TS Inter 2nd Year Economics Study Material Chapter 6 Industrial Sector

Telangana TSBIE TS Inter 2nd Year Economics Study Material 6th Lesson Industrial Sector Textbook Questions and Answers.

TS Inter 2nd Year Economics Study Material 6th Lesson Industrial Sector

Essay Questions

Question 1.
Explain the pattern of Industrial development in India.
Answer:
Pattern of Industrial Development in India :
The pattern of industrial development in India was determined by the state of economy in which the British left us. The British had used India as a source of cheap raw materials and a lucrative market for their finished products and they had not made any effort to develop the infrastructure. After getting independence, India immediately felt the need for capital goods and it was decided to promote the rapid growth of capital goods industries.

Almost till the end of the Third Five Year Plan, India had to import a variety of capital goods including iron and steel, transport equipment and Various kinds of machinery. But, the situation has radically changed now. India is now in a position to export these capital goods even to the technologically advanced countries of western Europe, America and Russia.

A significant feature of industrial development in India has been the phenomenal growth of the public sector. This sector comprises public utility services like the railways, road transport, post and telegraph, power and irrigation projects, departmental under takings of the central and state governments including the defense production establishments, and a number of other industrial undertakings which are wholly supported by the central government.

The public sector now contributes about one-fifth of the share of industrial sector in the national income knd the surpluses earned by it form an important source of non-tax revene of the government. It also offers job opportunities to large number of people.

With the initiation of the Indian five year plans in 1951, it was imperative that the perspective change in favour of industrial development of India as well as simultaneous development of agriculture. Development of agroindustries, village industries and small scale enterprises form an essential part of industrial development process.

According to the state-wise analysis of the absolute figures of working capital, employment and number of factories, Maharashtra continues to remain at the top. Next fo it Tamil Nadu followed by Gujarat, erstwhile Andhra Pradesh and Uttar Pradesh in respect of number of factories and workers employed. However, in terms of working capital, Gujarat occupies second place followed by Tamil Nadu, Uttar Pradesh, Karnataka, erstwhile Andhra Pradesh and Haryana.

It is heartening that due to the concerted effors made by the government for industrial development, India became the 6th industrialized country of the world having achieved a re-markable distinction in production of a variety of products and generation of employment. But unplanned efforts by the central and state governments did not control the emergence of uneven industrial development in the country.

Question 2.
Analyse the nature of Industrial growth in India.
Answer:
Industrial Growth in India :
It is a well-known fact that British government never intended to develop the industries in our country during pre-independence period. After independence, the people of this country expected high hopes from the government for the betterment of their life. It is the industrial development which provides basic infrastructure necessary for the development of the economy as a whole. Industrial Policy Resolution, 1948 and the Industries (Development and Regulation) Act, 1957 gave an idea of the attitude’ of the government with regard to the development of industries. But, it was only the adoption of planning in 1951 which created a favourable atmosphere for the development of industries in India.

A large number of industries have been established in the post-independehce Ihdia in private, public and joint sectors. There are a lot of industrial resources afnd raw ihateiials avilable in India. For instance, Bhilai, Bokaro, Rourkela, Ranchi, Jamshedpur, RenUkoot emerged as major centers during the first one and a half decades of independence.

However, later on, industrialization at medium and small scale was taken up in all the states. The main sectors of industrialization today are electronics, transport and telecommunications. Compared to advanced countires, industrialization in India has to develop at a much faster rate. About 10 percent of the total workers are employed in the organized industrial sector. Both private and public sectors have grown side by side since independence.

The state enterprises and public sector undertakings rate into heavy losses, and this puts a question mark on the capabilities of the Indian state and its approaches in managing its own establishment. A debate started on private-public sector partnership. The debate titled in favour of die private sector. Many of the government enterprises were handed over to private entrepreneurs and industrialists. Privatization has entered in a selected way in the transport sector, including roads, railways and airways.

Large-scale industries started in the first fifteen years of planning in India. Rate of industrial growth was fluctuating between 2 and 12 percent. However, India has observed a steady industrial progress after 1967. The enduring factors which have contributed to the growth are vast natural resources, economic surplus, large labour force, high urban concentration, and concentration of surplus within a small social group, availability of trained personnel, a stable political structure and powerful means of state economic control. Today, India is one of the top developing countries compared to the countries of Africa and South America.

However, production of luxury goods, control of monopolies, sluggish rate of agricultural development have come as obstacles in industrial development. Despite these factors, investments in private sector have been increasing.

Collaborations with industrially advanced countries like the USA the UK, Russia, France, Germany, Italy, Japan are a clear testimony of India’s industrial porgress. A boost has been given to the development of small-scale industries too during various plans. India today is a global market, India and China are considered as the fast developing countrie in the world.

In twentieth century when science and technology have gained unquestionable supremacy, the level of the industrial development of a country has become the yardstick to be applied to judge i,ts actual development.

The development of the economy can be measured with the help of different criteria such as, the growth rate in industrial output, industry’s contribution to national income and two employment. A close application of these criteria divides the planned period into two distinct phases, the first upto 1965-66 and the second from 1965-66. The economy took rapid strides during the first three five year plans, but slowed down later. Since, industry’s contribution to national, income and its capacity to generate employment have displayed similar trends, we cannot describe our industrial development as spectacular though there has been a spurt of new industrial complexes all over the country.

Question 3.
Comment on the Industrial development during the Five year plans in India.
Answer:
Industrial Growth in India: The real growth and development of the industrial sector in India started during the period of five year plans.

First Five Year Plan (1951-56) :
The main thrust of the first five year plan Was on agricultural development. Therefore, the emphasis was on increasing capacity of the then existing industries rather than the establishment of new industries. Cotton, woollen and jute textiles, cement, paper, news – print, power – looms, medicines, paints, sugar, vanaspati (vegetable oil), chemical and engineering goods and transport equipment show some progress.

Second Five Year Plan (1956-61) :
Great emphasis was laid on the establishment of heavy industries during the second five year plan. The main thrust of industrial development was on iron and steel, heavy engineering, lignite projects and fertilizer industries, Three new iron and steel plants were located in Bhilai, Durgapur and Rurkela.

Third Five Year Plan (1961-66) :
There Was emphasis on the expansion of basic industries like iron and steel, fossil – fuel and machine building. The Ranchi Machine Tool and three more HMT units were established. Machine building, locomotive and railway coach making, ship-building, air – craft manufacturing, chemicals, drugs and fertilizer industries also made steady progress. .

Annual Plans (1966-69) :
The period between 1966 and 1969 was the period of annual plans. The industrial period could not make much progress during the annual plans period.

Fourth Five Year plan (1969-74) :
During this plan, there was much emphasis on the agro – based industries such as sugar, cotton, jute, vanaspati, metal based and chemical industries. It was during this plan, much progress was made in alloys, aluminium, automobile tyres, electronic goods, machine tools, tractors and special steel. Efforts were also made to accelerate the process of industrial dispersal.

Fifth Five Year Plan (1974-79) :
The main stress in this plan was on rapid growth of steel plants, export-oriented articles and goods of mass consumption. The steel plants at Salem. Vijayanagar and Visakhapatnam were proposed to create additional capacity. The Steel Authority of India Ltd. (SAIL) was constituted. Moreover, drug Manufacturing, oil refining, chemical fertilisers and heavy engineering industries made steady progress.

