TYBCOM SEM 5 Business Economics Paper V PDF

T.Y.B.COM. SEMESTER - V (CBCS) BUSINESS ECONOMICS PAPER-V MACRO ECONOMIC ASPECTS OF INDIA SUBJECT CODE : 23113  © UNIVERSITY OF MUMBAI Prof. Suhas Pednekar Vice-Chancellor, University of Mumb...

T.Y.B.COM. SEMESTER - V (CBCS) BUSINESS ECONOMICS PAPER-V MACRO ECONOMIC ASPECTS OF INDIA SUBJECT CODE : 23113  © UNIVERSITY OF MUMBAI Prof. Suhas Pednekar Vice-Chancellor, University of Mumbai, Prof. Ravindra D. Kulkarni Prof. Prakash Mahanwar Pro Vice-Chancellor, Director, University of Mumbai, IDOL, University of Mumbai, Programme Co-ordinator : Ms. Rajashri Pandit Asst. Prof. in Economics, Incharge Head Faculty of Commerce, IDOL, University of Mumbai, Mumbai Course Co-ordinator : Ms. Rajashri Pandit & Editor Asst. Prof. in Economics, Incharge Head Faculty of Commerce, IDOL, University of Mumbai, Mumbai Course Writer : Dr. Koel Roy Choudhury SIES (Nerul) College of Arts, Science and Commerce, Sri. Chandrasekarendra saraswati Vidyapuram, Navi Mumbai - 400706 : Dr. Shivanand jankiram Suryawanshi SNDT Women's University, Smt. Nathibai Road, Churchgate Campus, Mumbai 400020 : Dr. Priti Ghag Gurukul College of Commerce, Ghatkopar, (East) Mumbai - 400077. Dr. Jitendra Aherkar 1/C Principle, B.L. Amlani College of Commerce and Economics, N. S. Road , 6 JVPD Scheme, Vile Prle (West), Mumbai - 400056 May 2022, Print - 1, ISBN-978-93-91735-44-9 Published by : Director, Institute of Distance and Open Learning , University of Mumbai, Vidyanagari, Mumbai - 400 098. DTP Composed & : Mumbai University Press, Printed by Vidyanagari, Santacruz (E), Mumbai  CONTENTS Unit No. Title Page No. MODULE I 1. Macro Economics Overview of India 01 2. Foreign Direct Investment 19 MODULE II 3. Agriculture During Post Reform Perod 28 4. Agricultural Finance 35 MODULE III 5. Industry And The Service Sector During Post Reform Period 43 6. Service Sector : Trends in Healtcare and Tourism India 80 MODULE IV 7. Baking and Financial Market 93 8. Money and Capital Market 106   Revised Syllabus of Courses of B.Com. Programme at Semester V with effect from the Academic Year 2022-2023 Elective Courses (EC) 1 B. Discipline Related Elective (DRE) Courses 4. Business Economics - V Macro Economic Aspects of India Modules at a Glance Sr. Modules No. of No. Lectures 1 Macro Economic overview of India 15 2 Agriculture During Post Reform Period 10 3 The Industry And Service Sector During Post Reform Period 10 4 Banking and Financial Market 10 Total 45 Sr. No. Modules / Units 1 Macro Economic overview of India  Overview of New Economic Policy-1991, - Role of Social Infrastructure with reference to education, health and family welfare.  Sustainable Development Goals and Policy measures: Make in India, Invest in India, and Skill Development and Training Programmes.  Foreign Investment Policy Measures in India – Foreign Investment Promotion Board, FDI- MNCs and their role. 2 Agriculture During Post Reform Period  National Agricultural Policy 2000: Objectives, Features and Implications  Agricultural pricing and agricultural finance  Agricultural Marketing Development-Agricultural Market infrastructure - Market information- Marketing training- Enabling environments-Recent developments 3 The Industry And Service Sector During Post Reform Period  Policy Measures- Competition Act 2003, Disinvestment Policy, Micro, Small and Medium Enterprises [MSME sector] since 2007.  Industrial Pollution in India: Meaning, Types, Effects and Control.  Service Sector: Recent trends, role and growth in Healthcare and Tourism Industry 4 Banking and Financial Market  Banking Sector- Recent trends, issues and challenges in Banking and Insurance Industry  Money Market – Structure, Limitations and Reforms.  Capital Market – Structure, Growth and Reforms.  Module I 1 MACRO ECONOMIC OVERVIEW OF INDIA Unit Structure 1.0 Objectives 1.1 New Economic policy 1991 1.2 Social Infrastructure with reference to Education, Health and family welfare 1.3 Sustainable Development goals 1.4 Make in India, Skill Development and training programmes 1.5 Summary 1.6 Questions 1.0 OBJECTIVES  To study the reforms introduced under the New Economic policy 1991.  To understand the role of social infrastructure with reference to education and health  To understand the sustainable development goals  To analyze the Make in India and Skill development programmes of the Government 1.1 NEW ECONOMIC POLICY 1991 1.1.1 Objectives of New Economic Policy1991 New Economic Policy of India was launched in the year 1991 under the leadership of P. V. Narasimha Rao. This policy opened the door of the India Economy for the global exposure for the first time. In this New Economic Policy P. V. Narasimha Rao government reduced the import duties, opened reserved sector for the private players, devalued the Indian currency to increase the export. This is also known as the LPG Model of growth. New Economic Policy refers to economic liberalisation or relaxation in the import tariffs, deregulation of markets or opening the markets for private 1 Macro Economic Aspects and foreign players, and reduction of taxes to expand the economic wings of India of the country. Main Objectives of New Economic Policy – 1991, July 24 1. The main objective was to plunge Indian Economy in to the arena of ‘Globalization and to give it a new thrust on market orientation. 2. The NEP wanted to bring down the rate of inflation 3. It intended to move towards higher economic growth rate and to build sufficient foreign exchange reserves. 4. It wanted to achieve economic stabilization and to convert the economy into a market economy by removing all kinds of unnecessary restrictions. 5. It wanted to permit the international flow of goods, services, capital, human resources and technology, without many restrictions. 