DEVELOPMENT (INDUSTRIAL AND SERVICE SECTOR) – POLICIES, MEASURES AND ACHIEVEMENTS / ISSUES

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1. DOMESTIC RESOURCE MOBILISATION, THOUGH CENTRAL TO THE PROCESS OF INDIAN ECONOMIC GROWTH, IS CHARECTERISED BY SEVERAL CONSTRAINTS ? EXPLAIN.
2. THE CENTRAL GOVERNMENT FREQUENTLY COMPLAINS ON THE POOR PERFORMANCE OF THE STATE GOVERNMENTS IN ERADICATING SUFFERING OF THE VULNERABLE SECTIONS OF THE SOCIETY. RESTRUCTURING OF CENTRALLY SPONSORED SCHEMES ACROSS THE SECTORS FOR AMELIORATING THE CAUSE OF VULNERABLE SECTIONS OF POPULATION AIMS AT PROVIDING FLEXIBILITY TO THE STATES IN BETTER IMPLEMANTATION. CRITICALLY EVALUATE.
3.EXAMINE THE IMPACT OF LIBERALISATION ON COMPANIES OWNED BY INDIANS. ARE THEY COMPETING WITH THE MNC’S SATISFACTORILY ? DISCUSS.
4. NORMALLY COUNTRIES SHIFT FROM AGRICULTURE TO INDUSTRY AND THEN LATER TO SERVICES, BUT INDIA SHIFTED DIRECTLY FROM AGRICULTURE TO SERVICES. WHAT ARE THE REASONS FOR THE HUGE GROWTH OF SERVICES VIS-A-VIS INDUSTRY IN THE COUNTRY ? CAN INDIA BECOME A DEVELOPED COUNTRY WITHOUT A STRONG INDUSTRIAL BASE ?
5. LIST THE MAIN OBJECTIVES OF NATIONAL MANUFACTURING POLICY (MNP)
6.THERE IS A CLEAR ACKNOWLEDGEMENT THAT SPECIAL ECONOMIC ZONES (SEZ’S) ARE A TOOL OF INDUSTRIAL DEVELOPMENT, MANUFACTURING AND EXPORTS. RECOGNISING THIS POTENTIAL, THE WHOLE INSTRUMENTALITY OF SEZ’S REQUIRE AUGMENTATION. DISCUSS THE ISSSUEPLAGUING THE SUCCESS OF SEZ’S WITH RESPECT TO TAXATION, GOVERNING LAWS AND ADMINISTRATION.

7. HAS THE INDIAN GOVT. RESPONDED ADEQUATELY TO THE DEMANDS OF LIBERALISATION, PRIVATISATION AND GLOBALISATION STARTED IN 1991? WHAT CAN THE GOVT. DO TO BE RESPONSIVE TO THE IMPORTANT CHANGE?

8. “TRADITIONAL BUREAUCRATIC STRUCTURE AND CULTURE HAVE HAMPERED THE PROCESS OF SOCIO-ECONOMIC DEVELOPMENT IN INDIA.” DISCUSS.

9.“TO ENSURE EFFECTIVE IMPLEMENTATION OF POLICIES ADDRESSING WATER, SANITATION AND HYGIENE NEEDS THE IDENTIFICATION OF BENEFICIARY SEGMENTS IS TO BE SYNCHRONISED WITH THE ANTICIPATED OUTCOMES.” EXAMINE THE STATEMENT IN THE CONTEXT OF THE ‘WASH SCHEME’?

10.“INDUSTRIAL GROWTH RATE HAS LAGGED BEHIND IN THE OVERALL GROWTH OF GDP IN THE POST-REFORM PERIOD.” GIVE REASONS. HOW FAR THE RECENT CHANGES IN INDUSTRIAL-POLICY ARE CAPABLE OF INCREASING THE INDUSTRIAL GROWTH RATE?

11. DESPITE CONSISTENT EXPERIENCE OF HIGH GROWTH, INDIA STILL GOES WITH THE LOWEST INDICATORS OF HUMAN DEVELOPMENT. EXAMINE THE ISSUES THAT MAKE BALANCED AND INCLUSIVE DEVELOPMENT ELUSIVE.