Sixth Five Year Plan (1980-85) :
The main emphasis in the sixth five year plan was on producting goods to exploit the domestic and international markets. To achieve this objective industries like aluminium, automobiles, electric equipment, thermostats were given the priority. Production targets were achieved in industries like commercial vehicles, drugs, TV receivers, automobiles, cement, coal, jute industry, non – ferrous metals, textiles, railway wagons, sugar industry etc.

Seventh Five Year Plan (1985-90) :
The main thrust of the seventh five year plan was on high – techand electronic industries. Industrial dispersal, self employment, exploitation of local resources and proper training were the preference areas of the plan.

Eight Five Year Plan (1992-97) :
The period between 1990 and 1992 was the period of annual plans. There was a major change in the industrial policy of the government of India which was initiated in 1991. The policy of liberalization was adopted for the investment of foreign multinationals. Emphasis was given on the removal of regional imbalances and encouraging the growth of employment in small and tiny sectors.

Ninth Five Year Plan (1997-2002) :
The main emphasis during this plan was on cement, coal, crude oil, consumer goods, electricity, infrastructure, refinery and quality steel products.

Tenth five year plan (2002-07) :
During this plan, the main emphasis was on ;

1. The modernization, technology, upgradation, reducing transaction costs and increasing exports;
2. To enhance exports and to increase global competitiveness; and
3. To achieve balanced regional development.

Eleventh Five Year Plan (2007-12) :
This plan document entitled “Towards faster and more inclusive growth” gave priority to industry, infrastructure and employment. The plan recognized that there should be rapid industrial development that brings faster reduction in poverty, generates employment and ensures essential services such as health and education to all sections of the society.

Twelfth Five Year Plan (2012-17) :
The planning commission’s focus on instilling ‘incluSive growth1 is making headway. The plan is expected to create employment through developing India’s manufacturing sector and move the nation higher up the value chain is a boon for industry, the planning commission indicated that it aims to have industry & manufacturing related activities grow by 11% during this plan period, contrasted to 8% over the previous 11th five year plan.

However in 2014, the 65 years old planning commission was dissolved and a think tank, NITI (National Institution for transforming India). Aayog took in its place.

Question 4.
What are the reasons for industrial backwardness in India.
Answer:
Industrial Backwardness :
The industrial development is the indicator of economic development. The industrial backwardness results in economic backwardness. Consequently the quality of life of people is very bad and poverty level is very high.

The most backward districts lie in eastern Uttar Pradesh, Assam, Western Rajasthan, Central Plateau region of Telangana, Western ghat region and adjacent plateau region of Kerala.

Causes of Industrial Backwardness :
1. British Rule policy :
It rulers utilized the natural resources of India for their own economic development. They did not establish the industries in India. This policy affected industrial development badly. They used the raw material of this area in their own countries, which caused a huge loss to India.

2. Lack of Mineral Resources :
There is a lack of mineral resources like oil and coal which are necessary for industrial development. So, the rate of industrial development is very slow in India because it is facing the problem of mineral shortage.

3. Lack of Capital :
The rate of savings is low due to low percapita income in India. Due to low savings, rate of investment is very low. It is the main obstacle for industrialization.

4. Lack of Credit Facilities :
There is a shortage of credit facility by financial institutions which provide credit to the industries according to the needs of the industry.

5. Lack of Foreign Exchange :
There is a lack of foreign exchange which is the most important factor for the import of modem technology for industrial sector. It is the main problem for industrial development that India has to pay the debts and also to import the technology.

6. Lack of Technical Experts :
It is unfortunate that there is lack of skilled persons in India. It is the major drawback for the industries, A heavy amount is paid to the foreign experts and Indian skilled persons are working abroad for a higher return.

7. Lack of Transport Facility :
The transport system is less developed in India. The available facilities are costly and inadequate. Roads and railway transport conditions are miserable.

8. Lack of Industrial Research :
Due to lack of research and development facilities, invention did not take place in the production techniques which has increased the cost of production and reduced the demand for production.

9. Energy Crisis :
These is a shortage of electricity for industries because the sources of power are limited in the country.

10. Increase in Taxes :
Heavy taxes have been imposed on the industrial production. Heavy import and export duties have also discouraged the industrial production.

11. Limited Market :
Our domestic market has been limited. On the other hand, the quality of product is very poor and Indian products are unable to compete in the international market. So, the limited nature of domestic and international markets is also one impediment for faster rate of industrial development.

12. Attitude of the Labour :
The quality of labour is poor and the spirit of work is absent. Political parties also use them for their own benefits. It has discouraged the industrial prpduction.

13. Defective Planning :
There is a lack of effective planning in industrial sector. There is no c-ordination among the different wings of industrial sector. It increases the cost of production.

Question 5.
Discuss the features of Industrial Policy Resolutions 1948 and 1956.
Answer:
Industrial Policy Resolution :
Industrial policy is a statement which defines the role of government in industrial development, the place of the public and private sectors in industrialization of the country, the relative role of large and small industries and the role of foreign capital.

Industrial Policy Resolution, 1948 :
The Industrial Policy Resolution, 1948 was passed when our constitution was not adopted ahd there was no legal frame work.

The Government of India announced its Industrial policy Resolution (IPR) on April 6,1948 where by both public and private sectors were involved towards industrial development. Accordingly the industries were divided into four broad categories.

a) Exclusive state monopoly :
This includes the manufacture of arms and ammunition, production and control of atomic energy and the ownership and management of railway transport. These industries were the exclusive monopoly of the Central Government.

b) State monopoly for new units :
This category includes coal, iron and steel, aircraft manufacture, ship building, manufacture of telephone, telegraphs and wireless apparatus (ex-cluding radio receiving sets) and mineral oils. New undertakings in this category could hence forth be undertaken only by the State.

c) State Regulation :
This category included industries of such basic, importance like machine tools, chemicals, fertilizers, non-ferrous metals, rubber manufactures, cement, paper, newsprint, automobiles, electric engineering etc, which the central government would feel nec-essary to plan and regulate.

d) Unregulated Private Enterprise :
The industries in this category were left open to the private sector, individuals as well as to co-operatives.

Industrial Policy Resolution, 1956 :
Further, in December 1954, the Parliament adopted the, ‘Socialistic Pattern of Society’ as the goal of economic policy which called for the state or the public sector to increase its sphere of activity in industrial sector and thus prevent concen-tration of economic power in private hands. In view of all these developments, a new industrial policy was announced on 30th April, 1956. The main features of this industrial policy resolution of 1956 were as follows.
1) Classification of Industries :
Industries were classified into three types which are indicated below. .

i) Schedule A contained 17 industries :
All new units in these industries, where their establishment in the private sector has already been approved, would be setup only by the state.

ii) Schedule B contained 12 industries :
Such industries would be progressively state owned, but private enterprise is expected to supplement the efforts of the state in . these fields.

iii) The remaining industries fell in Schedule category. The future development of these industries had been left to the initiative and enterprise of the private sector.

2) Assistance to private sector :
while the industrial policy of 1956 sought to give domi-nant role to public sector, at the same time it assured a fair treatment to the private sector. The policy said that the state would continue to strengthen and expand financial institutions that extend financial assistance to private industries and co-operative enterprises. The state would also strengthen infrastructure to help private sector.