6. It wanted to increase the participation of private players in the all sectors of the economy by reducing number of sectors reserved for the government. 1.1.2 The various reforms introduced under the New economic policy Beginning with mid-1991, the Government has made some important changes in its policies related to foreign trade, Foreign Direct Investment, exchange rate, industry, fiscal discipline etc. The thrust of the New Economic Policy has been towards creating a more competitive environment in the economy as a means to improving the productivity and efficiency of the system. This was to be achieved by removing the barriers to entry and the restrictions on the growth of firms. Following steps were taken under the NEP Liberaliation : (i) Free determination of interest rate by the commercial Banks: Under the policy of liberalisation, interest rate of the banking system will no longer be determined by RBI, Instead all Commercial Banks are independent to determine the rate of interest. (ii) Increase in the investment limit for the Small Scale Industries (SSIs): Investment limit of the small scale industries has been raised to Rs. 1 crore. So these companies can upgrade their machinery and improve their efficiency making them more competitive. 2 (iii) Freedom to import capital goods: New Economic policy 1991 Indian industries will be free to buy machines and raw materials from foreign countries to enable them to grow and modernise themselves. (v) Freedom for expansion and production to Industries: Under the new liberalized era, the Industries were given the freedom to diversify their production capacities and reduce the cost of production. Earlier government used to fix the maximum limit of production capacity. Industries were not permitted to produce beyond that limit. Now the industries will get freedom to decide their own production based on the requirement of the markets. (vi) Abolition of Restrictive Trade Practices: According to Monopolies and Restrictive Trade Practices (MRTP) Act 1969, all those companies having assets worth Rs. 100 crore or more were called MRTP firms and were subjected to several restrictions. Now these firms do not require to obtain prior approval of the Govt. for taking investment decision. Now MRTP Act is replaced by the competition Act, 2002. (vii)Removal of Industrial Licensing and Registration: Earlier private sector had to obtain license from Government for starting a new venture. Under the new policy, private sector has been freed from licensing and other restrictions. Industries licensing is necessary for following industries: (i) Liquor (ii) Cigarette (iii) Defence equipment (iv) Industrial explosives (v) Drugs (vi) Hazardous chemicals 2. Privatisation: Privatisation means permitting the private sector to set up industries which were previously reserved for the public sector. Under this policy many PSU’s were sold to private sector. In other words, privatisation is the process of involving the private sector-in the ownership of Public Sector Units (PSU’s). The main reason for privatisation was the current state of PSU’s as most were running in losses due to political interference. Production capacity remained underutilized. To increase competition and efficiency, privatisation of PSUs was inevitable. 3 Macro Economic Aspects The following steps are taken for privatisation: of India 1. Sale of shares of PSUs: Indian Government started selling shares of PSU’s to public and financial institution to raise resources for itself. Now the private sector will acquire ownership of these PSU’s. The share of private sector has increased from 45% to 55%. 2. Disinvestment in PSU’s: The Govt. has started the process of disinvestment in those PSU’s which had been running into loss. It means that Govt. has been selling out these industries to private sector. Govt. has sold enterprises worth Rs. 30,000 crores to the private sector. 3. Minimisation of Public Sector: Previously Public sector was given the importance with a view to help in industralisation and development of the country. But these PSU’s were not able to achieve this objective and policy of contraction of PSU’s was followed under new economic reforms. Number of industries reserved for public sector was reduces from 17 to 2. (a) Railway operations (b) Atomic energy 3. Globalization: Literally speaking Globalisation means opening the economy to global competition. Broadly speaking, Globalisation means the interaction of the domestic economy with the rest of the world with regard to foreign investment, trade, production and financial matters. Steps taken for Globalisation: Following steps are taken for Globalisation: (i) Reduction in tariffs: Custom duties and tariffs imposed on imports and exports are reduced gradually in order to make India economy attractive to the global investors. (ii) Long term Trade Policy: Forcing trade policy was enforced for longer duration so that the economy could benefit from the policy. Main features of the policy are: (a) Liberal policy (b) All controls on foreign trade have been removed 4 (c) Open competition has been encouraged. New Economic policy 1991 (iii) Partial Convertibility of Indian currency: Partial convertibility can be defined as to convert Indian currency (up to specific extent) in the currency of other countries. So that the flow of foreign investment in terms of Foreign Institutional Investment (FII) and foreign Direct Investment (FDI). This convertibility was permitted for following transaction: (a) Remittances to meet family expenses (b) Payment of interest (c) Import and export of goods and services. (iv) Increase in Equity Limit of Foreign Investment: Equity limit of foreign capital investment has been raised from 40% to 100% percent. In 47 high priority industries, foreign direct investment (FDI) to the extent of 100% will be allowed without any restriction. In this regard Foreign Exchange Management Act (FEMA) will be enforced. If the Indian economy is shining at the world map currently, its sole attribution goes to the implementation of the New Economic Policy in 1991. 