Presentation on theme: "INDUSTRIAL POLICY IN INDIA: ISSUES, OBJECTIVES & EXPERIENCE"— Presentation transcript:
1INDUSTRIAL POLICY IN INDIA: ISSUES, OBJECTIVES & EXPERIENCE M.H. Suryanarayana
2Structure Industrial Policy: Objectives & Evolution Current Status Evaluation
3Background:Planning and Industrial policy evolution highly inter-twined:Objectives of industrial policy articulated in the Industrial Policy Resolutions of 1948 and 1956Specific priorities and strategies spelt out in successive five year plans to be implemented by:A system of licensing provided for by the Industries (Development & Regulation) Act, 1951; andA system of import licensing and foreign trade policies meant to promote import substituting industrializationLicensing ensured realization of physical targets for capacity set by the plan, trade policy sought to promote domestic industrialization by physical allocation of imports by products.
4Industrial Policy Resolution 1948 Outlined the approach to industrial growth and developmentEmphasized the importance of securing a continuous increase in production and ensuring its equitable distribution.
5Industrial Policy Resolution 1948 Progressively active role for the State in thedevelopment of Industries.State monopoly: Arms and ammunition, atomic energy and railway transportState exclusively responsible for the establishment of new undertakings in six basic industries-except where, in the national interest, the State itself found it necessary to secure the cooperation of private enterprise.
6Industrial Policy Resolution 1948 Rest of the industrial field open to private enterprise though the State would also progressively participate in this field.
7Industrial Policy Resolution 1956 After the adoption of the Constitution and the socio-economic goals, the Industrial Policy was comprehensively revised and adopted in 1956.Sought to accelerate the rate of economic growth and speed up industrialization to achieve a socialist pattern of society.Capital was scarce & the base of entrepreneurship not strong enough. Hence, the gave primacy to the role of the State to assume a predominant and direct responsibility for industrial development.
8Industrial Policy Resolution 1956 Objectives:Improvement in living standards and working conditions for the mass of the people.Reduction in income and wealth disparitiesPrevention of private monopolies and concentration of economic power in different fields in the hands of small numbers of individuals.
9Industrial Policy Resolution 1956 Progressively predominant and direct responsibility for the State in setting up new industrial undertakings and for developing transport facilitiesUndertake State trading on an increasing scale.Equal opportunity for the private sector to develop and expand.
10Industrial Policy Resolution 1956 Private sector to develop on the principle of cooperation; increasing proportion of the private sector activities to develop on cooperative lines.The adoption of the socialist pattern of society as the national objective.The need for planned and rapid development.
11Industrial Policy Resolution 1956 Public sector: All industries of basic and strategic importance, or in the nature of public utility services.The State can undertake any type of industrial production.
12Industrial Policy Resolution 1956 Categorization of industries:i) Set of industries the future development of which will be the exclusive responsibility of the Stateii) Category of industries which will be progressively state-owned and in which the State will, therefore, generally take the initiative in establishing new undertakings, but in which private enterprise will also be expected to supplement the efforts of the State.
13Industrial Policy Resolution 1956 iii) Rest of industries left to the initiative and enterprise of the private sector.Stress the role of cottage and village and small scale industries in the development of the national economy.Disparities in levels of development between different regions should be progressively reduced.
14Industrial Policy 1973Certain structural distortions called for policy changes in IPR 1956Provide for a closer interaction between the agricultural and industrial sectorsHighest priority to the generation and transmission of power.Identify products to be reserved for the small scale sector: list of industries exclusively reserved for the small scale sector expanded from 180 items to more than 500 items.
15Industrial Policy 1973Within the small scale sector, a tiny sector was also defined with investment in machinery and equipment up to Rs.1 lakh & located in towns with a population < 50,000 according to 1971 census figures, and in villages.Proposal for special legislation to protect cottage and household industries
16Industrial Policy 1973Compulsory export obligations, merely for ensuring the foreign exchange balance of the project, would no longer be insisted upon while approving new industrial capacity.In the areas of price control of agricultural and industrial products, the prices would be regulated to ensure an adequate return to the investor.
17Industrial Policy 1977 Emphasis on producing inputs needed by a large number of smaller units and making adequate marketing arrangements.upgrading the technology of small units.Promoting the development of a system of linkages between nucleus large plants and the satellite ancillaries
18Industrial Policy 1977 Emphasis on: the development of small scale industries, the investment limit in the case of tiny units was enhanced to Rs.2 lakh, of a small scale units to Rs.20 lakh and of ancillaries to Rs.25 lakh.building buffer stocks of essential raw materials for the Small Scale Industries for operation through the Small Industries Development Corporations in the States and the National Small Industries Corporation in the Centre.