3) Expanded role of cottage and small scale industries :
The industrial policy laid stress on the role of cottage and small scale industries for generating larger employment opportunities making use of local man power and resources and reducing regional inequalities in industrial development. It stated that the government would continue pursuing a policy of supporting such industries through tax concessions and subsidies.

4) Balanced industrial growth among various regions :
The industrial policy helped to reduce regional disparities in industrial development. The policy stated that facilities for development will be made available to industrially backward areas. The state, apart from setting up more public sector industries in these backward areas, will provide incentives such as tax concessions, subsidized loans etc. To the private sector to start industries in these backward regions.

5) Role of. foreign capital :
The industrial policy of 1956 recognized the important role of foreign capital in country’s development. The foreign capital supplements domestic savings. It provides more resources for investment and relieves pressure on balance of payments.

6) Development of managerial and technical cadres :
The industrial policy noted that the program of rapid industrilization in India will create large demand for managerial and technical personnel.

7) Incentives to Labour :
The industrial policy recognized the important role of labour as a partner in the task of development. The policy therefore, put emphasis on the provision of adequate incentives to workers and improvement in their working and service conditions.

The industrial policy 1956, thus, provide a comprehensive framework for industrial de-velopment in India. However, this policy has been criticized on the grounds that by enormously expanding the field of public sector, it had drastically reduced the area of activity for the private sector.

Question 6.
Critically examine the Industrial Policy Resolution, 1991.
Answer:
The Government of India announced a sensational industrial policy in parliament on 24 July, 1991. Later this was come to known as new economic policy. The architect of this policy was then Finance Minister and the present Prime Minister of the country, Dr. Manmohan singh.

1991 Industrial Policy is also known as the liberalised economic policy or Rao – Manmohan model or the LPG model.

Objective :

1. Liberalising the industrial sector from all kinds.of legal and administrative controls.
2. Mediating the indian economy with the global economy known as globalisation.
3. Generation of more employment opportunities by enlarging and strengthening the private sector.
4. Increase in the capacity of the Indian economy to compete and face the competition at the international level.
5. Reduction in the economic inequalities.
6. To increase the economic growth rate.
7. To enhance the industrial production capacity.

Important Elements :
The following are the important elements in the industrial policy 1991.

1. industrial licensing policy :
The 1991, industrial policy abolished industrial licensing for all, but for 18 industries. Again in 2002, licensing is compulsory for only 5 industries.

2. Gradual dilution of public sector :
The 1956 resolution had reserved 17 industries for the public sector. The 1991 industrial policy reduced this number to 8. Now, only 3 industries are reserved exclusively for the public sector.

3. Foreign investment :
Foreign direct investment is permitted upto 100 percent on the automatic route in 34 most important industries. The new industrial policy resolution prepared a specified list of high technology and high investment priority industries.

4. Foreign technology :
In the case of 34 important industries mentioned to have direct foreign investment, where in technology can also be imported, which was made easy. The amount is limited to one crore for importing the technology. Government permission is not required to import the managerial expertise.

5. Amendment to MRTP Act :
The new industrial policy scrapped the threshold limit of assets in respect of MRTP and dominant undertakings. On the recommendations of the S.VS Raghavan committee in 2002, MRTP Act was abolished and in its place competition act was declared.

6. Wider Extensive Licensing :
In 1985 the wider extensive licensing policy permitted the industries to use now machinery without obtaining the Government permission. The industrial units need not obtain separate licenses when there is close resemblance in production process.

7. Wider definition to industry :
The definition of industry is widened under the 1991 industrial policy. The services related to industry and trade units are also brought under the purview of industry.

8. Special package to small, tiny and village industry :
The Government announced a special package to the small, .tiny and village industry. The investment limit to the tiny sector was increased from ₹ 2 lakh to ₹ 5 lakh. Because of this reason many small industries in big cities got recognition as the tiny sector.

9. Medium scale industries :
The maximum investment limit to the medium scale industries is ₹ 10 lakh.

10. Liberalised industrial location policy :
As a departure from the earlier locational policy for industries, the new industrial policy provided that in locations other than cities of more than 10 lakhs population, there will be no requirement of obtaining industrial approvals from the centre, except for industries subject to compulsory licensing.

Critical Analysis :
I. Positive Impact :

1. Creativity and innovation have become the order of the day. Industries started concent rating on research and development to bring out creativity.
2. The focus is on total equality which is to be maintained at all levels right from the manufacture of goods till it reaches the customer.
3. Free flow of foreign capital on account.
4. Employment opportunities in MNCs.
5. Increase in standard of giving.

II. Negative impact:

1. Though competition for domestic industries.
2. Opposition from trade unions.
3. Unemployment.
4. Indiscriminate use of natural resources of domestic country by MNCs.
5. Distortions in production structure.

Question 7.
Explain the economic reforms introduced in India since 1991.
Answer:
Liberalization, Privatization and Globalizatio (LPG) :
The important features of the economic reforms were as follows.

I. Liberalization :
The new economic policy introduced a number of liberalization measures to remove the unnecessary controls a’nd regulations on the industrial sector. Liberalization refers to the removal of restrictions on trade and industry. The main objective of liberalization was to unshackle the industrial sector from the cobwebs of unnecessary bureaucratic controls.

The main features of liberalization policy were as follows :

I. Abolition of Industrial Licensing :
The new industrial policy of 1991 abolished the industrial licensing for all the industries except for a selected 18 industries due to security and strategic concerns. These included industries manufacturing hazardous chemicals and industries that could cause environmental pollution.

2. Removal of Restrictions :
All industries, other than those 18, could setup and sell shares without any restrictions; they could expand their business and start a new product line without the need of obtaining any license.

3. Relaxation of MRTP Restrictions :
The MRTP Act aimed at controlling monopoly practices to pevent concentration of economic power. It also aimed at preventing unfair and re-strictive trade practices to protect consumer’s interest. Prior to introduction of reforms, a number of restrictions were imposed on industries with an investment of Rs. 100 crore or more under the Monopolies and Restrictive Trade Practices (MRTP) ACt.

The MRTP Act has now t?een replaced by the Competition Act, 2002, which came into effect from 2009. The Competition Act checks all anti-competitive practices and prohibits abuse of dominance. In order to protect consumer interest at large, it aims at promoting and sustaining competition in the market.

4. Foreign Investment :
The 1991 reforms reduced a number of procedural bottle necks for foreign investments. Approval was given for foreign direct investment upto 51 percent of equity in high priority industries. The liberalization measures enhanced the investment ceiling on small scale industries. Industries were also allowed to raise invesments from abroad with simple procedures.

5. Foreign Technology :
Automatic approval was provided to Indian industries with respect to foreign technology agreements, especially in the case of high priority industries, Permissions were not required for hiring foreign technicians and experts and for foreign testing of indigenously developed technologies.

II. Privatization :
Privatization refers to the introduction of private ownership in public sector enterprises. The privatization measures introduced during the economic reforms reduced the number of industries reserved exclusively for public sector from 17 to 18. The government’s holding in public sector enterprises was sold to increase private participation.

Many public-sector units were incurring losses due to inefficiencies in management and lack of innovation and investments in research and development. Privatization measures enabled the use of modem technology and improved the quality of service and led to efficient utilization of resources.