12. THE NEED FOR COOPERATION AMONG VARIOUS SERVICE SECTORS HAS BEEN AN INHERENT COMPONENT OF DEVELOPMENT DISCOURSE. PARTNERSHIP BRIDGES THE GAP AMONG THE SECTORS. IT ALSO SETS IN MOTION A CULTURE OF ‘COLLABORATION’ AND ‘TEAM SPIRIT’. IN THE LIGHT OF STATEMENTS ABOVE EXAMINE INDIA’S DEVELOPMENT PROCESS.

 

          MODEL ANSWERS OF THE ABOVE QUESTIONS 

 

1. DOMESTIC RESOURCE MOBILISATION, THOUGH CENTRAL TO THE PROCESS OF INDIAN ECONOMIC GROWTH, IS CHARECTERISED BY SEVERAL CONSTRAINTS ? EXPLAIN.

Domestic resource mobilization refers to generating savings and taxes from domestic resources and allocating them to economically and socially productive activities instead of using external sources of financing.

TYPES OF RESOURCES IN INDIA ARE AS FOLLOWS-:

a)Natural Resources – Coal, Petroleum, Natural Gas, Water, Spectrum etc.

b)Human Resources – The labour force and intellectual capacity of a nation

Mobilization of Natural Resources

India, though a country with sufficient reserves, due to policy bottlenecks, is importing coal and iron. This is increasing our Current Account Deficit.

Mobilization of Human Resources

Organizing human potential for ready use is necessary for growth of India. In-fact, as country of 125 crore people, India now is eyeing more on its human resource potential. The demographic dividend is also in favour of India.

  • Mobilization of human resources highlights the need to empower human resources.
  • Weaker sections like women, children, SC, ST, OBC etc should be brought into mainstream.
  • There should be right employment opportunities for human resources, and when there is lack of skill the job demands, there should be skill development programs.
  • Utilize the demographic dividend.
  • India is currently levering on its technologists – engineers, doctors and scientists.

Mobilization of Financial Resources

If a country needs to grow, then more goods and services should be produced. The production can be done by government sector, private sector or in PPP mode. But for that, the economic resources of a country should be mobilised.

In India, despite having good savings rate, domestic investment is less. Indians are investing in less productive assets like gold and consumer durable.  If India needs to grow, there should be more investments in agriculture, manufacturing or services.

  • IMPORTANCE OF DOMESTIC RESOURCE MOBILISATION (DRM)

  1. Greater reliance on DRM is vital to elevating economic growth, accelerating poverty reduction and underpinning sustained development.
  2. High-growth economies typically save 20-30 per cent or more of their income in order to finance public and private investment.
  3. DRM is potentially more congruent with domestic ownership than external resources.
  4. Foreign aid invariably carries restrictions and conditionality.
  5. FDI is primarily oriented to the commercial objectives of the investor, not the principal development priorities of the host country.
  6. DRM is more predictable and less volatile than aid, export earnings, or FDI.
  • ISSUES WITH DOMESTIC RESOURCE MOBILISATION

  1. DIVERSIFIES AND EXPANDS RESOURCES
  2. FORMULATES AN INDEPENDENT BUDGET {FUND}
  3. ALLOWS SPENDING AND UTILISATION OF RESOURCES
  4. MINIMISE DEPENDENCY ON OTHERS
  5. MAXIMISES USE OF DOMESTIC CAPITAL AND SKILLS
  6. SUSTAINS THE NATION AND ITS POLICIES

 

2.THE CENTRAL GOVERNMENT FREQUENTLY COMPLAINS ON THE POOR PERFORMANCE OF THE STATE GOVERNMENTS IN ERADICATING SUFFERING OF THE VULNERABLE SECTIONS OF THE SOCIETY. RESTRUCTURING OF CENTRALLY SPONSORED SCHEMES ACROSS THE SECTORS FOR AMELIORATING THE CAUSE OF VULNERABLE SECTIONS OF POPULATION AIMS AT PROVIDING FLEXIBILITY TO THE STATES IN BETTER IMPLEMANTATION. CRITICALLY EVALUATE.

