INDIAN ECONOMY

INDUSTRIAL POLICIES AND PROGRAMMES IN INDIA

Overview
  • Industrial policies and programmes in India fall under the purview of the Ministry of Heavy Industry and Public Enterprises, and the Ministry of Commerce and Industry
  • The Ministry of Heavy Industry and Public Enterprise contains two departments:
    • Department of Heavy Industries
    • Department of Public Enterprises
  • The Ministry of Commerce and Industry has two departments:
    • Department of Commerce
    • Department of Industrial Policy and Promotion
  • Most industrial policies thus fall under the Department of Heavy Industries and the Department of Industrial Policy and Promotion
Compulsory licensing
  • The government requires compulsory licenses for certain specified industries
  • This licensing is mainly on account of environmental and strategic concerns
  • Industries requiring compulsory licensing include
    • Alcoholic drinks
    • Cigars and cigarettes made from tobacco and tobacco substitutes
    • Aerospace and defence equipment
    • All items related to use of atomic energy
    • Explosives
    • Hazardous chemicals
  • In addition to the above, certain items are reserved for manufacture by small scale industries only. Non-small scale industries are required to obtain licenses and undertake an export obligation of 50%
  • Drugs and pharmaceuticals were taken off the compulsory list in 2005
INDUSTRIAL POLICIES
Automobile Policy
  1. Objectives of the policy include
    • Emerge as a global source for automobile components
    • Establish an international hub for manufacture of small passenger cars, and a key centre for tractors and two-wheelers
    • Ensure a transition to open trade at minimal risk to the economy
    • Assist development of vehicles using alternative energy sources
    • Development of safety and environment standards at par with international standards
  2. The Policy assures automatic approval for FDI up to 100%
  3. Used vehicles imported into the country to meet environmental standards
  4. The Policy is implemented by the Department of Heavy Industry, Ministry of Industry and Public Enterprises
Industrial Policy
  • Launched in 1991
  • Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
  • Objectives include
    • Maintain sustained growth
    • Enhance gainful employment
    • Optimal utilization of human resources
    • Attain international competitiveness
  • The Policy enshrines the liberalisation of industrial licensing policy
  • The Policy enshrines the establishment of Software Technology Parks (STP) and Electronic Hardware Technology Parks (EHTP)
FDI Policy
  • India has one of the most liberal FDI policies among developing countries
  • FDI up to 100% is allowed in the automatic route in all activities except the following, which require prior approval
    • Prohibited sectors
    • Industries that require a compulsory license
    • Proposals in which the foreign collaborator has an existing collaboration in the same field
    • Acquisition of shares in an Indian company in the financial services sector
  • In the automatic route, no governmental approval is required
  • FDI in activities not covered under the automatic route, approval from Government in required. Such approvals are granted by the Foreign Investment Promotion Board
  • Sectors prohibited for FDI include
    • Gambling and betting
    • Lottery
    • Atomic energy
    • Retail trading
    • Agriculture (except Horticulture, animal husbandry) and plantations (except tea plantations)
North East Industrial and Investment Promotion Policy (NEIIP)
  • Launched in 2007
  • Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
  • Covers Arunachal Pradesh, Assam, Manipur, Mizoram, Nagaland, Meghalaya, Tripura and Sikkim
  • Major initiatives include subsidy for infrastructure expansion (25%), exemption from income tax and excise duty (100%)
  • Industries covered by the Policy include
    • Services
    • Bio technology
    • Power generation
  • The nodal agency for the Policy is the North East Industrial Development Finance Corporation (NEDFi)
INDUSTRIAL PROGRAMMES AND SCHEMES
Indian Leather Development Programme (ILDP)
  • Launched in 2007
  • Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
  • Objectives of the programme include
    • Augmentation of raw material base
    • Enhancement of capacity
    • Addressing environmental concerns
    • Global marketing of Indian leather
  • Activities covered under the scheme include
    • Modernisation of machinery
    • Hardware and IT solutions
    • Worker safety
    • Environmental and waste management
Industrial Infrastructure Upgradation Scheme
  • Launched in 2001
  • Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
  • Central government to sponsor 75% of expenditure
  • Activities covered under the scheme include
    • Physical infrastructure (such as road, water etc)
    • Effluent treatment, waste disposal
    • IT infrastructure
    • R&D infrastructure
    • Quality and benchmarking infrastructure
    • Marketing infrastructure
Industrial Park Scheme
  • Launched in 2002
  • Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
  • Envisages the establishment of
    • Industrial model towns for the development of industrial infrastructure
    • Industrial parks with facilities for industrial purposes
    • Growth Centres, to act as hubs for industrial activity in the under developed areas
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