Various privatization measures introduced in India included :

1. Transfer of ownership of public sector units, either fully or partly, to private hands through denationalization.
2. Transfer of control to the private sector through disinvestment policies.
3. Opening of areas that were exclusively reserved for public sector.
4. Transfer of management to the private sector through franchising, contracting and leasing.
5. Limiting the scope of the public sector.

III. Globalization :
Globalization may be defind as the integration of the domestic economy with the world economy with the objective of facilitating free movement of goods, services, people, ideas, technology etc. It refers to the opening up of the economy to international competition.
The major features of globalization measures as undertaken in 1991 were :

1. Reduction of Trade Barriers :
Trade barriers restrict free flow of goods and services between countries. With the introduction of globalization measures, these restrictions were reduced. Globalization created an environment for smooth exchange of goods and services between India and other nations.

2. Promotion of Foreign Direct Investment :
With the introduction of globalization, many Indian industries were opened to foreign direct investment. India became a favourable investment destination for foreign investors due to the low cost of production and availability of cheap labour resources. The efficiency of the banking sector also improved because of the competition from foreign banks.

The government of India further initiated a series of measures to promote foreign technical collaborations incase of high priority industries and for import of foreign technology. Foreign Investment Promotion Board (FIPB) was set upto facilitate foreign direct investments in India.

3. To Encourage Efficiency :
Globalization encouraged domestic industries to become more competitive and efficient to face competition at the global level. The domestic industries had to produce quality goods at low cost to compete with the cheaper and superior quality goods of he foreign producers.

4. Diffusion of Technology :
Globalization provided an opportunity to India to have an access to global technology. It made diffusion of knowledge faster. India could utilize the tech-nologies of developed countries without much investment in research and development.

Question 8.
What do you mean by privatisation ? Discuss the reasons for its implementation in India.
Answer:
The privatization wave in India, which was a part of the economic reforms of 1991, in-creased the role of private sector and restricted the public sector to priority areas which included

1. Physical and social infrastructure
2. Mining and oil exploration
3. Manufacture of producs that were of strategic importance and where security concerns were involved like in the case of manufacture of defense equipment, and
4. Investments in technologies that required huge outlay and where private sector investment was inadequate.

Privatization measures were introduced in India as part of the economic reforms in 1991 for the following reasons :
1. To Reduce the Burden of the Government :
The public sector companies created the base for industrial growth in India. However, a number of public sector companies were incurring continuous losses due to delay in completion of projects and rise in the cost of production. Many public sector units were only functioning to protect the interests of the labourers. Privatization offloaded this burden from the government and reduced the strain on resources.

2. To Promote Efficiency :
Many public sector companies were also struggling due to inefficient management, lack of transparency and corruptive practices. Poor industrial relations and over staffing reduced the productivity, causing losses to these units. The measures got rid of these problems and enabled the public sector units to achieve optimum productivity.

3. To Enhance Investment Opportunities :
Privatization helped in reducing the incon-sistencies in management and improved the economic status of many public sector units. This brought in good returns and attracted investments.

4. To facilitate Growth of infrastructure :
Privatization of industries led to the growth of industrial sector on modem lines. The private enterprises, to provide competitive products and services, initiated and facilitated improvement of the infrastructure.

5. To Reduce Unnecessary Bureaucratic Interventions :
Privatization reduced unnecesssary government intervention in the management, thereby giving the private enterpries more autonomy in management and operations. This enhanced their efficiency and profitability. Elimination of restrictions effectively reduced corruption and improved productivity.

Question 9.
What are small and cottage industries? State the characteristics of small scale industries.
Answer:
Small scale industries are the industrial units having fixed investment in plant and machinery, whether held on ownership basis (or) lease basis (or) hire purchase basis and the investment is more than ₹ 25 lakhs, but not exceeding ₹ 1 crore.

Characteristics of Small Scale Industries :
i) Ownership :
Ownership of small scale unit is with one individual in sole proprietorship (or) it can be with a few individuals in partnership.

ii) Management and Control :
A small scale unit is normally a one man show and even in case of partnership the activities are mainly carried out by the active partner and the rest are generally sleeping partners. These units are managed in personalized fashion. The owner is actively involved in all decisions concerning business.

iii) Area of operation :
The area of operation of small units is generally localized catering to the local (or) regional demand. The overall resources at the disposal of small scale units are limited and as a result of this, it is forced to confine its activities to the local level.

iv) Technology :
Small industries are fairly labour intensive with comparatively smaller capital investment than the larger units, Therefore, these units are more suited for economies where capital is scarce and there is abundant supply of labour.

v) Gestation period :
Gestation period is that period after which teething problems are over and return on investment starts. Gestation period of small scale unit is less when compared to large scale unit.

vi) Flexibility :
Small scale industries are highly reactive and responsive to socio-economic conditions. They are more flexible to adopt changes like new method of production, introduction of new products.

vii) Resources :
Small scale units are use local (or) indigenous resources and such can be located any where subject to the availability of these resources like labour and raw materials.

viii) Dispersal of units :
Small scale units use local resources and can be dispersed over a wide territory. The development of small scale Units in rural and backward areas promotes more balanced regional development and can prevent the migration of job seeks from rural areas.

Question 10.
Describe the role of small scale industries in Indian Economy.
Answer:
In a developing country like India, the role and importance of small scale industries is very significant in terms of poverty eradication, employment generation, rural development and creating regional balance in promotion and growth of various development activities.

It is estimated that this sector has been contributing at present about 40% of the gross value of output produced in the manufacturing sector and the generation of employment by the small scale sector is more than five tijnes to that of the large scale sector.

1) Small Scale Industries Generate Employment Opportunities :
The basic problem that is confronting the Indian economy is increasing pressure of population on the land and the need to create massive employment opportunities.

2) Enhance Mobilization of Resources and Entrepreneurial Skill :
Small scale industries can mobilize a good amount of savings and entrepreneurial skills from rural and semiurban areas remain untouched from clutches of large industries and put them into productive use by investing in small scale units.

3) Facilitate Equitable Distribution of Income :
The small scale industries ensure equitable distribution of income and wealth as the Indian society is largely characterised by more concentration of income and wealth in the organized sector keeping unorganized sector undeveloped. This is mainly due to the fact that small industries are wide spread and are having large employment potential.

4) Regional Dispersal of Industries :
People migrate from rural and semi urban areas to the urban areas and highly developed centers in search of employment and sometimes to earn a better living which ultimately leads to many evil consequences of over-crowding, pollution, creation of slums, etc. This problem of Indian economy is better solved by small scale industries which utilize local resources and brings about dispersion of industries in the various parts of the country, thus promotes balanced regional development.

5) Provide Opportunities for Development of Technology :
Small scale industries have tremendous capacity to generate (or) Absorb innovations. They provide ample opportunities for the development of technology and technology in return creates an environment conductive to the development of small units. It also facilitates the transfer of technology from one to other. As a result, economy reaps the benefits of improved technology.

6) Utilize Indigenous Organizational and Management Capabilities :
Small scale industries make better use of indigenous organizational and management capabilities by drawing a pool of entrepreneurial talent that is limited in the early stages of economic development. They provide productive Outlets for enterprising independent people. They also provide a seed bed for entrepreneurial talent and a testing ground for new ventures.

