‭Economy‬

‭Chapter 10: Industry‬

‭Lecture 01: Industry‬

‭Industry:‬
‭Topics to be Covered:‬
‭●‬ ‭What is the meaning of Industry?‬
‭●‬ ‭India and its Industrial pattern‬
‭●‬ ‭Different types of Industry‬
‭●‬ ‭Process of Industrialisation in a country.‬
‭●‬ ‭Types of Public Sector undertaking‬
‭●‬ ‭Industrial policies before 1991‬
‭●‬ ‭New Industrial Policy of 1991‬
‭●‬ ‭Disinvestment and Privatisation‬
‭●‬ ‭Corporate governance‬
‭●‬ ‭Corporate Social Responsibility‬
‭●‬ ‭MSME Act, 2006‬
‭●‬ ‭Index of Industrial Production‬
‭●‬ ‭Purchasing Manager Index‬
‭●‬ ‭Miscellaneous‬

‭What is Industry?‬
‭●‬ ‭The‬ ‭economic‬ ‭activity‬ ‭including‬ ‭the‬ ‭preparation‬ ‭of‬ ‭raw‬ ‭materials,‬ ‭the‬ ‭production‬ ‭of‬
‭commodities‬ ‭in‬ ‭factories,‬ ‭and‬ ‭the‬ ‭provision‬ ‭of‬‭services‬‭is‬‭referred‬‭to‬‭as‬‭Industry.‬‭Without‬
‭the‬ ‭growth‬ ‭of‬ ‭industry,‬ ‭a‬ ‭nation‬ ‭cannot‬ ‭experience‬ ‭a‬ ‭good‬‭amount‬‭of‬‭economic‬‭progress.‬
‭As,‬‭huge‬‭number‬‭of‬‭individuals‬‭are‬‭employed‬‭by‬‭industry,‬‭which‬‭greatly‬‭increases‬‭or‬‭creates‬
‭the wealth and income of the country.‬
‭●‬ ‭The output of an economy can be segregated as‬
‭○‬ ‭Primary (Use of Natural Resources)‬

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 ‭○‬ ‭Secondary (Manufacturing)‬
‭○‬ ‭Tertiary (Services)‬
‭○‬ ‭Quaternary (Research and Development)‬
‭○‬ ‭Quinary (Rearrangement)‬
‭●‬ ‭Industries‬‭could‬‭also‬‭be‬‭classified‬‭as‬‭Agriculture‬‭and‬‭allied‬‭activities,‬‭Industry,‬‭and‬‭Services‬
‭sectors.‬
‭●‬ ‭In‬ ‭the‬ ‭context‬ ‭of‬ ‭the‬‭Indian‬‭economy,‬‭the‬‭agriculture‬‭sector‬‭accounts‬‭for‬‭around‬‭18%‬‭of‬
‭output,‬ ‭the‬ ‭industrial‬ ‭sector‬ ‭around‬ ‭28%‬ ‭and‬ ‭Tertiary‬ ‭sector‬ ‭accounts‬ ‭for‬ ‭54%.‬ ‭A‬
‭distribution‬‭which‬‭is‬‭very‬‭similar‬‭to‬‭high‬‭income‬‭economies.‬‭The‬‭important‬‭feature‬‭however‬
‭is‬ ‭the‬ ‭economic‬ ‭dependence‬ ‭with‬ ‭as‬ ‭much‬ ‭as‬ ‭44%,‬ ‭25%‬ ‭and‬ ‭around‬ ‭30%‬ ‭depends‬ ‭on‬
‭agriculture, industries and service sector.‬
‭●‬ ‭In‬‭India‬‭the‬‭sector‬‭that‬‭contributes‬‭the‬‭least‬‭has‬‭the‬‭maximum‬‭dependence.‬‭In‬‭most‬‭other‬
‭countries,‬‭as‬‭the‬‭share‬‭of‬‭the‬‭agricultural‬‭sector‬‭goes‬‭down,‬‭the‬‭economic‬‭dependence‬‭also‬
‭goes‬ ‭down,‬ ‭this‬ ‭is‬‭not‬‭there‬‭in‬‭case‬‭of‬‭India.‬‭Such‬‭a‬‭pattern‬‭of‬‭economic‬‭dependence‬‭on‬
‭India may not allow for inclusive growth.‬

