Academic journal article Indian Journal of Industrial Relations

Entrepreneurship & Global Competitiveness: A Study on India

Academic journal article Indian Journal of Industrial Relations

Entrepreneurship & Global Competitiveness: A Study on India

Article excerpt

Background

At the time of independence of India, the idea of rapid industrialisation of the economy had gained strong support from the policy makers. The ownership pattern consisted of three different types: (1) exclusive ownership of government, (2) the private sector; and (3) the joint sector. The Industrial (Department and Regulation) Act (IDR Act) was enacted in 1951. Though the government wanted to boost industrialisation, the IDR Act, with licensing powers in the hands of the government to regulate the pattern of industrial development in the country, proved itself to be the major obstacle towards reaching the objectives. "The bureaucracy acquired unprecedented powers and authority over all kinds of industrial activities and industrial entrepreneurs felt that they were placed at the mercy of ... bureaucrats" (Government of India 2002: 151). The Industrial Policy Resolution 1956 recorded 17 industries (for example, railways, air transport, iron and steel, atomic energy, arms and ammunition etc.) to be exclusively reserved for the public sector; 12 other industries envisaged to be state owned but also open for the private sector to supplement the efforts of the State; and the rest remained open for the private sector (although the option of state's participation remained open). Another round of reservation policy was initiated in 1967 with 47 items reserved for the small-scale sector, which was expanded to 504 items by 1978. In 1978, the reservation list was recast into NIC codes (National Industrial Classification of all economic activities) which again expanded items for the small-scale sector to 807. Since then, from time to time some items have been added to the list and also some items have been deleted from the list. However, since 1991, India has been liberalising its economy with delicensing as one of its main agenda, and today only five industries (alcoholic drinks, tobacco, defence equipments, industrial explosives including detonating fuses, gunpowder etc., and hazardous chemicals) have been retained under compulsory licensing of the IDR Act 1951. As far as foreign participation and international competition in this connection are concerned, this can be well-understood from the Second Report of the National Commission on Labour (Government of India 2002: 139) where it observed: "In the early years, Indian industry thrived within protective tariff walls. The policy was to encourage Indian industries and though foreign technical collaborations were encouraged, direct foreign investment in any corporate body was restricted to 40%. In 1991, this policy was changed completely and foreign majority investment was encouraged in a variety of industries, import restrictions were removed, customs tariff was brought down and the doors of the Indian economy were opened for foreign competition".

Protection for small-scale industries has been grossly abandoned after the initiation of new economic policy in 1991. At present, there are only 21 items that are exclusively reserved for manufacture in the small-scale sector. Random de-reservation has been vehemently criticised by many scholars and activists. They argue that while such de-reservation has increased the scope for greater investments in manufacturing of various items by the formal sector, the new policy has posed tremendous threats to the large population engaged in the unorganised as well as informal sectors. One must agree with the view that the growth of entrepreneurship in the formal sector may be interrupted if large sections of population are either unemployed or living under the threat of losing livelihoods, and possess low level of skill and education, and have fragile health. Unless such problems are addressed through proper policy measures, the poor will continue to face barriers in reaping the fruits of industrial growth. Thus, very low level of living of a large population does not satisfy at least one initial condition (Myrdal 1968) of economic development and thus may hamper the existing industries to grow to their full extent on the one hand and constrain, to some extent, the flow of new entries of firms into the regional industrial sector on the other. …

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