 

Centrally Sponsored Schemes are schemes that are implemented by state governments  but are largely funded by the Central Government with a defined State Government share. Some examples of such schemes are Mahatma Gandhi National Rural Employment Guarantee Act, Pradhan Mantri Gram Sadak Yojana etc.

TYPES OF SCHEMES INITIATED BY THE CENTRE-

A) CENTRAL SECTOR SCHEMES

B) CENTRALLY SPONSORED SCHEMES

a) core schemes

b) core of the core scheme

UNDER ARTICLE 22 OF OUR CONSTITUTION, the Union or a State may make any grants for any public purpose, notwithstanding that the purpose is not one with respect to which Parliament or the Legislature of the State, as the case may be, may make laws.

DIFFERENCE BETWEEN CENTRALLY SPONSORED SCHEMES AND CENTRAL SECTOR SCHEMES

Centrally Sponsored Schemes are different from Central Sector Schemes in the sense that Central Sector Schemes are implemented by Center directly while Centrally Sponsored Schemes are implemented by states.

CSS, Flagship Schemes and ACA: CSSs are backed by Central government grant money. They have been implemented by State governments over at least ten Five Year Plans. Out of the Centrally sponsored schemes, Government gives priority to certain special schemes to achieve social objectives. These schemes are called Flagship schemes. Schemes covered under additional central assistance are known as ACA. Conceptually both CSS and Additional Central Assistance (ACA) Schemes have been passed by the Central Government to the State governments. The difference between the two has arisen because of the historical evolution and the way these are being budgeted and controlled and release of funds takes place. In case of CSS, the budgets are allocated under ministries concerned themselves and the entire process of release is also done by them.

SOME EXAMPLES OF CENTRALLY SPONSORED SCHEMES

  • Rashtriya Krishi Vikas Yojana (RKVY)
  • National Rural Health Mission
  • Sarva Shiksha Abhiyan (SSA)
  • National Rural Employment Guarantee Scheme

SOME ISSUES WITH CENTRALLY SPONSORED SCHEMES

  • CSS dictate Centers’ agenda and priorities which may not be relevant for states.
  • CSS offers little flexibility for the states.
  • Needs of states differ among themselves and a universal CSS package may not be practical in all cases.
  • Many CSS which offers only partial support from Center may impose a burden on states.

RECOMMENDATIONS OF CHATURVEDI COMMITTEE

  • CSS has multiple objectives and service delivery standards are not clearly defined.
  • In principle, there should be consultations with states in designing the schemes, but this is hardly done.
  • “The one-size-fits-all” approach cannot succeed in a large and diverse country like India.
WAY FORWARD
  • GROSS BUDGETARY SUPPORT CAN BE EXTENDED TO SOME STATES AS WELL
  • REWARDS SHOULD BE GIVEN FOR BETTER PERFORMANCE OF STATES WITH MORE ALLOCATION OF FUNDS
  • INTERSTATE COUNCIL SHOULD BE AUTHORIZED TO SOLVE SUCH ISSUES

 

3.EXAMINE THE IMPACT OF LIBERALISATION ON COMPANIES OWNED BY INDIANS. ARE THEY COMPETING WITH THE MNC’S SATISFACTORILY ? DISCUSS.

Liberalisation is the process or means of the elimination of control of the state over economic activities.It provides a greater autonomy to the business enterprises in decision making and eliminates govt. interference

HISTORY OF LIBERALISATION IN INDIA

Some liberalisation proposals were prefaced in the 1980s in areas of export-import policy, technology up-gradation, fiscal policy, and foreign investment, industrial licensing, and economic reform policies launched in 1991 were more general.

