As far as can be ascertained, during the pre-independence period, there were few aspects of government policy, which could be, characterized as any kind of industrial policy. Apart from public investment in roads, railways, and irrigation, there was little public investment of any kind. In particular, education was highly neglected and industrial protection for the nascent industries was hardly provided. The industrial scene at independence can be characterized as follows:

• The industrial sector was extremely undeveloped.
• There was great resentment at the lack of infrastructure industries.
• The lack of government intervention in favour of industries sector was seen as an important cause of underdevelopment.
• Export orientation had been against the country’s interests.
• Structure of ownership was highly concentrated and family-based.
• Technical and managerial skills were in very short supply.

As a result, the national consensus was that economic sovereignty and economic independence lay in rapid industrialization, particularly the promotion of industrial infrastructure. The Indian industrial houses of the day were seen as having served the nationalist cause in the face of colonial adversity and were therefore deserving of all protection. Furthermore, the composition of exports was tilted towards the export of primary goods whereas imports were mainly of manufactures. Thus, excessive exports were seen as being against the economic necessities of the country rather than as a growth-inducing process. The discrimination faced by Indians in all economic activities, particularly related to the attainment of responsible positions, both in the government and in the private sector, provided a great urge towards rapid indigenization in all respects and a general antipathy towards foreign influence, foreign trade, and foreign investment. The stage was, therefore, set for the practice of economic and industrial policies, which emphasized rapid industrialization, but through an activist and interventionist role of the government, accompanied by a tendency towards autarky.

Industrial Policy

The evolution of the policy environment of the Indian Industry is a fascinating story. The genesis of industrial policy in independent India can be traced back to the setting up of a National Planning Committee in 1938 under the chairmanship of Jawaharlal Nehru, which emphasized active state planning and control.

Industrial Policy Resolution of April 1948

It divided the industries into four broad categories and retained defence production, atomic energy and railways under the exclusive domain of the central government and provided that industries like aircraft manufacture, shipbuilding, coal, iron and steel, mineral oils and manufacture of telecommunication equipment should be set up only by the central or state governments. It laid down the foundation of a mixed economy. 

Industrial Policy Resolution of April 1956

The second industrial policy resolution, April 1956: It classified the industries under three schedules and extended the sphere of government ownership and control by clubbing the first two categories of industries of the 1948 resolution and also adding heavy machinery, heavy electrical, core mining, generation and distribution of electricity, basic metals, air transport to the reserved list. The resolution also emphasized the need for reducing regional disparities, securing a balanced regional development, and developing village and small-scale industries while recognizing the necessity of securing the participation of foreign capital and enterprise for fostering industrial development and imparting training to Indian personnel.

Industrial Licensing Mechanism

The industrial licensing mechanism: This was evolved in 1951 and strengthened over time till the early seventies. Under this regime, industrial diversification and growth proved to be limited from the mid-sixties to the early seventies. The continued slow industrial growth for the third year in succession since the onset of the seventies, the shortage of wage goods and the high inflation rate forced the government to take a serious view of its industrial policy.

The Monopolies & Restrictive Practices Act 1969

The important objectives of MRTP Act, 1969 are:

• To prevent centralization of economic power and to put control on monopolies.
• To check restrictive and unhealthy trade practices.

After the enforcement of this Act, all those companies whose assets were more than a prescribed limit (Rs. 100 crore w.e.f. 1989) and which were classified as MRTP companies were given permission of entry in some selected industries only (that too on the basis of separate permission in different matters). Besides control through industrial licensing, these big firms had to obtain permission separately in matters of investment proposals. Consequently, an adverse effect on the development and extension plans of many large private firms was observed. 

In order to remove the initial limits of assets related to MRTP the Parliament passed MRTP Amendment Act, 1991. The Amendment Act has totally eliminated pre-entry restrictions.  No prior approval of the Central Government is required now for the expansion and establishment of new undertakings, major amalgamation take over, or appointment of directors in respect of the undertakings.

According to a major decision taken by the MRTP commission, Government departments providing commercial services will also be excluded from the MRTP Act. In this services like telecommunication, transportation (including railways), and housing services have been included.  Services, which are provided without fees, are not included in the provisions of the MRTP Act.

Now, the MRTP Act has been replaced by the Competiton Act of 2002.

