EEP Assignment

Agricultural policy

Introduction to Agricultural Policy:

Agricultural policy plays a pioneer role in the economic development of a country. It is an important instrument
for providing incentives to farmers for motivating them to go in for production oriented investment and
technology. In a developing country like India where majority of the population devotes 2/3 of its expenditure on
food alone and where majority of the population is engaged in agricultural sector, prices affect both income and
consumption of the cultivators. The Govt. of India announces each year procurement/support prices for major
agricultural commodities and organizes purchase operations through public agencies.

Objectives of Agricultural Policy:

To ensure relation between prices of food-grains and agricultural goods

To watch interests of producers and consumers
Relation between prices of crops
To control seasonal fluctuations
Integrate the price
Stabilise the general price
Increase in production

Effects of Agricultural Policy:

Incentive to Increase Production

Increase in the level of income of Farmers
Price Stability
Change in Cropping Pattern
Benefit to Consumers
Benefit to Industrials

Advantages of Agricultural Policy:

To prevent fall in the price in the situation of over production

To protect the interests of the farmers by ensuring them a minimum price for their crops in the
situation of a price fall in the market

To meet the domestic consumption requirement

To provide price stability in the agricultural product

5. To ensure reasonable relationships between prices of agricultural products and manufactured commodities

To remove price difference between two regions or the whole country

To increase the production and exports of agricultural products
To provide the raw material to the different industries at reasonable prices in the whole country
Shortcomings of Agricultural Policy:

Inadequate Coverage
Remunerative Price
Ineffective Public Distribution System
Difference in Prices
Unaccompanied by Effective Policy

8 Important Policy Measures Introduced in the Agricultural Sector in India

1. Technological Measures:

Initiation of measures to increase agricultural production substantially to meet the growing needs of
the population and also to provide a base for industrial development included steps to increase both
extensive cultivation and intensive cultivation.

2. Land Reforms:

Measures taken under this head included:

Abolition of intermediaries.
Tenancy reforms to
Regulate rents paid by tenants to landlords;
Provide security of tenure to tenants; and
Confer ownership rights on tenants.

(iii) Imposition of ceilings on holdings in a bid to procure land for distribution among landless
labourers and marginal farmers.

3. Institutional Credit:

After nationalisation of banks in 1969, nationalised banks have paid increasing attention to the needs
of agriculture. Regional Rural Banks were also set up to deal specially with the needs of agricultural
credit. A National Bank for Agriculture and Rural Development (NAB ARD) was also set up.
4. Procurement and Support Prices:

Another policy measure of significant importance is the announcement of procurement and support prices to
ensure fair returns to the farmers so that even in years of surplus, the prices do not tumble down and farmers
do not suffer losses This is necessary to ensure that farmers are not penalized for producing more.

5. Input Subsidies to Agriculture:

The objective of input subsidisation is to increase agricultural production and productivity by encouraging
the use of modern inputs in agriculture. Under the government policy, various inputs to the farmers are
supplied at prices which are below the level that would have prevailed in the open market.

6. Food Security System:

In a bid to provide food grains and other essential goods to consumers at cheap and subsidised
rates, the Government of India has built up an elaborate food security system in the form of Public
Distribution System (PDS) during the planning period.
7. Targeted Public Distribution System (TPDS):

The Government has streamlined the PDS by issuing special cards to people below poverty line
(BPL) and selling essential articles under PDS to them at specially subsidised prices with better
monitoring of the delivery system.

8. Rural Employment Programmes:

PDS alone cannot serve as an effective safety net. This is due to the reason that unless the poor
have adequate purchasing power they cannot buy their requirements from the PDS. Therefore, large-
scale poverty alleviation programmes in the form of rural employment programmes are required to
provide purchasing power to the poor.

Industrial policy

Introduction to industrial policy:

The industrial policy of a country, sometimes denoted IP, is its official strategic effort to encourage the
development and growth of part or all of the manufacturing sector as well as other sectors of the economy. The
government takes measures "aimed at improving the competitiveness and capabilities of domestic firms and
promoting structural transformation. A country's infrastructure (transportation, telecommunications and energy
industry) is a major part of the manufacturing sector that often has a key role in IP.

Objectives of the Industrial Policy of the Government:

to maintain a sustained growth in productivity; to enhance gainful employment;

to achieve optimal utilization of human resources; to attain international competitiveness and

to transform India into a major partner and player in the global arena.