‭Process of Industrialization in a Country‬

‭●‬ ‭As‬ ‭an‬ ‭economy‬ ‭develops‬ ‭there‬ ‭is‬ ‭a‬ ‭need‬ ‭for‬ ‭the‬ ‭industrial‬ ‭sector‬ ‭to‬ ‭accelerate‬ ‭overall‬
‭growth‬ ‭of‬ ‭the‬ ‭economy.‬ ‭It‬ ‭is‬ ‭through‬‭this‬‭most‬‭of‬‭the‬‭economy‬‭today‬‭have‬‭acquired‬‭the‬
‭status of industrialised nations like the US, UK, Japan etc.‬
‭●‬ ‭The‬ ‭industrial‬ ‭sector‬ ‭can‬ ‭be‬ ‭seen‬ ‭as‬ ‭a‬ ‭basic‬ ‭industry‬ ‭(like‬ ‭steel,‬ ‭cement,‬ ‭aluminium,‬
‭etc.),‬ ‭capital‬‭goods‬‭sector‬‭(heavy‬‭machines),‬‭intermediate‬‭goods‬‭(tools,‬‭sphere‬‭parts‬
‭etc) and consumer goods (TV, fridge, AC etc)which are also known as White goods.‬
‭●‬ ‭In‬ ‭the‬ ‭initial‬‭stage‬‭and‬‭to‬‭initiate‬‭the‬‭process‬‭of‬‭industrialization,‬‭the‬‭government‬‭has‬‭to‬
‭focus‬‭on‬‭basic‬‭and‬‭capital‬‭goods‬‭which‬‭creates‬‭the‬‭demand‬‭for‬‭intermediate‬‭goods‬‭as‬‭well‬
‭as‬ ‭consumer‬ ‭goods.‬ ‭Their‬ ‭growth,‬ ‭in‬ ‭turn,‬ ‭creates‬ ‭demand‬ ‭for‬ ‭capital‬ ‭and‬ ‭basic‬ ‭goods‬
‭industries, which eventually creates a cycle in the process of industrialization.‬
‭●‬ ‭The‬‭basic‬‭and‬‭capital‬‭goods‬‭sectors‬‭are‬‭highly‬‭capital‬‭intensive,‬‭technology-intensive,‬‭have‬
‭long‬‭gestation‬‭periods‬‭(time‬‭gap‬‭between‬‭investment‬‭and‬‭production)‬‭and‬‭high‬‭break-even‬
‭point (‬‭profit occurs after a long period of time).‬
‭●‬ ‭The‬ ‭process‬ ‭of‬ ‭industrialization‬ ‭in‬ ‭India‬ ‭was‬ ‭initiated‬ ‭during‬ ‭the‬ ‭Second‬ ‭Five‬ ‭Year‬ ‭Plan‬
‭(1955-56‬ ‭to‬ ‭1960-61),‬ ‭also‬ ‭called‬ ‭the‬ ‭Mahalanobis‬ ‭model,‬ ‭w‬‭hich‬ ‭was‬ ‭a‬ ‭top-down‬

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 ‭approach.‬‭It‬‭focused‬‭on‬‭rapid‬‭industrialisation‬‭by‬‭prioritising‬‭investment‬‭in‬‭heavy‬‭industries‬
‭like‬ ‭steel,‬ ‭cement,‬ ‭aluminium,‬ ‭etc.‬ ‭(basic‬ ‭industries),‬ ‭heavy‬ ‭machines‬ ‭(capital‬ ‭goods‬
‭industries)‬ ‭because‬ ‭these‬‭industries‬‭were‬‭considered‬‭a‬‭key‬‭to‬‭long-term‬‭economic‬‭growth.‬
‭This‬‭model‬‭was‬‭advocated‬‭on‬‭similar‬‭lines‬‭as‬‭those‬‭run‬‭by‬‭developed‬‭countries‬‭during‬‭their‬
‭process of industrialization.‬
‭●‬ ‭The‬ ‭large‬ ‭need‬ ‭of‬ ‭economic‬ ‭resources‬ ‭an‬ ‭technology‬ ‭required‬ ‭and‬ ‭a‬ ‭need‬ ‭for‬ ‭define‬
‭industrialization,‬ ‭the‬ ‭government‬ ‭of‬ ‭India‬ ‭took‬ ‭over‬ ‭the‬ ‭responsibility‬ ‭of‬ ‭industrialisation‬
‭through‬ ‭the‬ ‭public‬ ‭sector,‬ ‭this‬ ‭was‬ ‭not‬ ‭a‬ ‭matter‬ ‭of‬ ‭choice‬ ‭but‬ ‭a‬ ‭matter‬ ‭of‬ ‭compulsion,‬
‭given‬‭the‬‭need‬‭and‬‭absence‬‭of‬‭private‬‭sector‬‭to‬‭handle‬‭such‬‭a‬‭enormous‬‭responsibility‬‭and‬
‭that’s how the public sector was born in India.‬

