of transport with other economic sectors (e.g. Office supply firms, equipment and parts suppliers, maintenance and repair services, insurance companies, consulting and other business services).
Transportation links together the factors of production during a complex web of relationships between producers and consumers. The result is usually a more efficient division of production by an exploitation of geographical comparative advantages, also because the means to develop economies of scale and scope. The productivity of space, capital and labor is thus enhanced with the efficiency of distribution and private mobility. Economic process is increasingly linked with transport developments, namely infrastructures, but also with managerial expertise, which is crucial for logistics. Thus, although transportation is an infrastructure intensive activity, hard assets must be supported by an array of sentimental assets, namely labor, management and knowledge systems. Decisions must be made about the way to use and operate transportation syst
Railways:
Railways. The second stage of commercial revolution within the 19th century was linked with the event and implementation of rail systems enabling more flexible and high capacity inland transportation systems. This opened substantial economic and social opportunities through the extraction of resources, the settlement of regions and therefore the growing mobility of freight and passengers.
Roads:
Roads. The 20th century saw the rapid development of comprehensive road transportation systems, like national highway systems, and of automobile manufacturing as a serious economic sector. Individual transportation became widely available to mid income social classes, particularly after the Second war . This was related to significant economic opportunities to service industrial and commercial markets with reliable door-to-door deliveries. The car also permitted new sorts of social opportunities, particularly with suburbanization.ems during a manner that optimize benefits and minimize costs and inconvenience.
Rail-Road Competition:
View Original In India, Railways is facing increasing competition from road transports. As for instance, the share of road transport in respect of freight has increased from 11 per cent in 1950-51 to 58 per cent in 1985-86 then declined to 40 per cent in 1992. But the share of railways in respect of freight has come down from 89 per cent in 1950-51 to 42 per cent in 1985-86 then again increased to 60 per cent in 1992.
Same is additionally the case in respect of passenger traffic. Thus through evil competition road transport in India is expanding its network over railway transport. Although such competition has enhanced the extent of efficiency and productivity but it's also generated various problems within the transportation.
Need for Rail-Road Co-ordination:
In order to get rid of such a wasteful competition, there should be proper rail-road co-ordination within the country in order that one can supplement the opposite services accordingly. Thus there should be a balanced growth of both these two modes of transport.
Thus proper rail-road co-ordination is suggested on the subsequent grounds:
(a) Huge investment within the fixed assets of railways should be utilized optimally for gaining maximum return;
(b) Lack of proper co-ordination between road and rail transport results in the establishment of dual system of competitive transportation resulting in huge wastage;
(c) Rail-road co-ordination is a crucial prerequisite for all-round development of the country; and
(d) Rail-road co-ordination is extremely important for the event of latest projects like construction of river bridges, new railway lines etc.
Measures Adopted for correct Rail-Road Co-ordination:
In order to achieve proper rail-road co-ordination the government has instituted various committees like:
(a) Mitchel Kirkness Committee, 1932,
(b) Rail-road conference, 1933,
(c) Central Transport Advisory Conference, 1935,:
(d) Wedgewood Committee, 1939,
(e) Road Transport Enquiry Committee, 1959 for avoiding rail-road, evil competition and to possess a far better understanding between these two modes of transport.