7) Promote Exports :
Small scale industries have registered phenomenal growth in their exports over the years. They contribute about 40% of India’s total exports. Thus, they help in increasing the country’s foreign exchange reserves there by reducing the pressure on country’s balance of payment.

8) Support the Growth of Large Industries :
The small scale industries play an important role in assisting bigger industries and projects, so that the planned activity of development work is timely attended. They support the growth of large industries by providing components, accessories and semifinished goods required by them. Infact, small industries can breathe vitality into the life of large industries.

9) Maintain Better Industrial Relations :
Better industrial relations between employer and employees help in increasing efficiency of employees and reducing the frequency of industrial disputes. The loss of production and man – days are comparatively less in small scale industries. There are hardly any strikes and lock outs in these industries due to good employee -employer relationship.

Question 11.
Examine the problems of small scale industries in India.
Answer:
Problems faced by the small scale industries in India :
The various constraints and problems faced by the small scale industries are explained below.

1) Finance :
It is the lifeblood of an organization and non organization can function effectively in the. absence of adequate funds. Small scale industries are facing acute shortage of finance in India. The scarcity of capital and inadequate availability of credit facilities are the major causes of this problem.

2) Raw Material :
It is important to note that small scale industries normally tap local sources for meeting raw material requirements. These units have been facing numerous problems like availability of inadequate quantity, poor quality and even supply of raw material is not on regular basis. All these factors adversely affect the functioning of these units.

3) Idle capacity :
It is a fact that there is under utilization of installed capacity to the extent of 40 to 50 percent incase of small scale industries. Various causes of this under utilization are shortage of raw material problem associated with funds and even availability of power. Small scale units are not fully equipped to overcome all these problems as is the case with the rivals in the large scale sector.

4) Technology :
Indian small scale entrepreneurs are not fully exposed to the latest technology. Moreover, they lack requisite resources to update or modernize their plant and machinery. Due to obsolute methods of production, they are confronted with the problems of less production in’inferior quality and that too at higher cost. They are in no position to compete with their better equipped rivals operating modern large scale units.

5) Marketing :
Small scale industries are also exposed to marketing problems in Our country. They are not in a position to get first – hand information about the market i.e., about the competition, tastes, liking, disliking of the consumers and prevalent fashion. With the result, they are not in a position to upgrade their products keeping in mind market requirements.

6) Infrastructure :
infrastructure aspects adversely affect the functioning of small scale units. There is inadequate availability of transportation, communication, power and other facilities in the backward areas. Inadequate and inappropriate transportation and communication network will make the working of various units all the more difficult All the factors are going to adversely affect the quantity, quality and production schedule of the enterprises operating in these areas. Thus, the operations will become uneconomical and unviable.

7) Project Planning :
Another important problem faced by small scale entrepreneurs is poor project planning in India. These entrepreneurs do not attach much significance to viability studies. They do not bother to study the demand aspect, marketing problems, sources of raw materials and even availability of proper infrastructure before starting their enterprises. Project feasibility analysis, covering all these aspects in addition to technical and financial viability of the projects, is not at all given due weightage.

8) Skilled Manpower :
A small scale unit located in a remote backward area may not have problem with respect to unskilled workers, but skilled workers may not be available there. The reasons are; firstly, skilled workers may be reluctant to work in these areas and secondly, enterprise may not afford to pay the wages and other facilities demanded by these workers.

9) Managerial Competence :
Many small scale units have turned sick due to lack of managerial competence on the part of the entrepreneurs. An entrepreneur is required to undergo training and counseling for developing his managerial skills.

Question 12.
What is Industrial finance? What are the major sources of Industrial finance in India?
Answer:
Finance is the life and blood of any industry. The amount of finance required by industrial establishments to carry out their production activity is known as industrial finance. The finance can be mobilized by the industrial concerns for investing in fixed and working capital from different sources.

a) Internal Self – Finance :
One source, quantitatively of big importance, is the saving of the unit itself. It may be the household, the business or the government. Normally the household not only invests out of its own savings, but it also has surplus which it lends to other units via, financial institutions, like banks, capital market etc.

b) Equity, Debentures and Bonds :
A large part of finance for fixed assets comes from different types of equity or shares such as ordinary cumulative and non – cumulative preference shares. These shares bear risks of different degrees and are tailored to suit the temperament of different investors. Often industrial companies also get long – term finance through the issues of debentures and bonds.

c) Public Deposits :
Another source is public deposits. It is also a debt – instrument, mostly for short – term finance. Under this system people keep their money as deposit with these companies or managing authorities for a period of six months, a year, two years, three years or so. Depositors receive a fixed interest.

d) Loans from Banks :
Commercial banks can also provide funds for meeting Short – term needs or for meeting working capital. Loans are given against the guarantee of government securities and stocks with companies. Loans are advanced in the form of overdraft and cash credit. Commercial banks are generally reluctant to put their money in the purchase of shares.

e) Indigenous Bankers :
Inspite of the establishment of new financial institutions, indigenous bankers also provide financial help to a few large scale industries, particularly during the time of stress, both for fixed capital and working capital.

f) Foreign capital :
As a supplement to domestic finance, external capital too has been made use of in meeting the needs of industrial finance, mostly for long – term needs. This has taken several foreign institutions dike the World Bank) extended to the government.

g) Development Finance Institutions :
Established with the help of the government to fill in the gap in industrial finance and to promote the objective of planning, these institutions cater to the needs of large and small industries. These institutions provide huge quantity of finances for setting up of new industries, for meeting their several needs and in several forms. These institutions also ensure and monitor the use of finance in pre-planned directions. As such, they fit well with the modem scenario of industrial development. The following are the most important development banks in india.

i) Industrial Development Bank of India (IDBI) :
IDBI provides credit and other facilities for industrial development in the country. It provides long term finance for green field projects, as also for modernization, expansion and diversification. It has structured various products such as equipment finance, asset credit and corporate loans in order to cater to the needs of its corporate clients.

ii) Industrial Finance Corporation of India (IFCI) :
IFCI’s operations principally comprise project finance, financial services and corporate advisory services. Through, its subsidiaries or companies, IFCI provides custodial and investor services, rating and venture capital services.

iii) Industrial Credit and Investment Corporation of India (ICICI) :
ICICI plays a facilitating role in consolidation in various sectors of the Indian industry, by financing mergers and acquisitions. The ICICI groups financing and banking operations, both wholesale and retail, have been integrated into a single company effective to from May 2002.

iv) Industrial Investment Bank of India (IIBI) :
UBI offers a variety of financial products such as project finance, short duration non – project asset-backed financing and working capital, other short term loans to companies.

v) Infrastructure Development Finance Company Limited (IDFC) :
IDFC Ltd. was incorporated in 1997, conceived as a specialized institution to facilitate the flow of private finance to commercially viable infrastructure projects through innovative products and processes. Energy, telecommunications, information technology, integrated transportation, urban infrastructure and food and agribusiness infrastructure constitute the current areas of operation measures for IDFC Ltd.

vi) Small Industries Development Bank of India ( SIDBI) :
SIDBI offers refinance, bill re-discounting, lines of credit and resource support mechanism to route assistance to SSI sector through a work of banks and state level financial institutions. SIDBI also offers direct finance for meeting specific requirements of SSI sectors. It underates a wide range of promotional and developmental measures for rural poor.