1.2 SOCIAL INFRASTRUCTURE WITH REFERENCE TO EDUCATION, HEALTH AND FAMILY WELFARE 1.2.1 Meaning and importance of social infrastructure Social infrastructure are the basic amenities that do not directly influence the economic activities, but indirectly have an impact on the economy through achieving certain social objectives. For example, education does not directly influence economic activities like production and distribution but indirectly helps in the economic development of the country by spill- over effects. So education, health services and sanitation etc. are the examples of social infrastructure. Importance of social infrastructure Social infrastructure plays an important role in both the economic development of a country and the development of society’s quality of life. Social infrastructure enhances social wellbeing and furthers economic growth by providing basic services and facilities which allow human development in the economy. 1) Human development : Human development is the process of widening people ‘s choices and improving their quality of life. Social infrastructure like education and health care are important to achieve human development in the country. 5 Macro Economic Aspects 2) Better standard of living: Accessibility to education is important of India for creating employable workforce in the economy. Gainful employment is necessary for enjoying better standard of living and improve the community well being. 3) Productive efficiency: Availability of adequate basic facilities like safe drinking water, health care facilities, family planning measures, education infrastructure increases productive efficiency among the people. These facilities forms the basis for enhancing economic growth in the country. 4) Better resource utilization: Utilization of resources available in the community depends on the capability of human resources. Availability of good educational system enables skill development among the people. It promotes a culture of research and development in the economy. This is important in improving resource utilization. 5) Social change: Spread of education plays an important role in enlightening people’s minds and helps to bring about social changes. For example , education of girl child will be encouraged in those societies where people value the role of education. This will also help to reduce social conflicts in the country. 1.2.2 Government policy measures for the development of education in India India is a very vast and populated country but is still a developing nation. Hence, Education is one of the most vital components that will help in transforming India from a developing nation to a developed nation. The following are some of the measures adopted by the Government for development of education in India. 1) Sarva Sahiksha Abhiyan (SSA): It was launched in 2001-02. It is a part of RTE Act 2009 and free education for all in the age group of 6-14 years. It aims at reducing gender and social gaps at primary and elementary levels of education. It also aims at providing basic facilities like access to clean drinking water, toilets and free text books to children. 2) National program for education of girls at elementary level(NPEGEL): It was launched in July 2003. The aim of the programme is to make education equitable.It supports education for the underprivileged disadvantaged girls at the elementary level. It also provides for model school in every cluster with the involvement of girls in schools. 3) National programme of Mid-Day Meals in schools: National Programme of Mid-Day-Meal in Schools (MDMS) is a flagship programme of the Government of India aiming at enhancing enrolment, retention and attendance and simultaneously improving nutritional levels among children studying in primary and upper primary schools across the country. The main objectives of the Mid-Day-Meal scheme is to Improve the nutritional status of children in classes one to five in Government and 6 Government aided schools and to encourage children from disadvantaged New Economic policy 1991 background to attend school regularly and help them to concentrate in school activities. 4) Rashtriya Madhyamik shikha Abhiyan (RMSA): it was launched in 2009. It is a centrally sponsored scheme for the development of secondary education throughout India. It aims to provide universal education for all children between 15-16 years of age. 5) Saakshar Bharat/Adult education: It aims at creating a literate society through a variety of teaching learning programme for non-literate and neo-literate of 15 years and above. It also aims at continuing education programme for lifelong education at the community level. 6) Rastriya Uchchatar Shiksha Abhiyan(RUSA) : It was launched in 2013. It aims at holistic development of higher education in India. The centrally sponsored scheme aims at providing strategic funding to higher educational institutions throughout the country. 7) Samagra Shikha Abhiyan: Samagra Shiksha is an overarching programme for the school education sector extending from pre-school to class 12. The scheme has been prepared with the broader goal of improving school effectiveness measured in terms of equal opportunities for schooling and equitable learning outcomes. It subsumes the three Schemes of Sarva Shiksha Abhiyan (SSA), Rashtriya Madhyamik Shiksha Abhiyan (RMSA) and Teacher Education (TE) and was launched in 2018. 