Industrial Policy Statement, February 1973

It was intended to merely make some changes in the industrial structure. It allowed larger industrial houses with assets of not less than Rs.20 crore to participate in the establishment of core industries along with other applicants provided the item was not reserved for production in the public sector or the small sector.

Delicensing Order 1975

The government first delicensed 21 industries and permitted unlimited capacity expansion in 30 other industries by monopoly houses as well as foreign companies. The government followed this up in November 1975 by declaring 25 percent of excess unauthorized capacity as legal under normal expansion and by allowing another 25 percent to be covered by automatic licensing over a five-year period. Thus, industrial licensing was not formally withdrawn. Unauthorized capacities were ratified periodically in order to ensure that production was augmented.

Industrial Policy of 1977

Under the 1977 policy, industries were classified into three categories - cottage and household industries, tiny sector, and small-scale industries. This was done to design policy measures for each category. The policy attempted to define the role of the large-scale sector by declaring them 

1. basic industries for providing infrastructural items (such as cement, steel, oil, etc.) to small-scale industries and others;
2. capital goods industries that provide capital goods to small-scale industries;
3. high technology industries widely required by small-scale and agriculture sectors;
4. other industries

The public sector along with producing strategic goods of basic nature will also take care of maintaining essential supplies for the economy.

Industrial Policy of 1980

The policy was announced with the following socio-economic objectives:

1. optimum utilization of installed capacity
2. achievement of higher productivity
3. higher employment generation
4. correction of regional imbalances
5. strengthening of the agricultural base through agro-based industries
6. promotion of export-oriented industries
7. promotion of economic federalism through the equitable spread of investment and dispersal of returns
8. consumer protection

Major External Payments Problem 1991

It was partly because of large fiscal deficits and partly because of an overvalued currency, the government undertook a major decision of introducing comprehensive economic reforms, with emphasis as much on structural as on macro-economic areas.

Industrial Policy - July 24, 1991

The new industrial policy, July 24, 1991: The new policy aimed at eliminating barriers to entry and removing restrictions of the MRTP Act on the domestic industry to enable it to expand, facing foreign competition, promoting direct foreign investment, restructuring the public sector and integrating the Indian economy with the global economy. Industrial licensing for all industries, except a few, was abolished. Eight major categories of industries were placed in the reserved list for the public sector and 18 industries were listed for which industrial licensing was made compulsory. Of these, nine were subsequently taken out from the purview of industrial licensing by July 1997. The remaining nine industries for which industrial licensing is necessary are coal and lignite, petroleum (other than crude) and its distillation products, distillation and brewing of alcoholic drinks, sugar, cigars, and cigarettes of tobacco and manufactured tobacco substitutes, electronic aerospace, and defence equipment of all types, industrial explosives, hazardous chemicals, and drugs and pharmaceuticals. The important aspect of the new industrial policy was that FDI was allowed up to 51 percent of the equity in priority industries, which required high investment and advanced technology. 100 percent equity was allowed if the entire output was to be exported. High-priority industries were to be accorded automatic approval for technology agreements within certain specified parameters. Other industries were also extended this facility provided no expenditure of free foreign exchange was involved. The terms of technology transfer were also left to the commercial judgment of individual companies. The Monopolies & Restrictive Trade Practices Act was toned down to allow large companies free rein.

Evaluating the performance of public sector enterprises, the industrial policy noted that these have yielded a low rate of return on capital invested and need to be restructured by rehabilitation of loss-making enterprises through the Board for Industrial and Financial Reconstruction (FIPB) and raising resources by dilution of government equity holdings.

The main objectives of the Industrial Policy of India

1	To maintain a sustained growth in productivity
2	To enhance gainful employment
3	To achieve optimal utilization of human resources
4	To attain international competitiveness
5	To transform India into a major partner and player in the global arena
6	To promote workers' participation in management, enhancing their welfare and equipping them to deal with the inevitability of technological change

To achieve these objectives, the policy focus is on

1	Deregulating Indian industry
2	Allowing freedom and flexibility to the industry in responding to market forces
3	Providing a policy regime that facilitates and fosters growth
4	Running public sector on business lines

Various initiatives taken under the policy

• Industrial licensing has been abolished for all industries except for those that are related to security and strategic concerns, hazardous chemicals, etc.
• Constitution of the Foreign Investment Promotion Board (FIPB) to negotiate with large international firms and approve FDI. Now, FIPB stands dissolved and FDI proposals are scrutinized and approved by the departments concerned.
• The number of industries reserved for the public sector has been reduced to three - atomic energy, minerals, and rail transport.
• Construction of the Board for Industrial and Financial Reconstruction (BIFR) to advise about the rehabilitation and reconstruction of chronically sick public enterprises.
• MRTP Act has been abolished and the Competition Act has been introduced in its place.