‭Types of Central Public Sector Enterprises (CPSE) in India:‬

‭●‬ ‭Departmental Undertakings:‬
‭○‬ ‭Departmental undertakings are formed and managed by the government.‬
‭○‬ ‭It‬‭is‬‭attached‬‭to‬‭a‬‭government‬‭ministry,‬‭Its‬‭motive‬‭is‬‭to‬‭deliver‬‭essential‬‭goods‬‭and‬
‭services at a fair price.‬
‭○‬ ‭Examples of Departmental Undertakings in India are:‬
‭■‬ ‭Indian Space Research Organisation (ISRO)‬
‭■‬ ‭Defence Research and Development Organisation (DRDO)‬
‭■‬ ‭Indian Railways‬
‭■‬ ‭All india Radio (AIR)‬
‭■‬ ‭Indian Post, etc‬
‭●‬ ‭Statutory Corporations:‬
‭○‬ ‭A‬‭statutory‬‭company‬‭definition‬‭is‬‭defined‬‭as‬‭a‬‭company‬‭that‬‭is‬‭created‬‭by‬‭a‬‭special‬
‭Act of the Parliament.‬
‭○‬ ‭Their‬ ‭precise‬ ‭nature‬ ‭varies‬ ‭by‬ ‭jurisdiction,‬ ‭thus,‬ ‭they‬ ‭are‬ ‭statutes‬ ‭owned‬ ‭by‬ ‭a‬
‭government‬‭or‬‭controlled‬‭by‬‭the‬‭national‬‭or‬‭sub-national‬‭government‬‭to‬‭the‬‭extent‬
‭provided for in the creating legislation.‬
‭○‬ ‭Examples of statutory corporations in India are:‬
‭■‬ ‭Reserve Bank of India (RB1)‬
‭■‬ ‭Securities and Exchange Board of India (SEBI)‬
‭■‬ ‭National Highways Authority of India (NHAI)‬

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 ‭■‬ ‭Food Corporation of India (FCI)‬
‭■‬ ‭Insurance Regulatory and Development Authority of India(IRDAI)‬
‭■‬ ‭Airports Authority of India (AAl)‬
‭●‬ ‭Government Companies‬
‭○‬ ‭Government‬‭company‬‭means‬‭any‬‭company‬‭in‬‭which‬‭not‬‭less‬‭than‬‭fifty-one‬‭percent‬
‭of‬‭the‬‭(paid-up‬‭share‬‭capital)‬‭is‬‭held‬‭by‬‭the‬‭Central‬‭Government,‬‭or‬‭by‬‭any‬‭State‬
‭Government‬‭or‬‭Governments,‬‭or‬‭partly‬‭by‬‭the‬‭Central‬‭Government‬‭and‬‭partly‬‭by‬‭one‬
‭or more State Governments.‬
‭○‬ ‭Examples of government companies in India are:‬
‭■‬ ‭Coal India Limited (CIL)‬
‭■‬ ‭Engineers India Limited (ElL)‬
‭■‬ ‭Hindustan Petroleum Corporation Limited (HPCL)‬
‭■‬ ‭Bharat Petroleum Corporation Limited (BPCL)‬
‭●‬ ‭Autonomous Bodies:‬
‭○‬ ‭These‬‭are‬‭set‬‭up‬‭as‬‭per‬‭the‬‭exigencies‬‭of‬‭time‬‭and‬‭discharge‬‭functions‬‭outside‬‭the‬
‭governmental set-up with some amount of independence and flexibility.‬
‭○‬ ‭These‬‭are‬‭set‬‭up‬‭by‬‭the‬‭Ministries/Departments‬‭concerned‬‭and‬‭are‬‭funded‬‭through‬
‭grants-in-aid,‬ ‭either‬ ‭fully‬ ‭or‬ ‭partially,‬ ‭depending‬ ‭on‬ ‭the‬ ‭extent‬ ‭to‬ ‭which‬ ‭such‬
‭institutes generate internal resources of their own.‬
‭○‬ ‭Examples of autonomous bodies in india are‬
‭■‬ ‭All India Institute of Medical Science (AIMS)‬
‭■‬ ‭Indian Institute of Technology (IIT)‬
‭■‬ ‭Indian Institute of Management (IIM)‬
‭■‬ ‭Jamia Millia Islamia‬
‭■‬ ‭Indian Council of Agriculture Research (ICAR)‬
‭■‬ ‭Council of Scientific and Industrial Research (CSIR), etc.‬