19Industrial Policy 1977 Emphasis on: Industrial processes and technologies involving optimum utilization of energy or the exploitation of alternative sources of energy for giving special assistance, including finance on concessional terms.
20The Industrial Policy Statement 1980 Formulated wrt the Industrial Policy Resolution of 1956 to provide for (i) Optimum utilization of installed capacity; (ii) Maximum production and achieving higher productivity; (iii) Higher employment generation; (iv) Correction of regional imbalances; (v) Strengthening of the agricultural base through agro based industries and promotion of optimum inter-sectoral relationship;(vi) Promotion of export-oriented industries;
21The Industrial Policy Statement 1980 (vii) Promotion of economic federalism through equitable spread of investment and dispersal of returns;(viii) Consumer protection against high prices and bad quality.
22INDUSTRIAL POLICY 1991 Govt . recognizes the need for social and economic justice, to end poverty and unemployment and to build a modern, democratic, socialist, prosperous and forward-looking IndiaIndia to grow as part of the world economy and not in isolationGreater emphasis placed on building up ability to pay for imports through our own foreign exchange earningsdevelopment and utilization of indigenous capabilities in technology and manufacturing as well as its up gradation to world standards.
23INDUSTRIAL POLICY 1991Sound policy framework encompassing encouragement of entrepreneurship, development of indigenous technology through investment in research and development, bringing in new technology, dismantling of the regulatory system, development of the capital markets and increasing competitiveness for the benefit of the common man.
24INDUSTRIAL POLICY 1991The spread of industrialization to backward areas of the country will be actively promoted through appropriate incentives, institutions and infrastructure investments.Government will provide enhanced support to the small-scale sector so that it flourishes in an environment of economic efficiency and continuous technological up gradation
25INDUSTRIAL POLICY 1991Foreign investment and technology collaboration will be welcomed to obtain higher technology, to increase exports and to expand the production base.Government will endeavor to abolish the monopoly of any sector or any individual enterprise in any field of manufacture, except on strategic or military considerations and open all manufacturing activity to competition.
26INDUSTRIAL POLICY 1991The Government will ensure that the public sector plays its rightful role in the evolving socioeconomic scenario of the country. Government will ensure that the public sector is run on business lines as envisaged in the Industrial Policy Resolution of 1956 and would continue to innovate and lead in strategic areas of national importance.
27INDUSTRIAL POLICY 1991Government will fully protect the interests of labour, enhance their welfare and equip them in all respects to deal with the inevitability of technological change Labour will be made an equal partner inprogress and prosperityWorkers’ participation in management will be promoted
28INDUSTRIAL POLICY 1991Workers cooperatives will be encouraged to participate in packages designed to turn around sick companies.The major objectives of the new industrial policy package will be to build on the gains already made, correct the distortions or weaknesses that may have crept in, maintain a sustained growth in productivity and gainful employment and attain international competitiveness.
29INDUSTRIAL POLICY 1991Need to preserve the environment and ensure the efficient use of available resources.Government’s policy will be continuity with change
30INDUSTRIAL POLICY 1991In pursuit of the above objectives, Government have decided to take a series of initiatives in respect of the policies relating to the following areas. A. Industrial Licensing. B. Foreign Investment. C. Foreign Technology Agreements. D. Public Sector Policy. E. MRTP Act.
31INDUSTRIAL POLICY 1991 Industrial licensing: Foreign Investment: Modified industrial licensing policy to ease restrictions on capacity creation, respond to emerging domestic & global opportunities by improving productivityAbolished industrial licensing for most industries but for 18 categoriesSmall scale sector reservedForeign Investment:FDI (up to 51% foreign equity) permitted in high priority industries (high investment and advanced technology) & export oriented companies
32INDUSTRIAL POLICY 1991 Foreign Technology Agreements: Towards technological dynamism, automatic approval for technological agreements related to high priority industries; eased procedures for hiring foreign technical expertisePublic Sector Policy:Restructuring pubic sector units, raise resources through pubic participation PSUs, refer sick units to Board of Industrial & Financial ReconstructionMRTP Act:Abolished scrutiny of investment decision of MRTP companies etc.