National Manufacturing Policy 2011

This is the first policy of its kind for the manufacturing sector to address areas of regulation, skill development, technology, infrastructure, exit mechanism, etc.

Objectives of the policy

1. Increase in manufacturing sector growth to 12-14% per annum over the medium term;
2. Increase the share of the manufacturing sector to GDP to 25% by 2022;
3. Create 100 million jobs in the manufacturing sector by 2022;
4. Create appropriate skill sets among rural migrants and the urban poor for inclusive growth;
5. Increase in domestic value additions and technological depth in manufacturing;
6. Enhance the global competitiveness of the Indian manufacturing sector;
7. Enhance sustainable growth in the interest of the environment

The focus of the policy

The policy shall focus on the following areas:

1. Employment-intensive industries - textiles, food processing, and gems & jewelry, etc.
2. Capital goods industries - machine tools, heavy transport, earthmoving and mining equipment, etc.
3. Industries with strategic significance such as space, shipping, IT hardware, electronics, solar energy, telecommunication equipment, defence equipment, etc.
4. Industries where India enjoys a competitive advantage such as pharmaceuticals, automobiles, medical equipment, etc.
5. Small and Medium Enterprises

National Investment and Manufacturing Zones (NIMZ)?

What is NIMZ?

An NIMZ is a big-sized greenfield industrial township where world-class manufacturing activities take place. The minimum size prescribed for an NIMZ is 5000 hectares with at least 30% processing area. 

Responsibilities of the centre and state governments

Centre Government	State Government
Cost of master planning shall be borne by the Centre Improving/providing external physical infrastructure linkages including rail, roads, ports, airports, telecom Providing institutional infrastructure for productivity skill development promotion of investments - domestic and global	Identification of land Providing for water requirement, power connectivity, physical infrastructure, utility linkage Conducting environmental impact studies Bearing the cost of resettlement and rehabilitation packages for the owners of the acquired land Support in the acquisition, if necessary

The benefit of a unit being in NIMZ

1. In government purchases, preference will be given to units operating in NIMZs.
2. Moreover, a single window clearance will be provided for units in the NIMZ.
3. In case a unit is declared sick, the transfer of assets of such a unit will be facilitated by the company managing the NIMZ.
4. A 5% interest reimbursement and 10% capital subsidy for the production of equipment/machines/devices for controlling pollution, reducing energy consumption, and water conservation.
5. Small and Medium Enterprises (SMEs) will be given access to the patent pool and/or part of reimbursement of technology acquisition costs up to a maximum of Rs.20 lakh for the purpose of acquiring appropriate technologies up to a maximum of five years.
6. Easy exit policy
7. Flexible labour laws
8. Relaxation in environmental regulations
9. Financial and tax incentives to small and medium enterprises
10. Foreign investments and technologies will be welcome

• A number of NIMZs have been identified under the Delhi-Mumbai Industrial Corridor (DMIC) and beyond.

National Manufacturing Competitiveness Programme (NMCP)

• Announced in 2014
• It aims at supporting the MSMEs in their endeavour to become globally competitive
• NMCP targets at enhancing the entire value chain of the MSME sector through the following components:

1. Lean Manufacturing Competitiveness Scheme for MSMEs
2. Promotion of Information and Communication Technology in MSMEs
3. Technology and quality upgradation support to MSMEs
4. Desing clinic scheme for MSMEs
5. Enabling manufacturing sector to become competitive through quality management standards and quality technology tools
6. Marketing assistance and technology upgradation scheme for MSMEs
7. National campaign for building awareness on Intellectual Property Rights
8. Support for entrepreneurial and managerial development of SMEs through incubators
9. Bar Code under Market Development Assistance (MDA) scheme

Make in India

As part of the nation-building initiative, the Make in India programme was launched by the Prime Minister in September 2014. It is aimed at transforming India into a global design and manufacturing hub. 