1.2.3 The role of Health and family welfare in India Healthcare has become one of India’s largest sector, both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. The Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services and increasing expenditure by public as well private players. Indian healthcare delivery system is categorised into two major components public and private. The Government, i.e. public healthcare system, comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of primary healthcare centres (PHCs) in rural areas. The private sector provides majority of secondary, tertiary, and quaternary care institutions with major concentration in metros and tier I and tier II cities. 1) Ayushman Bharat Yojana Ayushman Bharat or “Healthy India” is a national initiative launched by the Government as the part of National Health Policy 2017, in order to achieve the vision of Universal Health Coverage (UHC). This initiative has been designed on the lines as to meet SDG and its underlining commitment, which is “leave no one behind”. 7 Macro Economic Aspects.Ayushman Bharat aims to undertake path breaking interventions to of India holistically address health at primary, secondary and tertiary level. Ayushman Bharat consists of two inter-related components, which are - Establishment of Health and Wellness Centres Pradhan Mantri Jan Arogya Yojana (PM-JAY) a) Establishment of Health and Wellness Centres–The first component, pertains to creation of 1,50,000 Health and Wellness Centres which will bring health care closer to the homes of the people. These centres will provide Comprehensive Primary Health Care (CPHC), covering both maternal and child health services and non-communicable diseases, including free essential drugs and diagnostic services. b) Pradhan Mantri Jan Arogya Yojana (PM-JAY) –PM-JAY is one significant step towards achievement of Universal Health Coverage (UHC) and Sustainable Development Goal - 3 (SDG3).It aims to provide health protection cover to poor and vulnerable families against financial risk arising out of catastrophic health episodes. 2) Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) The Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) aims at correcting the imbalances in the availability of affordable healthcare facilities in the different parts of the country in general, and augmenting facilities for quality medical education in the under-served States in particular. The scheme was approved in March 2006. It has been decided to set up 6 AIIMS-like institutions, one each in the States of Bihar (Patna), Chattisgarh (Raipur), Madhya Pradesh (Bhopal), Orissa (Bhubaneswar), Rajasthan (Jodhpur) and Uttaranchal (Rishikesh) 3) Integrated Disease Surveillance Program (IDSP) The Integrated Disease Surveillance Program (IDSP) was initiated in assistance with World bank, in the year 2004. The scheme aimed to strengthen disease surveillance for infectious diseases to detect and respond to outbreaks immediately. The objective of this programme is to maintain decentralized laboratory-based IT enabled disease surveillance system for epidemic-prone diseases to monitor disease trends and to detect and respond to outbreaks in early rising phase through trained Rapid Response Team (RRTs). 4) Pulse Polio Programme Pulse Polio Immunization programme was launched in India in 1995. Children in the age group of 0-5 years administered polio drops during immunization rounds (in high risk areas) every year. The Pulse Polio Initiative was started with an objective of achieving hundred per cent coverage under Oral Polio Vaccine. It aimed to immunize children through improved social mobilization, plan mop-up operations in areas where poliovirus has almost disappeared and maintain high level of morale among the public. WHO on 24th February 2012 removed India 8 from the list of countries with active endemic wild polio virus New Economic policy 1991 transmission. 5) National Programme for Health Care of the Elderly (NPHCE) With a comparatively young population, India is still poised to become home to the second largest number of older persons in the world. Projection studies indicate that the number of 60+ in India will increase from 100 million in 2013 and to 198 million by 2030. To overcome the medical expenses for elderly whose income decreases post retirement, Ministry of Health and Family Welfare launched The National Programme for Health Care for the Elderly (NPHCE). The interventions are designed to capture the Preventive, Curative and rehabilitative aspects in the geriatric field. 6) National Health mission National Health Mission (NHM) was launched by the government of India in 2013 subsuming the National Rural Health Mission and National Urban Health Mission. It was further extended in March 2018, to continue till March 2020. The main components include Health System Strengthening in rural and urban areas for - Reproductive-Maternal- Neonatal-Child and Adolescent Health (RMNCH+A), and Communicable and Non- Communicable Diseases. The NHM envisages achievement of universal access to equitable, affordable & quality health care services that are accountable and responsive to people's needs. The National Health Mission seeks to ensure the achievement of the following indicators: -  Reduce Maternal Mortality Ratio to 1/1000 live births  Reduce Infant Mortality Rate to 25/1000 live births  Reduce Total Fertility Rate to 2.1  Prevention and reduction of anemia in women aged 15–49 years  Prevent and reduce mortality & morbidity from communicable, non- communicable; injuries and emerging diseases  Reduce household out-of-pocket expenditure on total health care expenditure 1.3 SUSTAINABLE DEVELOPMENT GOALS The Sustainable Development Goals (SDGs) are the