INDUSTRY POLICY & PRIVATIZATION BUSINESS ENVIRONMENT NOTES

NDUSTRY POLICY & PRIVATIZATION

1. BUSINESS ENVIRONMENT UNIT-2 Ms G PAVITHRA ASSISTANT PROFESSOR PG & RESEARCH DEPARTMENT OF COMMERCE SRI RAMAKRISHNA COLLEGE OF ARTS & SCIENCE

2. Meaning and Definition of IP

3. OBJECTIVES OF INDUSTRIAL POLICY

4. Industrial policy

5. TIMELINE OF INDUSTRAIL POLICY REFORMS

6. INDUSTRAIL POLICY RESOLUTION

7. Industrial Policy Resolution, 1948 It declared the Indian economy as Mixed Economy Small scale and cottage industries  were given the importance The government restricted foreign investments Industries were divided into 4 categories Exclusive monopoly of central government(arms and ammunitions, production of atomic energy and management of railways) New undertaking undertaken only by state(coal, iron and steel, aircraft manufacturing, ship building, telegraph, telephone etc.) Industries to be regulated by the government(Industries of basic importance) Open to private enterprise, individuals and cooperatives(remaining )

8. Industrial Policy Resolution, 1956 (IPR 1956) This policy laid down the basic framework of Industrial Policy This policy is also known as the Economic Constitution of India It is classified into three sectors Schedule A – which covers Public Sector (17 Industries) Schedule B – covering Mixed Sector (i.e. Public & Private) (12 Industries) Schedule C – only Private Industries This has provisions for Public Sector, Small Scale Industry, Foreign Investment. To meet new challenges, from time to time, it was modified through statements in 1973, 1977, and 1980.

9. Industrial Policy Statement, 1977 This policy was an extension of the 1956 policy. The main was employment to the poor and reduction in the concentration of wealth. This policy majorly focused on Decentralization It gave priority to small scale Industries It created a new unit called “Tiny Unit” This policy imposed restrictions on Multinational Companies (MNC).

10. Industrial Policy Statement, 1980 The Industrial Policy Statement of 1980 addressed the need for promoting competition in the domestic market, modernization, selective Liberalization, and technological up-gradation. It liberalized licensing and provided for the automatic expansion of capacity. Due to this policy, the MRTP Act (Monopolies Restrictive Trade Practices) and FERA Act ( Foreign Exchange Regulation Act , 1973) were introduced. The objective was to liberalize the industrial sector to increase industrial productivity and competitiveness of the industrial sector. The policy laid the foundation for an increasingly competitive export-based and for encouraging foreign investment in high-technology areas.

11. New Industrial Policy, 1991 The New Industrial Policy, 1991 had the main objective of providing facilities to market forces and to increase efficiency. Larger roles were provided by L – Liberalization (Reduction of government control) P – Privatization (Increasing the role & scope of the private sector) G – Globalization (Integration of the Indian economy with the world economy)

12. PUBLIC SECTOR The public sector is the portion of the economy that the government controls and manages. It consists of entities that offer public goods and services, including national defense, law enforcement, public education, health care, social welfare, and infrastructure development. Its purpose is to provide essential goods and services to the general public and ensure the well-being of the society as a whole.

13. PRIVATE SECTOR

14. Sole Proprietorship:  A business owned, incorporated, and sustained by one person. The proprietor can employ others to conduct and manage the business. It bears an  unlimited liability  towards the business debts. Partnerships:  In partnerships, two or more people conduct a business. It has fewer legal complications than a company. The partners are subjected to unlimited personal liability for the business  debts . Companies:  It is created to fulfill organizational goals. A company is often funded by debt equity. It enjoys a separate legal identity and has certain rights. The owners of a company are called shareholders. These people invest capital and are the prime decision-makers for business-related matters.

15. Joint Stock Companies A joint stock company is an organization which is owned jointly by all its shareholders. Here, all the stakeholders have a specific portion of stock owned, usually displayed as a share. Example of Joint Stock Company Few examples are mentioned below. Indian Oil Corporation Ltd. Tata Motors Ltd. Reliance Industries Ltd.

16. Features Features of Joint Stock Company Separate Legal Entity –  A joint stock company is an individual legal entity, apart from the persons involved. It can own assets and can because it is an entity it can sue or can be sued. Whereas a partnership or a sole proprietor, it has no such legal existence apart from the person involved in it. So the members of the joint stock company are not liable to the company and are not dependent on each other for business activities. Perpetual –  Once a firm is born, it can only be dissolved by the functioning of law. So, company life is not affected even if its member keeps changing. Number of Members – For a public limited company, there can be an unlimited number of members but minimum being seven. For a private limited company, only two members. In general, a partnership firm cannot have more than 10 members in one business. Limited Liability – In this type of company, the liability of the company’s shareholders is limited. However, no member can liquidate the personal assets to pay the debts of a firm . Transferable share –  A company’s shareholder without consulting can transfer his shares to others. Whereas, in a partnership firm without any approval of other partners, a partner cannot move his share. Incorporation –  For a firm to be accepted as an individual legal entity, it has to be incorporated. So, it is compulsory to register a firm under a joint stock company .

17. Types of Joint Stock Company The joint stock company is divided into three different types. Chartered Company – A firm incorporated by the king or the head of the state is known as a chartered company. Statutory Company – A company which is formed by a particular act of parliament is known as a statutory company. Here, all the power, object, right, and responsibility are all defined by the act. Registered Company – An organization that is formed by registering under the law of the company comes under a registered company.

18. CO-OPERATIVE SOCIETY The word “ cooperative ” means to work together and cooperate with each other, similarly, in a cooperative society, a group of people forms a voluntary association to benefit the members and work for the betterment of society, especially for the weaker sections.  A  cooperative society  works with the aim of self-help basically for its members. It requires the agreement of at least ten adult members to form a society. For the smooth functioning of a cooperative society, an act was formed, and each cooperative society is governed by the rules and regulation of the act called “ The Cooperatives Societies Act 1912 “

19. Features of Cooperative Society

20. BASIS FOR COMPARISON PRIVATIZATION DISINVESTMENT Meaning Privatization is the process of transfer of ownership of a public sector undertaking to the private sector. Disinvestment is a process in which an organization or government sells or liquidates the assets which it owns. Involves Change in ownership Dilution of ownership Shareholding of Government More than 50% Less than 50% Change in management Results in a change in management May or may not result in a change in management Scope Narrow Comparatively wide Objective To provide financial support and to enhance the efficiency of the concern. To make effective use of the public resource, and to increase operational and dynamic efficiency.

21. Benefits under Privatization

22. Arguments under Privatization

23. Privatization in India It means the transfer of ownership, management, and control of the public sector enterprises to the private sector. Privatization can suggest several things including the migration of something from the public sector to the private sector.