Page 49 - DMGT401Business Environment

Business Environment

Notes Objectives

After studying this unit, you will be able to:
State the objectives of industrial policy

Assess the industrial policies of India
Know about stock exchanges and Securities and Exchange Board of India (SEBI)
Explain the concepts of Liberalisation, Privatisation and Globalisation

Introduction

This unit deals with two major topics – 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.
The role of industrial policy is more important in a planned economy like India. Till liberalisation
came about, the industry was totally regulated by the government. In a planned economy,
industrial policy demarcates the areas in which the government will spend and the role it is
going to play in regulating the private industry. The past 55 years have seen many changes in
India's industrial policy.

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. This was because before
independence the India's balance of trade with Britain was positive but the balance of payment
was adverse.
Soon after independence, in 1948, India's first industrial policy was unveiled, and in 1956 a
second and more comprehensive industrial policy was announced. This policy remained broad
guideline for almost all the industrial policies which were followed upto 1980. To understand
industrial policy, it is essential to understand the policy makers and the situation in which the
policy was framed.

Almost all the leaders of India's freedom movement were ardent believers in a socialist
philosophy, regardless of their political differences. Both Jawahar Lal Nehru and Netaji Subhash
Chandra Bose wanted to build a socialist system in India. Even Shaheed-e-Azam Bhagat Singh
was a socialist by heart.

These ideas were reflected in the economic decisions made by the government of free India. The
objective of the Industrial Policy of India at the time was to achieve equality in society. But in the
coming years, India turned from an agriculturally rich nation to one of the poorest nations.
Nehru's model had failed and India had to resort to the characteristics of a capitalist economy.

The Union Government enacted the Securities Contract (Regulation) Act in 1956 (SCR Act) for
the regulation of stock exchanges and contracts in securities traded on the stock exchanges and
contracts in securities traded. The SCR Act and the Securities Contracts (Regulation) Rules (1957)
constitute the legal framework for the regulation of stock exchanges and protection of the
interest of investors.
The Securities and Exchange Board of India Act, 1992 provides for the establishment of the
Securities and Exchange Board of India (SEBI) to protect the interest of securities and to promote
the development of securities and to regulate the securities market.

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