blueprint for achieving a better and sustainable future for all. The United Nations (UN) General Assembly in its 70th Session held on 25th September 2015, with the aim of taking forward the success of Millennium Development Goals, adopted the document titled "Transforming our World: The 2030 Agenda for Sustainable Development" consisting of 17 Sustainable Development Goals and associated 169 targets. The SDGs came into force with effect 9 Macro Economic Aspects from 1st January, 2016. The SDGs are a comprehensive list of global of India goals integrating social, economic and environmental dimensions of development. India has adopted the SDGs and it is the part of national goals of the country. The NITI(National Institution for Transforming India)Aayog is responsible for coordinating the SDGs in India. India has made progress in SDGs by initiating and implementing various policies and programmes. SDG 1: No Poverty Government of India has launched a multi-pronged strategy to eradicate poverty in all its form. Due to the multidimensional nature of poverty, the Government is implementing a number of welfare schemes in the areas of nutrition, health, education, housing, drinking water, sanitation, skill development, social protection etc. The sustained economic growth has been instrumental in reducing the poverty over the years. In this context, it is pertinent to note that India has resolved to become the 5 trillion-dollar economy by 2025. SDG 2 :Zero Hunger A number of initiatives have been taken by the Government to ensure food for all and has launched one of the largest food security programs in the world owing to the National Food Security Act, 2013. The net area under the organic farming is increasing over the years. India has made a significant progress in the area of food security despite of having several challenges. SDG 3:Good Health and Well-Being The Government Policies on health sector aim to provide universal health services at affordable prices. In this direction, the National Health Policy, the world’s largest health protection programme - Ayushman Bharat Yojana, Pradhan Mantri Bhartiya Janaushadhi Pariyojana among others, have been instrumental in achieving significant progress in this area. Government interventions have led to reduction in maternal and neonatal mortality as well as under-five mortality. The pandemic of COVID-19 posed an unprecedented challenge before the health system of the country. Government health policies and infrastructure have shown remarkable resilience in exemplary handling of the pandemic. SDG 4: Quality Education Affording the opportunity of quality education is basic to improve people’s lives and their sustainable development. SDG 4 aims to ensure the completion of primary and secondary education by all boys and girls, and guarantee opportunities for equal access to quality technical and vocational education for everyone. India has made significant progress in improving school infrastructure, increasing enrollment of students and improving the level of gender parity. The Right to Education (RTE) Act makes education a fundamental right of every child between the ages of 6 and 14 years and ensures free and compulsory education. The coverage of 10 education is constantly increasing across the country. A lot of emphasis New Economic policy 1991 has also been given to the Skill development and vocational education. SDG 5 :Gender Equality Ending all forms of discrimination against women and girls is not only a basic human right but also is crucial for sustainable future of societies. Providing women and girls with equal access to education, health care, decent work, and representation in political and economic decision- making processes will achieve sustainable economies and will benefit societies and humanity at large. SDG 5 aims to ensure end to all forms of discrimination against women and girls everywhere. Government has initiated several social protection and financial inclusion programs focusing on women. Such type of initiatives has ensured the increased women participation. The Beti Bachao Beti Padhao created awareness and improved the efficiency of welfare services intended for girls. The Pradhan Mantri Matru Vandana Yojana has been instrumental in providing the social protection through maternity benefits to women. SDG 6: Clean Water and Sanitation SDG 6 ensures availability and sustainable management of water and sanitation for all and reflects its increased attention in the global political arena. The 2030 Agenda recognizes that social development and economic prosperity depends on the sustainable management of freshwater resources and ecosystems. Despite having a huge demand, with limited water resources, India has committed to provide the population safe and adequate drinking water. Jal Jeevan Mission has played a significant role in ensuring adequate water and sanitation. In addition, all districts in India have achieved the target of Open Defecation Free (ODF) under the Swachh Bharat Mission. SDG 7: Affordable and Clean Energy SDG 7 aims to improve energy efficiency, increase use of renewable sources and promotion of sustainable and modern energy for all. Pradhan Mantri Sahaj Bijli Har Ghar Yojana - Saubhagya was launched to provide electricity to all households. The scheme has ensured access to power with a special focus on renewable energy to lower the carbon emissions and reduce air pollution. Pradhan Mantri Ujjwala Yojana has successfully taken cooking gas to rural households to meet the energy requirements and contribute towards improvement to women’s health and reduced CO2 emission. SDG 8:Decent Work and Economic Growth The goal is to achieve full and productive employment, and decent work, reduce informal employment and the gender pay gap and promote safe and secure working environments for all women and men by 2030.The Government Initiative, Startup India, aims to help Indian entrepreneur and Micro Units Development and Refinance Agency (MUDRA) ensures loans at low rates proving helpful in providing credit to MSMEs. Several structural reforms have been taken for sustainable economic growth and productive employment. 