Page 60 - DMGT401Business Environment

Unit 2: Industrial Policy and Regulatory Structure

Fund (NRF) provided assistance to cover the cost of retraining and redeployment of Notes
labour and also provide compensation to labour affected by the closure of unviable
public sector units.
(c) Disinvestments and Privatisation: The government decided to reduce its stake in PSUs
and also decided to privatise a few PSUs. In the coming years, many PSUs were in
fact were privatised and disinvested.
5. MRTP Act: Under the MRTP Act, all firms with assets above a certain size ( 100 crores
since 1985) were classified as MRTP firms. The principle objective of the MRTP Act was:
(a) Prevention of concentration of economic power and control of monopolies
(b) Prohibition of monopolistic, restrictive and unfair trade practices.

There were many restrictions on MRTP firms as they were permitted to enter into selected
industries, that too on a case by case approval basis. Besides licences, these firms require
separate permission for any further investment.

Example: This restricted the growth of Indian industry and units like TISCO, TELCO,
HINDALCO and Ranbaxy, which though having the capacity to become global players, remained
confined to India, producing substandard goods.

In 1991, the MRTP Act was restructured and pre-entry restrictions removed with respect to
new undertakings, expansion, amalgamation, merger, takeover, registration, etc. under
Sections 20-26 of Part A of Charter III of the Act. The amended act gave more emphasis to
the prevention and restriction of restrictive and unfair trade practices.

Appraisal of the Industrial Policy

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.
In this way it opened many avenues for the industry and which, the industry took advantage of.
Indian companies began expanding and firms like Ranbaxy, Asian Paints, Aditya Vikram Birla
Group and many others became global players.

Example: Today Asian Paints is operates in 27 countries and Tata Tea acquired the
international tea brand Tetley.
In the past 15 years, India has witnessed drastic changes. People who have seen the 70s and 80s
would not have imagined that in 1990 they have to wait only for weeks to get a telephone
connection and by 1998 they can get a phone right on the spot and carry them in their pockets. By
mid-2005, the number of mobile connections had crossed the number of basic telephone users.
Today, India has one of the largest grass root refineries of the world in private hands, i.e.,
Reliance, and the country is now exporting aviation fuel. The Indian economy has shifted from
mini-plants to economies of scale, from economies of scarcities to economy of surplus in many
goods.
This liberalisation has proved to be a big boon for the service sector. Today, the service sector
produces more than 50% of the total GDP of India. India is becoming a manufacturing hub as
many companies are shifting their manufacturing utilities to India. This includes companies
like GE, Nokia and DuPont.

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