Short Answer Questions

Question 1.
Explain the structure of Indian Industry.
Answer:
Structure Of Indian Industry :
In India, industries can be structured on the following basis.

Structure in terms of usage :
a) Basic Industries :
These industries produce capital goods i.e, heavy engineering and machine building industries.

b) Industries producing consumer goods :
These industries produce consumer goods such as cotton textiles, leather goods, salt, sugar, paper, and other industries.

c) Industries producing intermediate goods :
These industries produce coal, cement, steel, power, alcohol, chemicals, and other industries.

Structure by type of ownership :
a) Public sector undertakings :
These are the undertakings owned, managed, and controlled by government. Ex : Air India Ltd, ONG.C, HPCL.

b) Private sector undertakings :
These are the undertakings owned, managed and controlled by private individuals or firms. Ex : Reliance industries Ltd.

c) Joint sector undertakings :
Joint sector consists of business undertakings wherein the ownership, control and management are shared jointly by the government, the private entrepreneurs and the public at a large. Ex : Cochin refineries.

Structure by size of the capital :
a) Large Industries :
The investment is more than ₹ 10 crores, but less than ₹ 100 crores in these industries.

b) Medium Industries :
The industry whose investment is more than ₹ 5 crores, but less than ₹ 10 crores in manufacturing units is called medium industry. This limit is ₹ 2 crores to ₹ 5 crores in service enterprises.

c) Mega Industries :
In these industries, the investment limit is more than ₹ 100 crores.

d) Micro Industries :
The industry whose investment is less than ₹ 25 lakhs in manufacturing units is called micro industry. This limit is ₹ 10 lakhs in service enterprises.

Question 2.
Identify the major industries in India.
Answer:
Major Industries in India.
The major industries in India are described as follows :

1. Textile Industry :
The textiles and apparel industry in India is the second largest employer in the country providing employment to about 45 million people. The domestic textiles and apparel industry contributes 2.3% to India’s GDR accounts for 13% of industrial production and 12% of the country’s export earnings (2018 – 2019). Although cotton textile mills are located in over 80 towns and cities of India, yet its larger concentration is found in Maharashtra, Gujarat, West Bengal, and Uttar Pradesh.

2. Sugar Industry :
Sugarcane is most important commercial crop and it is occupying about 5.0 million hectares in area in India: Sugar industries in India remain regulated and are a source of livelihood for about 50 million farmers and their families. It provides direct employment to over 5 lakhs not only for skilled labour, but also to semi-skilled labour in sugar mills and allied industries across the nation.

3. Cement Industry :
India is the second largest cement producer in the world and accounted for over 8 percent of the global installed capacity as of 2019. Cement production reached 337.32 million tonnes (MT) in 2018-19. The cement production capacity is estimated to touch 550 MT by 2020. Of the total capacity, 98 percent lies with the private sector and the rest with public sector. The top 20 companies account for around 70 percent of the total cement production in India. There are 210 large cement plants in the century. Of these 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu.

4. Iron and Steel Industry :
Iron and steel industry is one of the most important industries in India. This is a feeder industry whose products are used as raw material for other industries. In 2018 and 2019, India became the 2^nd largest producer of crude steel in the world after China. The iron and steel industry in India contributes around 2 percent of the Gross Domestic Product (GDP) and its weight in the index of industrial production (IIP) is 6.2 per cent.

5. Indian Pharmaceuticals Industry :
India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry supplies over 50 percent of global demand for various vaccines, 40 percent of generic demand in the US and 25 percent of all medicines in UK. Presently over 80 percent of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.

Indian pharmaceutical sector is expected to grow to US $ 100 billion and medical device, market expected to grow US $ 25 billion by 2025.

The drugs and pharmaceuticals sector attracted Cumulatiwe FDI inflows worth US$ 16.50 billion between April 2019 and March 2000, according to data released by the Department for Promotion of Industry and Internal Trade (DPIIT).

6. Mining Industry :
India ranks fourth in terms of iron ore production globally. Production of iron re in 2018 – 19 stood at 229 million tons. India has around eight percent of world’s deposits of iron ore. India became the world second largest, crude steel producer, in 2018-19 with production 111.2 million tons. According to Ministry of Mines, India and the 7th largest bauxite reserves around 2,908.85 million tons in 2017-18. Aluminium production stood at 2,43 MT in 2018-19.

7. Indian Automobile Industry :
India became the fourth largest auto market in 2018-19 with sales increasing 8.3 percent year-on-year to 3.99 million units. It was the seventh largest manufacturer of commercial vehicles in 2018-19. The two wheelers segment dominates the market in terms of volume owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The industry saw a 25.5 percent jump in Foreing Direct Invesment (FDI) from 2017-18 to 2018-19.

8. Indian Oil and Gas Industry :
India’s economic growth is closely related to energy demand. Therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conductive for investment. The government of India has adopted several policies to fulfill the increasing demand. The government has allowed 100 percent foreign direct investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries, among others. Today, it attracts both domestic arid foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India. India had 4.5 thousand million barrels of proven oil reserves at the end of 2018 and produced 39.5 million tons in 2018.

Question 3.
State the elements of Industrial Policy Resolution-1977.
Answer:
Industrial Policy Resolution, 1977 :
In March 1977, the Janata Party assumed power at the Centre. On 23^rd December 1977, the Janata Government announced its new industrial policy by way of a statement in the Parliament.

The main elements of this new policy were :

1. Small scale sector was classified into three categories viz :
   a) cottage and household industries,
   b) tiny unit with less than Rs. 1 lakh investment, and
   c) small scale industrial unit with an investment upto Rs. 10 lakhs.
2. District Industrial Centres were to be setup in each district to beep in the development of small scale and cotage industries.
3. Handloom sector was given preference over power loom and mill sectors.
4. For reduction in regional imbalance, shifting of industries to backward areas was to be assisted and establishment of new industries in urban areas was to be avoided.
5. Special fiscal concessions were proposed for export oriented units.
6. Takeover of sick units would be on a selective basis.
7. Special attention was to be given to the promotion of tiny sector, namely units with investment of Rs. 1 lakh and situated in towns / villages with a population not exceeding Rs. 50,000/-.
8. Large house would have to rely on their own internally generated resources for financing new projects or expansion of the existing ones.
9. The public sector would be strengthened with the responsibility of encouraging the development of a wide range of ancillary industries, and contributing to the growth of decentralized production by making available its expertise in technology and management to small scale and cottage industry sectors.
10. In order to promote technological self-reliance, the policy recognized the necessity for continued inflow of technology in sophisticated and high priority areas where Indian skills and technology were not adequately developed.

Question 4.
What are the major features of Industrial Policy Resolution, 1991?
Answer:
In June 1991, congress government took over charge and the wave of reforms and liberalization were observed in the economy. In this new atmosphere of economic reforms, the government announced a new industrial policy on July 24, 1991. This new policy deregulates the industrial economy in a substantial manner. The government announced a series of initiatives in the new industrial policy as outlined below :

Features of Policy :
The features of the policy are as follows.
1. Abolition of Industrial Licensing :
In a major move to liberalize the economy, the new industrial policy abolished all industrial licensing irrespective of the level of investment except for certain industries related to security and strategic concerns, and social reasons.