Aim of the Make in India

1. To promote India as an important investment destination and a global hub for manufacturing, design, and innovation;
2. To promote manufacturing and entrepreneurship in the country;
3. To develop a conducive environment for investment, and for laying modern and efficient infrastructure;
4. To open up new sectors for foreign investment;
5. To forge a partnership between government and industry through positive mindset

The Four Pillars of Make in India initiatives

1. New Processes - East of Doing Business Environment
2. New Infrastructure - Development of new infrastructures such as the development of industrial corridors and smart cities, creating world-class infrastructure with state-of-the-art technology and high-speed communication, and improved infrastructure for IPR registration
3. New Sectors - Opening up of new sectors for FDI
4. New Mindset

Invest India

• It is an official Investment Promotion and Facilitation Agency of the Department of Industrial Policy and Promotion.
• It has been mandated to facilitate investment into India.
• It is envisaged to be the first point of reference for potential investors.

?What does Invest India do?

• Location identification
• Expedition of regulatory approvals
• Facilitation of meetings with relevant government and corporate officials
• Aftercare services that include initiating remedial action on problems faced by investors

Industrial Parks

An industrial park refers to an area reserved for industrial or commercial activities. In such an area, plots of developed or built-up space in combination with common facilities and quality infrastructure are made available. Industrial growth is the obvious purpose of setting up industrial parks.

A project, being an industrial park, shall aim at setting up of

1. An Industrial Model Town for the development of industrial infrastructure for carrying out integrated manufacturing activities, including research and development, by providing plots or sheds and common facilities within its precincts; or
2. An Industrial Park for the development of infrastructure facilities or built-up space with common facilities in any area allotted or earmarked for the purpose of specified industrial use; or
3. A Growth Centre under the Growth Centre Scheme of the Government of India subject to the scheme implemented by an undertaking and the Growth Centre is distinctly developed as a separate centre.

The Government of India introduced the Industrial Park scheme in 2002. Below are given the criteria for an industrial park in India:

1. Minimum area required to be 1000 acres (4.047 km²) with a minimum of 50 units in case of an Industrial Model Town and varied area requirement with a minimum of 30 units in case of an Industrial Park and Growth Centre.
2. Allocated area for industrial use to be not less than 60% of the total allocable area.
3. Area for commercial use to be not more than 10% of the total allocable area.
4. Investment on infrastructure to be not less than 50% of the total project cost, in the case of an Industrial Model Town and 60% of the total project cost in case of an Industrial Park or Growth Centre.
5. No single unit shall occupy more than 50% of the allocable industrial area.

India's First Defence Industrial Park

Department of Industrial Policy and Promotion (DIPP) approved in 2015 the country's first defence industrial park at Ottapallam in Kerala. It is established as part of Make in India, Make in Kerala project. It will have modern common infrastructure facilities aimed at attracting component manufacturers in the defence industry. The Union Government has agreed to bring it under the Modified Industrial Infrastructure Upgradation Scheme (MIIUS). This project is in line with the declaration of self-sufficiency in production in the defence sector. Another defence industrial park is coming up at Coimbatore in Tamil Nadu. 

Modified Industrial Infrastructure Upgradation Scheme (MIIUS)

• MIIUS was notified in 2013 and the original Industrial Infrastructure Upgradation Scheme (IIUS) was launched in 2003.
• The objective of the IIUS was to enhance the industrial competitiveness of domestic industry by providing quality infrastructure through public-private partnerships in selected functional clusters/locations which have the potential to become globally competitive.
• Under MIIUS, projects have been undertaken to upgrade infrastructure in existing industrial parks/estates/areas. Greenfield projects have also been undertaken in backward areas and North-Eastern region.
• Project under the MIIUS are being implemented by the State Implementing Agency of the State Government.
• Central grant up to 50% of the project cost with a ceiling of Rs.50 crore is provided under MIIUS with at least 25% contributions of State Implementing Agency and in case of North-Eastern States, the central grant and minimum contribution of the State Implementing Agency are up to 80% and 10% respectively.

Industrial Corridors

Industrial corridors are dedicated corridors having high-end infrastructural multi-modal transport facilities. They provide hassle-free fast mobility for industrial purposes thus removing the hindrance of movement. These are usually built along ports, highways, and railroads. The purpose behind the establishment of industrial corridors is industrial development. 

Five industrial corridors have been launched by the Government of India. These projects are expected to play a critical role in increasing the contribution of manufacutirng sector to 25% of the GDP by 2025.