Evolution of Industrial Policy:

India was never industrially developed country prior to independence. It was an agrarian country
where in handicrafts attained supremacy unmatched anywhere else in the world. Some landmark
shifts in Industrial policy of India:

a)Industrial Policy Resolution, 1948:

In Industrial Policy Resolution of 1948, both public and private sectors were involved towards
industrial development. Accordingly, the industries were divided into four broad categories:

Exclusive govt. Monopoly

Government Monopoly for New Units

Regulation.

(d) Unregulated private enterprise

The main thrust of the 1948 Industrial Policy was to lay the foundation of a mixed economy where
both the private and public enterprises were to be given importance and work together to develop
economy to accelerate the pace of industrial development.

b) Industrial Policy Resolution, 1956:

The Industrial Policy Resolution of 1956 classified the entire industrial sector in three Schedules:

Schedule A: In the first category, those industries were included whose future development was the
exclusive responsibility of the State. 17 industries were included in this category. This included heavy and
strategic industries such as defense equipment; Atomic energy; Iron and Steel; Heavy castings and
forging of iron and steel; Heavy plant and machinery required for iron and steel production for mining.

Schedule B: In this category those industries were included which were progressively State- owned
and in which the private enterprises would be expected only to supplement the efforts of the State. In
this category 12 industries were included.

Schedule C: All industries not listed in schedule A or B were included in the third category. These
industries were left open to the private sector.

Small Scale Sector To encourage small sector, in the policy resolution, various steps were proposed such as:-

(a) Direct subsidy was provided to small scale sector, (b) Suitable taxation relief was given to this sector, and

(c) It was made objective of the State to protect small scale sector by advancing technical assistance.

Foreign Investment allowed foreign capital participation in Indian economic development but the
major share should belong to India. In case of already existing foreign establishments, these will be
replaced by Indian technicians gradually

c) The Monopolistic and Restrictive Trade Practices Act, 1969:

This act was hallmark of infamous license quota permit system. Companies having more than specified value
of assets needed to take permission/license before any expansion and commencement of operations.

Its objectives were

To prohibit monopolistic and restrictive trade practices (except by government)

To prevent concentration of economic power in few hands

To control the Monopolies

To protect consumer Interest

d) Industrial Policy Resolution 1977:

This resolution was result of change in government at center. Consequently, it had more focus on
small scale industry, cottage and village industry. This was move away from Nehruvian- Mahalanobis
ideology to Gandhian ideology of economic development.

This classified the small sector into three categories:-

a) Cottage and household industries which provide self-employment on a wide scale.

Tiny sector incorporating investment in industrial unit in machinery and equipment upto Rs. 1 lakh an
situated in towns with a population of less than 50000

Small-scale industries comprising industrial units with an investment of Rs. 10 lakh and in case of
ancillaries with an investment in fixed capital upto Rs. 15 lakh.

e) Industrial Policy resolution, 1980:

Congress made come back and soon restored its own industrial policy.

Major Changes were

Some of the items reserved for small scale industry were de reserved.

Many units/companies were operating on excess capacities, than allowed by law. These excess
capacities were regularized.

Foreign Investment was allowed with technology transfer

Regulations, Licensing, restrictions were eased a bit signaling inclination towards private sector.

f) New Industrial Policy, 1991: Industrial policy 1991 set out directions for industrialisation in an
economy that began its journey in liberalisation. It dealt with liberalising licensing and measures to
encourage foreign investments. A policy for public sector enterprises and the Monopolies and
Restrictive Trade Practices Act were introduced.

Areas of industrial policy by the government:

Industrial licensing policies Foreign investment

Foreign technology agreement Public sector policy

MRTP act
Highlights of Industrial policy:

De reservation of industries for the public sector De licensing

Abolition of phased manufacturing program Removal of mandatory convertibility clause

Amendment of monopolies restrictive trade practices Encouragement to foreign investment

Change of policy in small scale industry

Merits:

Attract more economic enterprise and investment Considerable internal deregulation

Improve the legal framework Open access to imports

Gradualist as against the big bang type adopted in some other countries
Limitations:

Absence of suitable policy for exports

Distortions in industrial pattern owing to selective inflow of investments Need

for strengthening inter-linkages between new and old sectors

Absence of incentives for raising efficiency

Absence of incentives for technological innovations. improperly defined

industrial location policy

Group members:
Govind Chandra
Poojith V S
Rahul Rajeevan
Surya Narayan S
Vishnu C