Tuesday, 3 March 2020

Industrial Policy and Regulatory Structure


Industrial Policy and Regulatory Structure

Industrial policy is one of the important government documents, which has a lasting
impact on a country's industry. It is a policy document prepared by the government which
states how the industrial environment of the country will take shape in the future.
Before independence, the industrial policy of British India was formulated with the sole
purpose of exploiting the resources of the country for Britain's advantage. Soon after
independence, in 1948, India's first industrial policy was unveiled, and in 1956 a second
and more comprehensive industrial policy was announced.
Industrial policy strives for a balanced regional development, i.e., it tries to ensure that
industries are not clustered in specific areas but develop in all parts of the country and to
ensure that the scarce resources of the nation are utilised in the interest of the nation and
not in the interest of profit.
The first industrial policy in 1948, itself paved the path for mixed economy in the nation.
It accepted the existence of both “public and private sectors in the economy. It assigned a
progressive role for the State, for investment in industrialisation, and in regulating the
private sector.
The draft of the 1956 industrial policy was very comprehensive. This laid emphasis on the
establishment of a socialist pattern of society. This policy also emphasized that industrial
development of the country should be guided by the Directive Principles of the
In March 1977 the first non-Congress government was at the centre. The Janata Party
assumed power and Morarji Desai, a die-hard Gandhian, became the Prime Minister. The
new government declared a new industrial policy.
The industrial policy of 1977 stated that funds of the public sector financial institutions and
banks should be devoted to the growth of the small scale and medium scale units.
The New Industrial Policy (NIP) was a big departure from the erstwhile industrial policy.
When all the earlier industrial policies talked about how to regulate the private sector in
a so-called national interest, NIP talked about deregulation and delicensing.
Notes Industrial licensing is governed by Industries (Development and Regulation) Act, 1951. It
is a very effective tool used by the government to regulate the private sector. Over the
years it has become a tool for exploitation. The NIP did away with licensing in a big
The New Industrial Policy was a new experience for India. On the one hand it provided a
conducive environment to the industry, allowing it to spread it wings and on the other
hand, it opened the doors for MNCs and sent a clear message to Indian firms to either
perform or perish.
The emergence of Capital Markets can be traced back to the second half of the eighteenth
century when the transactions were limited to loan stock transactions of the East India
Under the SCR Act, an exchange is defined as any body of individuals, whether incorporated
or not, constituted for the purpose of assisting, regulating or controlling the business of
buying, selling or dealing in securities.
The Bombay Stock Exchange is one of the oldest stock exchanges of India and Asia and it
is also one of the biggest stock exchanges of the world. It is said to be the nerve of the
Indian economy which reveals the health of economy.
The NSE was incorporated in November 1992 with an equity capital of 25 crores. It is
sponsored by IDBI and co-sponsored by other term-lending institutions, LIC, GIC, other
insurance companies, banks and financial institutions.
The OTCEI is primarily meant for small sized companies and small investors. This exchange
has the advantages of transparency, fast settlements and potential to reach the nooks and
corners of the country.
The Securities and Exchange Board Act of 1992 provides for the establishment of a board to
protect the interest of investors and to promote the development and regulation of the
securities market.
Underwriters make a commitment to get the underwritten issue subscribed either by
others or by themselves. They agree to take unsubscribed portions of the issue. They
render this service for a commission agreed upon between the issuing company and the
underwriter subject to the ceiling under the Companies Act.
The ongoing reforms in India are referred to as economic liberalisation of India.
Privatisation is the process of involving the private sector in the ownership or operation
of a state-owned or public sector undertaking. In a broader sense, it connotes private
ownership (or even without change of ownership) the induction of private control and
management in the PSUs.
The formation of systems of interaction between the global and the local has been a
central driving force in world history and has led to the phenomenon called globalisation.

Bear: A seller of securities
BIFR: Board of Industrial and Financial Reconstruction
Bull: A buyer in the stock market
District Industries Centres: Centres for the development of small scale and cottage industries
Notes GDP: Gross Domestic Product of an economy; indicator of economic growth
IDBI: Industrial Development Bank of India
Industrial Licensing: Tool to regulate private sector industries
Monopoly: Where single seller dominates the market
MRTP Act: Monopolies and Restrictive Trade Practices Act
OCTEI: Exchange for small sized companies and small investors
Planned Economy: Where proper planning takes place and expenditures are planned
Sick Units: Business units which are generating no profits or less revenue
Stock Brokers: Members of recognised stock exchanges who deal in securities
Stock Exchange: Any body of individuals, whether incorporated or not, constituted for the
regulating the capital market
Sub Brokers: Acts as an agent of a stock broker; assists him

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