11 Macro Economic Aspects SDG 9 :Industry, Innovation and Infrastructure of India Progression in business regulatory environment has ensured India’s improved position in Ease of Doing Business rankings. The upgraded infrastructure and new initiative like Dedicated Freight Corridor, Dedicated Industrial Corridor etc. have been instrumental in the sustainable industrialization. The measures taken towards innovations led significant progress of the country in the Global Innovation index. SDG 10 Reduced Inequalities The inequalities in income and wealth are severe and have been widening globally. SDG 10 aims to reduce income inequality based on age, gender, disability, religion and economic or other status within the country, as well as among countries. Government is committed to reduce economic inequality through various policies and programs. In this direction, numerous initiatives have been taken. Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Kisan Samman Nidhi are some such interventions. SDG 11: Sustainable Cities and Communities Atal Mission for Rejuvenation and Urban Transformation (AMRUT) is focused to establish infrastructure that could ensure adequate robust sewage networks and water supply for urban transformation. The Government launched Pradhan Mantri Awas Yojana (PMAY) to provide affordable housing to all. National Smart Cities Mission, the urban renewal and retrofitting program has been launched to develop smart cities across the country.The Municipal solid waste management is one of the major environmental problems of Indian cities. Government has taken several initiatives which has ensured significant progress in the waste management in Urban areas. SDG 12:Responsible Consumption and Production India is a part of international initiatives and agreements on sustainable consumption and production including the 10 Years Framework of Programmes on sustainable consumption and production (10YFP) process. Government has given special consideration on renewable energy, organic agriculture, bio fertilizers, reduced emission etc. in order to ensure responsible consumption and production. SDG 13:Climate Action India’s National Action Plan for Climate Change (NAPCC), with 8 sub- missions is a programme to mitigate and adapt to the adverse impact of climate change. The plan aims at fulfilling India's developmental objectives with focus on reducing emission intensity of its economy. Government strives to make disaster resilient societies and these efforts by Government have considerably reduced the causalities from disastrous events over the years. India achieved its pre 2020 goal of reduction in emission intensity and implementing programs for the post 2020 goals. SDG 14: Life Below Water The Goal advocates corrective human measures including effectively regulating harvesting and overfishing, protecting marine and coastal 12 ecosystems, increasing scientific knowledge to improve ocean health and New Economic policy 1991 providing access for small-scale artisanal fishers to marine resources and markets. Several initiatives have been undertaken to protect the marine and coastal ecosystems, mangrove and coral reefs. SDG 15: Life on Land Goal 15 highlights how these systems contribute to reducing risks of natural disasters such as floods and landslides, maintain productivity of agricultural systems while also regulating climate. It also highlights that concerted action is needed to protect, restore and promote terrestrial ecosystems. SDG 16: Peace, Justice and Strong Institutions The spirit of democracy, justice, liberty and equality has been deeply embedded in the Indian constitution. Acts like The Right to Information Act, Lok Pal and Lok Ayukta Act, Whistle Blowers Protection Act etc., further reinforced it. The political participation of vulnerable groups has been ensured in the constitutional framework of the country. SDG 17: Partnerships for the Goals The SDG 17 is critical to the achievement of all SDGs. The country is dedicated to strengthen the means of implementation and revitalizing the Global Partnership for Sustainable Development as provisioned under SDG 17.The partnership among the different stakeholders like Government, societies etc. is essential for achieving the sustainable development. India has introduced several policy improvements and process simplification over the years. In the endeavor to achieve SDGs, measuring the progress towards SDGs is important both at national and sub-national levels. 1.4 MAKE IN INDIA, SKILL DEVELOPMENT AND TRAINING PROGRAMMES 1.4.1 Make in India Make in India is an initiative launched by the Government of India to encourage multinational, as well as national companies to manufacture their products in India. The aim of launching this campaign in India is to make India a world level manufacturing powerhouse which will definitely help in solving the biggest issue of Indian economy. Objectives of Make in India  To make India a renowned manufacturing hub.  Inviting various companies from around the world and encourages them to set up their factories and expand their facilities in India.  To use the talents and skills of Indian manpower for creating zero defect products. 13 Macro Economic Aspects Steps to make ‘Make In India’ successful of India  Many programs will be launched specially for people from rural areas, also for the poor ones living in the cities for developing their skills.  