Liberalisation in India

With the arrival of liberalisation, the government has regulated the private sector organisations to conduct business transactions with fewer restrictions. The economic liberalisation in india reduced almost all the barriers/ obstacles over the control of the economy to the private sector

Objectives

  • To boost competition between domestic businesses
  • To promote foreign trade and regulate imports and exports
  • To improve the technology and foreign capital
  • To develop a global market of a country
  • To reduce the debt burden of a country

Reforms under Liberalisation

  • Deregulation of the Industrial Sector
  • Financial Sector Reforms
  • Tax Reforms
  • Foreign Exchange Reforms
  • Foreign Trade Policy Reforms

Positive Impacts of Liberalisation in India

  • Free flow of capital
  • Diversity for investors to invest in variety of assets
  • Impact on agriculture

Negative Impact of Liberalisation in India

  • Small scale industries got shut down or adjusted to the technological development after liberalisation
  • Mergers and acquisitions of small businesses by the big companies

 

4.NORMALLY COUNTRIES SHIFT FROM AGRICULTURE TO INDUSTRY AND THEN LATER TO SERVICES, BUT INDIA SHIFTED DIRECTLY FROM AGRICULTURE TO SERVICES. WHAT ARE THE REASONS FOR THE HUGE GROWTH OF SERVICES VIS-A-VIS INDUSTRY IN THE COUNTRY ? CAN INDIA BECOME A DEVELOPED COUNTRY WITHOUT A STRONG INDUSTRIAL BASE ?

India’s economy under the british colonial rule remained fundamentally agrarian – about 85 percent of the country’s population lived mostly in villages and derived livelihood directly or indirectly from agriculture.The contribution of both agricultur and industries during the colonial era and some decades after independence was very minimal as compared to the services sector

ISSUES INDIA HAD IN AGRICULTURE SECTOR

  • VARIOUS LAND SETTLEMENT SYSTEMS ADOPTED BY THE BRITISH GOVT. WHICH WERE NOT  BENEFICIAL FOR THE PEASANTS
  • LOW LEVELES OF TECHNOLOGY
  • LACK OF IRRIGATION FACILITIES
  • LACK OF RESOURCES WITH THE TENANTS, SMALL FARMERS AND SHARECROPPERS DUE TO SOME FARMERS SHIFTING FROM FOOD CROPS TO COMMERCIAL CROPS

ISSUES INDIA HAD IN THE INDUSTRIAL SECTOR-

  • TWO-FOLD POLICY OF THE BRITISH (i.e REDUCING INDIA TO THE STATUS OF A MERE EXPORTER OF IMPORTANT RAW MATERIALS FOR THE INDUSTRIES IN BRITAIN AND TURNING INDIA INTO A SPRAWLING MARKET FOR THE FINISHED PRODUCTS OF THOSE INDUSTRIES)
  • INDUSTRIES IN INDIA REMAINED CONFINED ONLY TO MAHARSAHTRA, GUJARAT AND WEST BENGAL
  • NO CAPITAL GOODS INDUSTRIES
  • LOW CONTRIBUTION IN GDP

THESE WERE SOME OF THE MAJOR REASONS WHY INDIA SHIFTED DIRECTLY FROM AGRICULTURAL SECTOR TOWARDS THE SERVICES SECTOR RATHER THAN SHIFTING FROM MANUFACTURING / INDUSTRIAL SECTOR TOWARDS THE SERVICES SECTOR UNLIKE SOME OTHER DEVELOPED NATIONS

 

5. LIST THE MAIN OBJECTIVES OF NATIONAL MANUFACTURING POLICY (NMP)

THE NMP WAS BROUGHT IN WITH THE OBJECTIVE TO PROMOTE THE MANUFACTURING SECTOR IN THE COUNTRY

Objectives of National Manufacturing Policy

  • Increase the rate of job creation in manufacturing to create 100 million additional jobs by 2022.
  • Creation of appropriate skill sets among the rural migrant and urban poor to make growth inclusive.
  • Increase domestic value addition and technological ‘depth’ in manufacturing.
  • Enhance global competitiveness of Indian manufacturing through appropriate policy support.
  • MANUFACTURING SECTOR TO CONTRIBUTE ATLEAST 25 PERCENT OF THE GDP BY 2022

Significance of National manufacturing Policy

  • This is a holistic policy for the promotion of the manufacturing sector in the country.
  • NMP helps in improving the performance of Small and Medium Enterprises (SMEs) by providing incentives for their growth.
  • Industrial training and skill up-gradation measures for the young workforce.
  • NMP proposed rationalisation and simplification of business regulations to reduce the burden of procedural and regulatory compliance on businesses.
  • Special Purpose Vehicle (SPV) will be constituted by the State Government to discharge the functions specified in the policy.