1. Delhi-Mumbai Industrial Corridor (DMIC)

• DMIC covers UP, Haryana, Rajasthan, Madhya Pradesh, Gujarat, and Maharashtra.
• It is the second longest corridor after the Amritsar-Kolkata Industrial Corridor.
• Japan is the major investing partner in the DMIC.

2. Bengaluru-Mumbai Industrial Corridor (BMIC)

• BMIC covers the two states of Maharashtra and Karnataka.
• Britain is a development partner in it.

3. Vizag-Chennai Industrial Corridor (VCIC)

• It is known as the East Coast Economic Corridor also.
• This 800 km long corridor covers Tamil Nadu, Andhra Pradesh, West Bengal, and Odisha.
• It is the first coastal economic corridor in the country.
• It is developed with assistance from the Asian Development Bank.

4. Chennai-Bengaluru Industrial Corridor (CBIC)

• It is funded by the Japanese International Cooperation Agency (JICA).
• This (approx) 550 km covers the states of Tamil Nadu, Andhra Pradesh, and Karnataka.

5. Amritsar-Kolkata Industrial Corridor (AKIC)

• It is the lengthiest of the five industrial corridors which extends from Amritsar (Punjab) to Dankuni (West Bengal).
• AKIC covers the states of Punjab, Haryana, Uttarakhand, UP, Bihar, Jharkhand, and West Bengal.

Significance of Industrial Corridors

1. Economic growth
2. Export promotion
3. Attraction of more investment
4. Generation of employment opportunities
5. Socio-Economic Development of the regions covered by industrial corridors

Related Challenges

1. Land acquisition
2. Business environment is not so conducive in India
3. Lack of skilled human resources and technical know-how
4. India's strict laws related to labour, taxation, and environmental compliance

Industrial Sickness

According to the Companies Act, a sick industrial company means an industrial company that has

• the accumulated losses in any financial year equal to 50% or more of its average net worth during four years immediately preceding such financial year; or
• failed to repay its debts within any three consecutive quarters on demand made in writing for its repayment by a creditor or creditors of such company

The criteria to determine the sickness of an industrial company include

1. The accumulated losses of the company to be equal to or more than its net worth (paid-up capital plus free reserves).
2. The company should have completed five years after incorporation under the Companies Act 1956.
3. It should have 50 or more workers any day of the 12 months preceding the end of the financial year with reference to which sickness is claimed.
4. It should have a factory license.

There may be internal or external causes behind industrial sickness,

Internal causes

1. Management issues
2. Financial issues
3. Labour issues
4. Entrepreneurial incompetence

External causes

1. Political conditions
2. Policies of the government
3. Market-related issues - supply chains, strong competition, input costing, etc.
4. Inadequate infrastructure - transportation, communication, energy, etc.

To address the industrial sickness, the Government of India constituted a Tiwari Committee in 1981. On the recommendation of the committee, the Sick Industrial Companies Act (SICA) was enacted n 1985. The main objective of SICA was to determine sickness and expedite the revival of potentially viable units and the closure of the unviable ones. It is important to address the sick units to free the capital resources tied up in such sick units and make the better utilization of capital freed from the sick industries. SICA applies to both private and public sector companies. Government companies were brought under SICA in 1991. SICA was repealed in 2016.

Another measure taken by the government to address industrial sickness was the formation of the Board for Industrial and Financial Reconstruction (BIFR) in 1987. The BIFR has been replaced by the National Company Law Tribunal (NCLT) now. The Appellate Authority for Industrial and Financial Reconstruction (AAIFT) was also constituted in 1987. AAIFR has been replaced with National Company Law Appellate Tribunal (NCLAT).

Disinvestment in India

In common parlance, disinvestment is the selling or liquidation of asset/s by an economic entity. 

In India's context, disinvestment means selling government stakes in a public sector enterprise. Though privatization and disinvestment seem similar. But the two are different. When disinvestment leads to the shift of management of a public sector enterprise into private hands, it is called privatization. So, every privatization is the result of disinvestment, but every disinvestment does not amount to privatization. Mathematically, if after disinvestment, the government stake in a public sector enterprise comes below 50%, it is privatization.