Under this campaign, twenty five key sectors have been selected, like telecommunication, automobile, tourism, etc.  Providing high quality training to the individuals who are between 15- 35 years of age. The training is provided in key areas like welding, nursing, masonries, painting, etc.  After the training, a skill certificate shall be provided.  Over 1000 training centers would be opened all over India for the next two years of commencement of this campaign. Advantages of Make in India  Creation of Job Opportunities: The primary purpose of Make in India is to create and provide a job for all, especially for the younger generation of the country. Jobs are created in sectors such as telecommunication, pharmaceuticals, tourism, etc. The younger generation of the country will be encouraged young entrepreneurs to use their innovative ideas for the development of the nation.  Improvement in Areas: When a factory or an industry is set up in an area, it attracts labor, markets, and other people. With this, the financial status of the families which are living nearby to these areas will also improve. The area, its neighbouring places and the people living in these places will develop all together.  Push to GDP: GDP means Gross Domestic Product. The value of its GDP calculates the development of a country. By the campaign of Make in India, the industries will develop in India, and this will create the flow of income. Sectors like exportation, architecture, textiles, communication, etc. will develop, and this, in turn, will make the economy of India stronger.  Increasing the Value of Rupees: Make in India will be attracting more Foreign Direct Investment and which will result in increasing the value of Indian Rupee against the American Dollar. This will also reduce the effect of the hegemony of Dollar over Indian Rupee.  A Shift From International Brand to Native Brands: Indians are attracted to international brands and do not pay attention to the indigenous brands, and this brings loss to indigenous producers. With Make in India, the indigenous products will get its recognition in the country, and these producers will start making profits.  Technological Advancements: Make in India allows Indians to use the latest technology. This campaign encourages Indians to make new 14  technology. Attention is also given to improving the skills of labor in New Economic policy 1991 the country.  Simplifying Business: Make in India is an open invitation to manufacturers present in every corner of the world. For inviting as many manufacturers as possible, the government has removed many restrictions.  Innovative Ideas From Young Generation: The young generation of India never gets an environment within the boundaries of the country to develop their skills and implement their innovative ideas in the country, and therefore they leave India for getting better opportunities. Make in India will provide the needed environment in the country itself and will take innovative ideas from the talented young generation of the country.  Development of Rural India: When a factory is set up, it not only attracts labor but also attract development in that particular region. When a factory is set up in rural areas, then such areas are blessed with schools, healthcare facilities, markets, etc. Disadvantages of Make in India  Exclusion of Agriculture: India is an agrarian country with 61 percent of the total land under cultivation. But, Make in India encourages industrial development and excludes agriculture from it.  Exploitation of Resources: Resources are limited in nature, while the demands of human beings have no end. Make in India focuses on developing manufacturing industries that consume many natural resources. This will endanger the survival of the population soon.  Loss to Small Entrepreneurs: Make in India welcomes other countries in India, and when these countries set up its manufacturing unit in India, they attract the local people toward them, and this brings loss to small entrepreneurs who are already struggling to set up their position.  Loss of Cultivable Land: The campaign focus on setting up of manufacturing unit in India. These manufacturing units can be set up at any place, and sometimes it also settles on those lands which are used for cultivation. Therefore, Make in India will destroy the worth of cultivable land.  Loss to Other Sectors: The Indian economy has three sectors, named the Primary sector, Industrial or Secondary sector, and Service sector, but Make in India is emphasising on Secondary sector leaving all sectors behind. As the economy cannot develop by developing one sector only, complete attention on the manufacturing sector will not bring economic development to the country.  Pollution: According to the data available, the Pollution Index of India is 76.50, and this level will surely increase after Make in India Campaign. 15 Macro Economic Aspects 1.4.2 Skill Development and Training Programmes of India Skill development and vocational training programmes are conceptualised, executed and monitored by various organisations, working closely with the Government of India. There are various plans and schemes that are dedicated to achieve scalable skilling with quality and higher productivity, particularly in the unorganised or informal sector which accounts for 83 per cent of India’s workforce. Lets look at various schmes that aim at skilling, upskilling and reskilling in order to provide gainful employment. 