33Current Scenario: Substantial changes: Only six industries require compulsory licensingOnly three industries reserved for the public sectorRelation of restriction on FDI: FDI up to 100 % under automatic route for most manufacturing activities in Special Economic Zones; FDI ceiling in pvt banking sector up to 74%; oil exploration (100%); natural gas and LNG pipelines (100%); telecom (74%)Small Scale industries sector: reduced # of items reserved from 821 (1991) to 506 (2005)
37Lessons from India: Industrial Policy should not be about: Controlling PricesControlling QuantitySpecifying Geographical Location of ActivityPreemption by Public SectorPolicy Body, Regulatory Body and Service Provider being Government Agencies
38Industrial Policy cannot be Viewed in Isolation EducationSchooling → Vocational \ Technical Education → Entry into Workforce → Employment ↔ Life Long LearningTypology of Higher Education InstitutionsInnovationPublic – Private – Partnership ModelsOpen Science Model, Licence Model, Innovation ModelIndustry – Academia CollaborationOffice of Sponsored Projects: Funding agreementsOffice of Technology Transfer: Patenting and licensing technologyGlobal CooperationOpen Source Drug Discovery is a CSIR Team India Consortium with Global Partnership with a vision to provide affordable healthcare to the developing world.FiscalTax Incentives for R&D ExpenditureFunding for Industry – Academia CollaborationTransparent Process (Metrics for Evaluation) for Funding Basic Research Vs Applied Research
39Industrial Policy cannot be Viewed in Isolation Infrastructure & Industrial PolicyInfrastructure Sectors -Heavy Industries -Local Infrastructure Development needs to be Dovetailed with Industrial StructureCluster ProgramSpecialization, Flexibility in Production, Linkages, Sub- contractors, Cooperation among Firms, Economies of Scale and ScopeKnowledge Transfer on Best PracticesResearch Parks in the Industrial Cluster
40Internationalization of Higher Education Global Universities are Reshaping the World: Ben Wildavsky1999 to 2009 – 57 percent increase in number of students attending a university outside their home countries (Size: 3 million)Since 1990 – Doubling of cross-border scientific collaboration (measured by co-authored journal articles)Half of the world's top physicists no longer work in their home countries60 percent increase in number of “branch campuses" (operating outside national borders) in just five years.Source: Joseph Klafter (2010) Together, we’re better, The Times Higher Education July 1, 2010
41Mission of Office of Technology Transfer To facilitate the transfer of university created discoveries into new products and services for public use and benefit.To promote regional economic growth and job creation.To reward, retain, and recruit faculty and graduate students.To create (new) relationships with industry.To generate net royalty income for the TO, inventors, and the university.To generate new funding support for the university and/or faculty from sponsored research funding, consulting opportunities for faculty, and donations of money or equipment.To serve as a service center to the university, faculty, students, and staff on all areas related to intellectual property, including providing seminars and consulting assistance when requested.To actively facilitate formation of university-connected start-up (spinout) companiesSource: Gilles Capart and Jon Sandelin (2004) Models of, and Missions for, Transfer Offices from Public Research Organizations
42Nine Points to Consider in Licensing University Technology Universities should reserve the right to practice licensed inventions and to allow other non-profit and governmental organizations to do soExclusive licenses should be structured in a manner that encourages technology development and useStrive to minimize the licensing of “future improvements”Universities should anticipate and help to manage technology transfer related conflicts of interestEnsure broad access to research toolsEnforcement action should be carefully consideredBe mindful of export regulationsBe mindful of the implications of working with patent aggregatorsConsider including provisions that address unmet needs, such as those of neglected patient populations or geographic areas, giving particular attention to improved therapeutics, diagnostics and agricultural technologies for the developing worldSource: In the Public Interest: Nine Points to Consider in Licensing University Technology 2007
43How do Research Universities Contribute? Open Science ModelLicence ModelInnovation Model- No IPR retained by universities (Contract Work, Publications)- FY2001: Over 494 new companies based on an academic discovery were formed, and over $1 billion in royalty incomeStanford University TTO – 1980 ($4 mn)1981 – 1990 ($40 mn)Since ($ 500 min)- Demonstration of proof of principle of the utility of such inventions- Collaborativeresearch with industry- Creation of spinoutSubsidiariesMore developed in certainEuropean countries (UK,Scandinavian countries,Netherlands and Belgium)Source: Gilles Capart and Jon Sandelin (2004) Models of, and Missions for, Transfer Offices from Public Research Organizations
44Spinouts from U.S. universities- Some Issues Approaches: 1. Licensing to established companies Facilitation of start-up companies to develop university inventionsSpinouts from U.S. universities- Some IssuesAssistance with preparation of business plansHelp in incorporating the companyDirectly providing or finding early stage investmentHelp in recruiting management team members.Requires significant resources & compensation systemsPotential for faculty conflict of interestPossibility for adverse public reaction and adverse media exposureRisk of involvement in product liability lawsuits.One spin-out company is created for every$15 million in research spending in UK universities$44 million for U.S. universities.54% of UK universities have business incubators.Source: U.K Department of Trade and Industry Research Management Briefing, No. 9, March 8, 2004Source: University Technology Transfer in the U.S: History, Status and Trends