Objectives of disinvestment

1. Relaxing government to focus on its core business
2. Freeing capital locked in public sector enterprises for investment in other development and welfare activities
3. Improving public finances
4. Reducing the fiscal burden on the exchequer
5. Encouraging private ownership
6. Improvement in the management of public sector enterprises
7. Promoting competition in the market

In India, there is a separate department named the Department of Investment and Public Asset Management (DIPAM) that takes care of disinvestment in the country. The government fixes its disinvestment targets every year and announced those in the budget document.

Methods of Disinvestment in India

1. Initial Public Offering (IPO) - public offer of shares for the first time by an unlisted government company
2. Further Public Offering (FPO) - offer of shares by an already listed public sector company to the public for subscription
3. Offer of Sale - Offer of Sale of Shares by the government through a stock exchange mechanism using the stock exchange platform for auction, this method is extensively used by the Government since 2012
4. Strategic Sale - a substantial portion (50% or more) of the government shareholding in a company is sold along with the transfer of control of management
5. Institutional Placement Programme (IPP) - only institutions are allowed to participate in the offering
6. CPSE Exchange Traded Fund - it allows the simultaneous sale of the government's stake in various government companies across diverse sectors through a single offering. It provides a mechanism for the government to monetize its shareholding in those government companies that are part of the ETF basket.

During Vajpayee's government, public sector undertakings were classified into strategic and non-strategic. The policy of the government was to make no investment in strategic units and to do disinvestment in a phased manner in non-strategic units. To implement the policy of disinvestment, a Department of Disinvestment (now renamed as the Department of Investment and Public Assets Management (DIPAM) was set up under the Ministry of Finance. Under UPA-2, the government decided that disinvestment in all public sector units can be made, but the government set an upper limit (49%) of disinvestment. The government also decided to make disinvestment only through public offers.

Rangarajan Committee on Disinvestment

The committee was set up in 1993 for making recommendations on disinvestment. The committee made the following recommendations:

1. Except in defence and atomic energy, disinvestment could be made up to any level. The government should retain the majority stake in defence and atomic energy.
2. Disinvestment should be made in a transparent manner and the protection of the rights of workers should be considered.
3. There is a need to establish an autonomous body for the smooth functioning ad monitoring of the disinvestment programme. On the basis of this recommendation, the Government of India established the Disinvestment Commission in 1996. The Commission was to function as an advisory body with a full-time chairman and four part-time members and it was to advise the government on the extent, timing, and pricing of disinvestment.
4. The Government may opt for any of the four modes of disinvestment - Trade Sale, Strategic Sale, Offer of Shares, or Sale of Assets.
5. In the public sector units reserved for the public sector, the maximum disinvestment should not exceed 49%, while 74% disinvestment in all other PSUs.

However, these recommendations were not implemented by the government.

Autonomy to Public Sector Enterprises

Because the public sector enterprises are of huge size and have the capacity to influence the economy of the country in a significant way. Therefore, the government of India decided to grant certain autonomy to some qualified PSUs so that may emerge large enough to compete in the global market. Accordingly, the government has started giving Maharatna, Navratna, and Miniratna status to various PSUs that qualify the prescribed criteria. These statuses are meant for Central Public Sector Enterprises  (CPSE) only.

Maharatna Status

Criteria:

1. Only a Navratna PSU can be given a Maharatna status.
2. The PSU must have been listed on an Indian stock exchange with minimum prescribed public shareholding under the SEBI regulations.
3. In the last three years, its average annual turnover should be more than Rs.25000 crore, the average net worth more than Rs.5000 crore, and the average net profit (after tax) more than Rs.5000 crore.
4. The unit should have a significant global presence.

The objective behind granting Maharatna status is to empower mega Central Public Sector Enterprises to expand their operations to emerge as global giants.

List of Maharatna companies in 2022:

1	Bharat Heavy Electricals Limited
2	Bharat Petroleum Corporation Limited
3	Coal India Limited
4	GAIL (India) Limited
5	Hindustan Petroleum Corporation Limited
6	Indian Oil Corporation Limited
7	NTPC Limited
8	Oil & Natural Gas Corporation Limited
9	Power Grid Corporation of India Limited
10	Steel Authority of India Limited

Navratna Status

Criteria:

(a) A CPSE must be having a Miniratna Category-I status.

(b) The CPSE must have obtained an 'excellent' or 'very good' rating.