Now, there are only 6 industries for Which licensing are compulsory as amended in February 1999. These are alcohol, cigarettes, hazardous chemicals, drugs and pharmaceuticals, electronics, aerospace and defense enquipment, and industrial explosives.

2. Public Sector’s Role Diluted :
Seventeen industries were reserved for the public sector since 1956. This number has now been reduced to three. They are: i) arms and ammunition and allied items of defense equipment, ii) atomic energy and iii) rail transport.

3. MRTP Actg 1969 :
This Act has been amended to remove the threshold limits of assets in respect of Monopolies restrictive trade practices (MRTP) companies and dominant un-dertakings. The new industrial policy also states that the government will undertake review of the existing public enterprises in low technology, small scale and non-strategic areas. Sick units will be referred to the Board for Industrial and Financial Reconstruction (BIFR) for advice about rehabilitation and reconstruction.

4. Free Entry to Foreign Investment and Technology :
The government is committed to promote increased flow of Foreign Direct Investment (FDI) for better technology, modernization, exports and for providing products and services of international standards. Therefore, the policy of the government has been aimed at encouraging foreign investment particularly in core infrastructure sectors, so as to supplement national efforts.

5. Liberalized Industrial Location Policy :
The new industrial policy provides that in locations other than Cities of more than 1 million population, there will be no requirement of Obtaining industrial approvals from the center, except for industries subject to compulsory licensing.

6. Removal of Mandatory Convertibility Clause :
A large part of industrial investment in India is financed by loans from banks and financial institutions. These institutions have followed a mandatory practice of including a convertibility clause in their lending operations for new projects. This has provided them an option of converting part of their loans into equity, if felt necessary by their managements. The new industrial policy has provided that henceforth financial institutions Will not impose this mandatory convertibility clause.

Question 5.
Write a note on the National Manufacturing policy.
Answer:
National Manufacturing Policy (NMP), 2011 of India :
The contribution of the manufacturing sector in Indian GDP was about 16-17% during 2011-12, which is much below its potential and in comparison of other big economies of the Asian continent. In order to bring about a quantitative and qualitative change and to give necessary impetus to the manufacturing sector, the Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry notified the National Manufacturing Policy (NMP) in November 2011 with the objective of enhancing the share of manufacturing in GDP to 25% and creating 100 million jobs over a decade or so.

Objectives of National Manufacturing Policy (NMP) :
Following are the main objectives of NMP:

1. The share of manufacturing sector in GDP to rise by 25% in 2022,
2. Increase in the rate of employment creation in manufacturing sector for creation of 100 million additional jobs by 2022.
3. Enhanced global competitiveness of Indian manufacturing sector through efficient policy support.
4. Launch of the Make in India program in 2014 with the aim of attracting business to make investments in manufacturing sector in India.,
5. To setup national investment and manufacturing zones (NIMZ) using clean energy efficient technology.
6. Industrial townships ae proposed to be self-governing and autonomous bodies under the constitution,
7. Infrastructure will be financed appropriately by the central government through viability gap funding, and
8. To improve access to finance for SMEs in manufacturing sector.

Question 6.
Discuss the major features of globalisation measures as initiated in 1991.
Answer:
National Manufacturing Policy (NMP), 2011 of India :

Globalization :
Globalization may be defind as the integration of the domestic economy with the world economy with the objective of facilitating free movement of goods, services, people, ideas, technology etc. It refers to the opening up of the economy to international competition.

The major features of globalization measures as undertaken in 1991 were :
1. Reduction of Trade Barriers :
Trade barriers restrict free flow of goods and services between countries. With the introduction of globalization measures, these restrictions were reduced. Globalization created an environment for smooth exchange of goods and services between India and other nations.

2. promotion of Fbreign Direct Investment :
With the introduction of globalization, many Indian industries were opened to foreign direct investment. India became a favourable investment destination for foreign investors due to the low cost of production and availability of cheap labour resources. The efficiency of the banking sector also improved because of the competition from foreign banks.

The government of India further initiated a series of measures to promote foreign technical collaborations incase of high priority industries and for import of foreign technology. Foreign Investment Promotion Board (FIPB) was set upto facilitate foreign direct investments in India.

3. To Encourage Efficiency :
Globalization encouraged domestic industries to become more competitive and efficient to face competition at the glpbal level. The domestic industries had to produce quality goods at low cost to compete with the cheaper and superior quality goods of he foreign producers.

4. Diffusion of Technology :
Globalization provided an opportunity to India to have an access to global technology. It made diffusion of knowledge faster. India could utilize the technologies of developed countries without much investment in research and development.

Question 7.
Write a note on demonetization in India.
Answer:
Demonetization :
Demonetization is a situation where the Central Bank of the country (Reserve Bank of India) withdraws the old currency notes of certain denomination as an official mode of payment.

On November 8, 2016, the central government announced that the existing higher denomination currency (Rs. 500 and Rs. 1,000)would cease to be legal tenders. It said this is government biggest push to fight black money and end corruption.

The government also introduced new Rs. 500 and Rs. 2,000 notes and urged people to move towards cash-less economy. This is not the first time that demonetization has been implemented in India. In 1936, Rs. 10,000, which was the highest denomination note, was introduced, but demonetized in 1946. Though, it was re-introduced in 1954 but later, in 1978, the then government in its intensive move to counter the black money, introduced the High Denomination Banks Act (Demonetization) and declared Rs. 500, Rs. 1,000, and Rs. 10,000 notes illegal.

A lot of analysis in India and abroad claimed that demonetization of November 2016 failed to do what it was supposed to do and its impact turned out to be more protracted than initial expected.

Even from the point of view of promoting digital money, the government need not 86 ‘ percent of all currency out of circulation. Further studies pointed out that very little black money was caught.

The Reserve Bank of India on August 30, 2017 released its report on demonetization. In the report, it said 99 percent of the banned notes came back into the banking sysem which trashes all claims of the central government that the move will flush out the black money and counterfeit currency. With 99 percent currency back in the system, the failure of demonetization hints two things: either the black money held in cash was very low or the government failed to implement the demonetization efficiently and all the black money held in Rs. 500 and Rs. 1,000 bank notes laundered back to the banking sysem.

Question 8.
Why is (QST) introduced in Indio? state its impact of Indian economy.
Answer:
Goods and Services T&x (GST) :
Goods and Services Tax (GST) is an indirect tax which has replaced many indirect taxes in India. The GST Act was passed in the Parliament on 29th March 2017. The act came into effect on 1st July 2017. The goods and services tax in India is a comprehensive, multistage, destination-based tax that is levied on every value addition. In simple words, GST is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India. GST is one indirect tax for the entire country.

Impact of GST OP Indian Economy :
This impact of GST on Indian economy is explained below:

1. GST reduces tax burden pn producers and fosters growth through more production. The earlier taxation structure, pumped with myriad tax clauses, prevents manufacturers from producing to their optimum capacity and retards growth. GST takes care of this problem by providing tax credit to the manufacturers.
2. Different tax barriers, such as check posts and toll plazas, lead to wastage of unpreserved items being transported. This penalty transforms into major costs due to higher needs of buffer stock and warehousing costs. A single taxation system eliminates this roadblock.
3. There is more transparency in the system as the customers will know exactly how much taxes they are being charged and on what base.
4. GST adds to the government revenues by extending the tax base.
5. GST provides credit for the taxes paid by producers in the goods or services chain. This is expected to encourage producers to buy raw material from different registered dealers and its hoped to bring in more vendors and suppliers under the purview of taxation.
6. GST removes the custom duties applicable on exports. The nation’s competitiveness, in foreign markets will increase on account of lower costs of transaction.