‭Public Sector and Private Sector Enterprises:‬

‭●‬ ‭A‬‭public‬‭sector‬‭enterprise‬‭is‬‭owned‬‭and‬‭controlled‬‭by‬‭the‬‭government.‬‭It‬‭operates‬‭under‬‭its‬
‭own set of rules and regulations.‬

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‭●‬ ‭A‬‭private‬‭sector‬‭enterprise‬‭is‬‭owned‬‭and‬‭controlled‬‭by‬‭individuals‬‭or‬‭entities‬‭other‬‭than‬‭the‬
‭government.‬ ‭It‬‭functions‬‭according‬‭to‬‭the‬‭rules‬‭and‬‭regulations‬‭set‬‭by‬‭the‬‭Government‬‭of‬
‭India and the respective state governments.‬
‭●‬ ‭A‬ ‭limited‬‭liability‬‭company‬‭can‬‭be‬‭established‬‭in‬‭India‬‭for‬‭commercial‬‭purposes‬‭under‬‭the‬
‭Companies Act, 2013.‬
‭●‬ ‭A‬ ‭limited‬ ‭liability‬ ‭partnership‬ ‭(LLP)‬ ‭firm‬ ‭can‬ ‭be‬ ‭started‬ ‭under‬ ‭the‬ ‭Limited‬ ‭Liability‬
‭Partnership Act, 2008.‬
‭●‬ ‭Limited‬ ‭liability‬ ‭means‬ ‭that‬ ‭the‬ ‭liabilities‬ ‭of‬ ‭a‬ ‭company‬ ‭or‬ ‭firm‬ ‭are‬ ‭restricted‬ ‭to‬ ‭the‬
‭company‬ ‭or‬ ‭firm‬ ‭itself.‬ ‭The‬ ‭personal‬ ‭assets‬ ‭of‬ ‭the‬ ‭owners‬ ‭cannot‬ ‭be‬ ‭used‬ ‭to‬ ‭repay‬
‭liabilities in case of the company's dissolution or closure.‬
‭●‬ ‭Under‬ ‭the‬ ‭Companies‬ ‭Act,‬ ‭2013,‬ ‭a‬ ‭limited‬ ‭company‬ ‭can‬ ‭be‬ ‭formed‬ ‭as‬ ‭either‬ ‭a‬ ‭public‬
‭limited company or a private limited company.‬
‭●‬ ‭To‬ ‭start‬ ‭a‬ ‭private‬ ‭limited‬ ‭company,‬ ‭a‬ ‭minimum‬ ‭of‬ ‭two‬ ‭members‬ ‭is‬ ‭required,‬ ‭whereas‬ ‭a‬
‭public limited company requires at least seven members.‬
‭●‬ ‭The‬ ‭maximum‬ ‭number‬ ‭of‬ ‭members‬ ‭in‬ ‭a‬ ‭private‬ ‭limited‬ ‭company‬ ‭is‬ ‭200,‬ ‭while‬ ‭a‬ ‭public‬
‭limited company has no upper limit on the number of members.‬
‭●‬ ‭A‬‭limited‬‭company‬‭or‬‭any‬‭company‬‭exists‬‭in‬‭the‬‭book‬‭of‬‭law,‬‭the‬‭day‬‭when‬‭the‬‭company/‬
‭firm‬ ‭started,‬ ‭it‬ ‭is‬ ‭their‬ ‭birth‬ ‭date‬ ‭and‬ ‭the‬ ‭closure‬ ‭day‬ ‭of‬ ‭the‬ ‭company‬ ‭is‬ ‭their‬ ‭end‬ ‭or‬
‭death day.‬
‭●‬ ‭A‬‭company‬‭can‬‭sue‬‭somebody‬‭and‬‭a‬‭company‬‭can‬‭be‬‭sued‬‭by‬‭somebody‬‭else‬‭because‬‭it‬‭is‬
‭a legal entity that exists in the book of law.‬

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