(c) The company must have obtained a composite score of 60 or above in the following selected parameter:

1. net profit to net worth ratio
2. manpower cost to the total cost of production/services ratio
3. profit (before depreciation, interest, and taxes) to the capital employed ratio
4. profit (before interest and taxes) to turnover ratio
5. earning per share
6. inter-sectoral performance

The Navratna category was introduced in the year 1997. Though the Maharatna category was introduced in 2010. The objective behind granting Navratna status to a CPSE is to give the company enhanced financial and operational autonomy. A Navratna company can invest up to Rs.1000 crore or 15% of its net worth on a single project without seeking government approval. In a year, a Navratna company can spend up to 30% of its net worth not exceeding Rs.1000 crore. Such a company also enjoys the freedom to enter into joint ventures, form alliances, and float subsidiaries abroad.

List of Navratna companies in 2022:

1	Bharat Electronics Limited
2	Contained Corporation of Indian Limited
3	Engineers India Limited
4	Hindustan Aeronautics Limited
5	Mahanagar Telephone Nigam Limited
6	National Aluminium Company Limited
7	National Buildings Construction Corporation (India) Limited - NBCC(India) Ltd.
8	National Mineral Development Corporation Limited (NMDC Limited)
9	NLC India Limited
10	Oil India Limited
11	Power Finance Corporation Limited
12	Rashtriya Ispat Nigam Limited
13	Rural Electrification Corporation Limited
14	Shipping Corporation of India Limited

 Miniratna Status

There are two categories of Miniratna companies - Miniratna-I and Miniratna-II. The criteria for a company to become Miniratna include

1. Category-I Miniratna - (a) the CPSE should have made profit in the last three years continuously, (b) the pre-tax profit should have been Rs.30 crore or more in at least one of the three years, and (c) should have a positive net worth.
2. Category-II Miniratna - (a) the CPSE should have made profit for the last three years continuously, and (b) should have a positive net worth.

• Such CPSEs shall be eligible for the enhanced delegated powers provided they have not defaulted in the repayment of loans/interest payment on any loans due to the government.
• Such PSEs shall not depend upon budgetary support or government guarantee.
• The Boards of such CPSEs should be reconstructed by inducting at least three non-official directors as the first step before the exercise of enhanced delegation of authority.
• The administrative ministry concerned shall decide whether a PSE fulfills the requirements of a Category-I/Category-II company before the exercise of enhanced powers.
• In 2022, there are 73 Miniratna companies divided into Category-I and Category-II.
• The Miniratna category was introduced in 1997.

Micro, Small and Medium Enterprises (MSMEs)

Definition

Whether a unit is a micro, small, or medium enterprise is determined on the basis of the value of its size and investment. On this basis, below is given an updated MSME definition:

Definition of MSME
Type of enterprise	Investment (in Rupees)	Turnover (in Rupees)
Micro	1 crore	5 crore
Small	10 crore	50 crore
Medium	50 crore	250 crore

• According to the Micro, Small and Medium Enterprises Development Act 2006, the MSMEs are categorized into two - Manufacturing enterprises, Service enterprises.

Significance of MSMEs

1.  Provide large employment
2. Require a lesser capital to set up
3. Key to the industrialization of rural areas
4. Complement various large industries as ancillary units 
5. Contribute enormously to the socio-economic development of India
6. There are more than 31 million MSMEs in India employing about 73 million people
7. MSMEs account for about 45% of India's manufacturing output and about 40% of India's exports

Problems faced by MEMEs

1. Sub-optimal scale of operation
2. Technological obsolescence
3. Supply chain inefficiencies 
4. Increasing competition
5. Working capital shortage
6. Insufficient skilled manpower
7. Change in manufacturing strategies
8. Uncertainties in market

Challenges to MSMEs

1. Credit - higher cost, lack of availability of adequate credit at the right time, collateral requirements
2. Limited access to equity capital
3. Procurement of raw materials at reasonable prices
4. Marketing issues - domestic competition, lack of access to global markets
5. Storage, R & D in designing, packaging
6. Low technology level and lack of access to the latest technology
7. Manpower issue - lack of trained manpower, higher labour turnover, the multiplicity of labour laws, worker-friendly labour laws
8. Higher compliance requirements

Scope of MSMEs

There are many opportunity areas for MSMEs.