Question 9.
Indicate the measure to solve the problem of smull scale industries,
Answer:
Goods and Sendees Tax (GST) :
The important measures to solve the problems of cottage and small scale industries :
1) Credit facilities :
The government should provide the credit to small and cottage industries at lower rate interest. Further, commercial banks should also provide lays to develop the industries.

2) Industrial Estates :
The government has setup number of industrial estates in different cities and towns. These areas have been provided Various facilities like roads, banking, marketing and transport to encourage the small scale industries.

3) Testing laboratories :
The government has established the testing laboratories to maintain the prescribed standard of product of cottage industries.

4) Supply of Designs :
The government is also providing the new models and designs to the producers to improve the quality of cottage industry.

5) Publicity :
The government has setup the display centres and showrooms inside and outside the country to increase the sales of cottage industry products.

6) Facilities of Raw material :
The government imports raw material for cottage Industries from abroad and provides them at lower price to encourage them.

7) Purchase of cottage industry prnduct :
The government also purchases finished products from them and sells the same in showrooms display centres inside and outside the countiy for creations demand.

8) Protection Against Foreign competitions :
The government has also provide protection to have industry by imposing, heavy duties on the imports still there is a need for further protection smuggling should be controlled.

9) Established of training institutions :
The government has set by various situations like industrial, vocational commercial and polytechnic institutions to provide qualified technical workers to the cottage and small scale industries.

10) Handicrafts centres :
Handicrafts, development centres have been setup to promote the handicrafts.

Question 10.
Suggest the. measures for survival and growth of small seals industries.
Answer:
Suggestions for Survival and Growth of Small Seale Industries :
Small scale iridustries are occupying a very important place in the industrial structure of the Indian economy.

Following remedial measures are suggested for the sustainable growth of small scale industries in India :

1. The government should conduct detailed survey of the existing small scale industries and draw up productive program for them.
2. The government has to make necessary arrangements for imparting proper training to workers engaged in small scale units.
3. The government should make provision for making available of proper and sufficient quantity of raw material at reasonable rates.
4. It is necessary to further liberalize the rules and practices of banking and other financial institutions supplying credit to small scale industries, so that they can arrange adequate credit required for the purpose.
5. The government should take adequate measures for the development of infrastructure in terms of roads, electricity, drainage and water supply particularly in the unorganized sector where the small scale industries are poorly served.
6. The government should establish effective marketing organizations to remove the comparative disadvantages vis-a-vis large scale units in the field of marketing.
7. The small scale industries should conduct research on the techniques of production and thus try to improve the techniques of production and make the industries to adopt mod* em and sophisticated technology in their units.
8. The entrepreneurs should maintain the quality and standard of their output produced on par with similar products of large units.
9. The government should take measures in lowering the rates of duty and provide export incentives to small entrepreneurs.

Thus, if all these steps are taken at proper time and spirit, small scale industries will come out successfully from the problems and continue their stay in the economy.

Very Short Answer Questions

Question 1.
Extractive industry.
Answer:
It concerned with extraction out goods from the soil, air, water. Products of extractive industries come in raw from and they are Used by manufacturing and construction industries for producing finished products. Ex : Coal, mineral, oil industry etc.

Question 2.
Construction Industry.
Answer:
This industry is different from all other types of industry because incase of other goods industries can be produced at place and sold at another place. This industries take up the work of construction of buildings.

Question 3.
Index of Industrial production.
Answer:
The index of industrial production (IIP) comprises three components of industry, i.e., mining, manufacturing and electricity. It also categorized by ‘use based classification’.

Question 4.
Textile Industry.
Answer:
This industry covers a wide range of activities ranging from generation of raw materials such as jute, wool; silk and cotton to greater value added goods such as readymade garments prepared from different types of man made or natural fibers. It provides job opportunity to over 45 million individuals thus playing a major role in the nation economy.

Question 5.
Iron and steel industry.
Answer:
Indian steel industry is a 400 years old. It is the fourth largest in the world. It provide employment opportunities to more than 0.6 million people. The key players in steel industry are Steel Authority of India (SAIL), Bokaro Steel Plant, TISGO etc.

Question 6.
Industrial backwardness.
Answer:
The industrial backwardness results in economic backwardness. The most backward districts lie in eastern U.P, Assam, Western Rajasthan Telangana etc.

Question 7.
Industrial policy resolution-1956.
Answer:
The 2^nd plan gave high priority to industrial development aimed at setting up a number of heavy industries such as steel plant capital goods industries etc. Inview of all these developments a new industrial policy was announced on 30^th April 1956.

Question 8.
Industrial, policy resolution -1977.
Answer:
The industrial policy 1956, failed expanding the field of public sector, it had drastically reduced the area of activity for the private sector. This was adversely affect the industrial growth of India by reducing private initiative and enterprises. So in March 1977, the Janata Party government anounced it new industrial policy by way of a statement in the parliament.

Question 9.
Industrial policy resolution – 1980.
Answer:
The congress govt in 1980 was announced a new industrial policy. The main features of this policy is revitalization of the public sector, economic federalism, promotion of rural industries, removed of regional imbalances etc.

Question 10.
Liberalisation.
Answer:
It refers to relaxation of previous government restrictions usually in area of social and economic policies thus, when government liberalised trade it means it has removed the tariff, subsidies and other under employment restrictions on the flow of goods and services between the countries.

Question 11.
Small industries development bank of India (SIDBI).
Answer:
SIDBI offers refinance, bill re-discounting, lines of credit arid resource support mechanism to route assistance to SSI sector through a Work of banks and state level financial institutions. SIDBI also offers direct finance for meeting specific requirements of SSI sectors. It underates a wide range of promotional and developmental measures for rural poor.

Question 12.
Industrial Finance.
Answer:
The amount of finance required by industrial establishments to carryout their production activity is known as industrial finance. The finance can be mobilised by the industrial concerns for investing in fixed and working capital from different sources. Finance is the life and blood of any industry.

Question 13.
Global market.
Answer:
The market in which the goods arid services of one counry are traded (purchased and solve to people of other countries. It is the activity of buying or selling goods and services in all countries of the world or the value of the goods and services sold. The explosive growth of the online company is forcing businesses of all sizes to compete in a global market.

Question 14.
Public and private sector.
Answer:
Public sector is usually comprised of organisations that are owned and operated by the government and exist to provide services for its citizens, organisations in the public sector do not seek to generate profit.

Private sector is the part of the economy, sometimes reffered to as the citizeji sector, which is owned by private individuals or groups, usually as a means of enterprise for profit, rather than being owned by the state.

Question 15.
Make in India.
Answer:
The ‘Make in India’ initiative was launched in September 2014 as a part of a wider set of nation-building 2014 as part of a wider set of nation-building’initiatives. Devised to transform India into a global design and manufacturing hub. In this programme, companies are boosted to set up their plans in India. Make in India was a timely response to a critical situation.