Difference between NIMZ and SEZs

What are NIMZs?

The NIMZs are envisaged as integrated industrial townships with state-of-the-art infrastructure; land use on the basis of zoning; clean and energy-efficient technology; necessary social infrastructure; skill development facilities etc. to provide a productive environment for persons transitioning from the primary to the secondary and tertiary sectors.

The main objective of Special Economic Zones is for the advancement of exports. While NIMZ is based on the idea of industrial growth that involves collaboration with the local government. NIMZ is also different from SEZ in other aspects such as level of infrastructure planning, and regulatory procedures:

NIMZs SEZ
They are established Under the National Manufacturing Policy in 2011 They are established under the Special Economic Zones Act, 2005
NIMs would have a minimum area of 5000 hectares Size of SEZs varies from 10-1000 hectares depending on the sector
Income tax exemption To small and medium enterprises Income tax exemption of 100% for the first 5 years and 50% for the next 5 years
Environmental Impact Assessment guidelines would be provided by the state government EIA guidelines would be provided by the central government.

 

 

6.THERE IS A CLEAR ACKNOWLEDGEMENT THAT SPECIAL ECONOMIC ZONES (SEZ’S) ARE A TOOL OF INDUSTRIAL DEVELOPMENT, MANUFACTURING AND EXPORTS. RECOGNISING THIS POTENTIAL, THE WHOLE INSTRUMENTALITY OF SEZ’S REQUIRE AUGMENTATION. DISCUSS THE ISSSUE PLAGUING THE SUCCESS OF SEZ’S WITH RESPECT TO TAXATION, GOVERNING LAWS AND ADMINISTRATION.

– An SEZ is a territory within a country that is typically duty-free (Fiscal Concession) and has different business and commercial laws chiefly to encourage investment and create employment.

CURRENTLY THERE ARE 379 SEZ’S OUT OF WHICH 265 ARE OPERATIONAL UNDER THE SEZ’S ACT, 2005, WITH THE HIGHEST NUMBER OF SEZ’S BEING IN TAMIL NADU FOLLOWED BY MAHARASHTRA AND KARNATAKA

  • Objectives of the SEZ Act:
    • To create additional economic activity.
    • To boost the export of goods and services.
    • To generate employment.
    • To boost domestic and foreign investments.
    • To develop infrastructure facilities.

BENEFITS OF SEZ’S

  • INCREASES THE OVERALL EASE OF DOING BUSINESS
  • INCREASES JOB OPPORTUNITIES AND THUS EMPLOYMENT
  • SKILLING OF LABOUR TAKES PLACE
  • PROMOTES MORE INDUSTRIALISATION
  • INCREASE IN PRODUCTIVITY OF THE INDUSTRIES

CHALLENGES WITH SEZ’S

  •  Illicit activities such as counterfeiting, money laundering, and smuggling may take place
  • Poorly managed SEZs also present a threat to international security, especially in the area of weapons proliferation.
  • Unutilised land of sez’s due to pandemic
  • Existence of multiple models like delhi-mumbai industrial model, NIMZ’S, etc poses a challenge in integrating various models
  • India has been less competent as compared to ASEAN countries

WAY FORWARD-

(AS PER BABA KALYANI COMMITTEE RECOMMENDATIONS)

  • PROMOTION OF MSME INVESTMENTS IN SEZ’S
  • Infrastructure status to improve access to finance and enable long term borrowing.
  • Dispute resolution through arbitration and commercial courts.
  • Extension of Sunset Clause and retaining tax or duty benefits.
  • Promote integrated industrial and urban development– walk to work zones, States and centers to coordinate on the framework development to bring linkages between all initiatives.

 

7.HAS THE INDIAN GOVT. RESPONDED ADEQUATELY TO THE DEMANDS OF LIBERALISATION, PRIVATISATION AND GLOBALISATION STARTED IN 1991? WHAT CAN THE GOVT. DO TO BE RESPONSIVE TO THE IMPORTANT CHANGE?

 

 

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