1. Make in India
2. Digital India
3. Start-Up India
4. Enhanced degree of liberalization
5. Public Procurement Policy of the Government of India - as a policy measure, 25% of the total procurement by defence and public sector enterprises should be from the MSMEs
6. Skill India initiative
7. Pradhan Mantri MUDRA Yojana
8. Scheme of Fund for Regeneration of Traditional Industries (SFRUTI)

Revival and Rehabilitation of MSMEs

In 2015, the Ministry of Micro, Small and Medium Enterprises notified a Framework for the Revival and Rehabilitation of MSMEs. The main features of the framework include

• Identification of incipient stress - before a loan amount of an MSME turns into a bad/NPA, creditors are required to identify incipient stress in the account.
• Committee for distressed MSMEs - banks shall constitute one or more committees at such locations as may be considered necessary by the board of directors of a bank to provide reasonable access to all eligible MSMEs, which have availed credit facilities from such bank. The committee shall explore various options to resolve the stress in the account. The options under the corrective action plan by the committee may include:

1. rectification - regularize the account so that the account does not slip into NPA category;
2. restructuring the account if it is prima facie viable and the borrower is not a willful defaulter;
3. recovery - if the above two options are not seen a feasible

• If the committee decides to restructure the account, it will have the option of either referring the account to Enterprise Debt Restructuring (EDR) or restructuring the same independent of the EDR mechanism.
• In case of willful defaulters and non-cooperative borrowers, banks are required to strictly adhere to the guidelines issued by the RBI from time to time regarding treatment of willful defaulters.

Phases of Industrial Development

1951-1966

The first phase 1951-66 coincided with the first three Five Year Plans and was characterized by high rates of growth of industrial output, concentrated on capital goods and metal-based industries in the public sector. The stimulus to growth came partly from large doses of public investment, as well as a significant degree of import substitution. Productivity level and growth rates were low. The high level of capital intensity of these investments was accompanied by slow but steady growth of employment and wage growth in excess of productivity growth. Exports grew slowly, and there was a significant shift of destination away from OECD (Organization for Economic Cooperation and Development) countries towards East European countries, apart from an increase in the role of capital goods exports.

1966-1980

The second phase lasted from 1966 to 1980, and was characterized by significantly slower growth, resulting from the slow-down in public investment, the impact of wars of 1965 and 1971, slower agricultural progress in the initial few years, increase in costs-direct or indirect due to global hike of oil prices in 1973 and emerging problems of coordination between critical intermediate goods producing enterprises within the public sector. Consequently, the slowdown was especially marked in capital goods industries. Productivity levels continued to stay low, and capital intensity continued to rise. Industrial wages also fell in the late sixties, and stagnated thereafter till 1980, while employment continued to grow at a crawling pace. No more import substitution was achieved: dependence on imports actually rose (even after excluding petroleum imports). Exports grew faster especially in textiles, leather, and handicrafts (Overall, phase of deceleration and retrogression).

1980s

The third phase, a lasting decade of the eighties, in contrast, witnessed a gradual recovery of industrial growth. Despite the continuing growth of capital intensity, the growth process appeared to be qualitatively dissimilar from the first phase. Product group-wise, chemicals, and petrochemicals achieved the fastest growth while end-user-wise, while consumer durables - exhibited the fastest growth, capital goods (with the exception of electrical machinery) continued to grow slowly. For the first time productivity tended to improve, though slowly. This was probably related to a host of varied factors; improved labor utilization, easier access to imports, liberalization of regulations, greater reliance on exports, especially to OECD countries, improved demand for consumer durables resulting from the liberal fiscal regime and hence wage growth and expansion of public expenditure and from increased prosperity of large farmers in certain regions of the country during the post-green revolution phase. This phase of industrial recovery came to an abrupt end in the nineties essentially because it was based on an unsustainable demand conceived and developed by fiscal deficit, which also affected the balance of payments unfavorably as the demand spilled over as the economy liberalized.

On the whole, some of the main objectives of industrial policy laid down during the fifties were therefore achieved:

• An increasingly diversified industrial structure; an increasing role for basic, intermediate and capital goods;
• Growing importance of the public sector, and a reduction of dependence on foreign imports.

1990s

The overall rate of industrial growth gradually increased from 2.3 percent in 1992-93 to 6.0 percent in 1993-94, 9.4 percent in 1994-95, and 12.1 percent in 1995-96. However, in 1996-97 it slumped to 7.1 percent resulting in an average growth rate of 7.3 percent - against a target of 7.4 percent - during the Eighth Plan period. Since then industrial growth has been continuously falling.