1. Deen Dayal Upadhyay Gram Kaushal Yojana (DDU-GKY): The Deen Dayal Upadhyay Gram Kaushal Yojana (DDU-GKY) is a placement linked skill development programme for the rural youth. DDU-GKY funds a variety of skill training programmes all over the country that include over 250 trades such as Retail, Hospitality, Health, Construction, Automotive, Leather, Electrical, Plumbing, Gems and Jewellery, to name a few. DDU-GKY is being adopted throughout India as the scheme is being implemented on a large-scale basis, in almost all the states and union territories. 2. Deen Dayal Antyodaya Yojana – National Urban Livelihoods Mission (DAY-NULM): The main aim of DAY-NULM mission is to curb poverty of the urban poor households by providing them access to their skill related employment opportunities in an organised manner. As a part of this scheme, regional workshops have also been conducted in support of urban homeless, urban street vendors, etc. A major objective of the scheme is to help people earn a sustainable livelihood through skilling and upskilling. Through this scheme, the Government of India also hopes toeradicate the threats that a regular worker faces in the unorganised sectors of work. The belief that poor also have entrepreneurial capability and have an intent desire to come out of poverty, is what that drives this mission. 3. Directorate General of Training: Modular Employable Skills (DGT- MES): Government of India and the Ministry of Labour together have launched Modular Employable Skills (MES) under Skill Development Initiative (SDI). Under this scheme, school dropouts and existing workers, specially, in the unorganised sector are to be trained for employable skills. The basic objective of the scheme is to provide vocational training to school dropouts, ITI graduates, rural and unemployed youth to improve their employability. Also, priority is given to those above the age of 14 years who have suffered in the form of child labour to enable them to learn employable skills in order to get gainful employment. 4. Ministry of Labour and Employment (MoLE): The Ministry of Labour and Employment (MoLE) is one of the oldest and important Ministries of the Government of India. The main responsibility of this Ministry is to protect the interests of workers in general and also the rural and urban poor and that section of people who are deprived and disadvantaged sections of the society. The Ministry majorly focuses on women and child welfare and has also started schemes to support various 16 initiatives. The National Career Services is another scheme under the New Economic policy 1991 Ministry of Labour and Employment which deals with providing job matching services to youth in an easy manner. 5. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): NREGA guarantees right to work in rural areas by providing wage employment to unskilled manual workers. People are ensured of at least 100 days of employment in every household to a member who is willing to do unskilled work. Apart from providing economic security and creating rural assets, MGNREGA also aims at protecting the environment, empowering rural women, reducing rural- urban migration and fostering social equity, among others. 6. Ministry of Skill Development and Entrepreneurship (MSDE): The Ministry of Skill Development and Entrepreneurship (MSDE) is responsible for the coordination of overall skill development efforts across the country, building the vocational and technical training framework, skill upgradation, building of new skills, and innovative thinking not only for existing jobs but also jobs that are to be created. The Ministry has aided and supported several other missions that also focus on skill development like the National Skill Development Agency (NSDA), National Skill Development Corporation (NSDC), National Skill Development Fund (NSDF) and 33 Sector Skill Councils (SSCs) as well as 187 training partners registered with NSDC. 7. National Skill Development Corporation (NSDC): The National Skill Development Corporation (NSDC) is a unique organisation under PPP mode, under the Ministry of Skill Development and Entrepreneurship. It aims to promote skill development by initiating the creation of large and quality oriented training institutes all over the country. The Government of India works closely with NSDC to help financing training and thus contribute to the overall target of skilling 400 million people in India by 2022. 8. National Skill Development Agency (NSDA): NSDA is an autonomous body of Ministry of Skill Development and Entrepreneurship (MSDE), which aims to coordinate the skill development efforts of the Government and the private sector to achieve the skilling targets by 2022. The NSDA works in partnership with several agencies like the NSDC, Central Ministry Skill Programmes, Ministry of Skill Development and Entrepreneurship and Sector Skill Councils. The NSDA works with 26 different kinds of skill sectors. The NSDA aims to be the major agency for State Skill Development Missions and also ensure that the skilling needs of the disadvantaged and the marginalised groups like SCs, STs, OBCs, minorities,women and differently abled persons are taken care of without any bias 9. Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Pradhan Mantri Kaushal Vikas Yojana (PMKVY) is a unique initiative by the Government of India that aims to train about24 lakh Indian youth to be industry relevant, skill based and to prepare them for the globalmarket. Under this 17 Macro Economic Aspects scheme, the trainees will also be given financial support and a of India certificateon successful completion of training and assessment, which will help them in securing a jobfor a better future. This scheme mainly focuses on the upbringing of youth and to prepare them to face the challenges of the industrial world. The PMKVY scheme is being implemented successfully with many skill sectors all over the country. 1.5 SUMMARY In this unit, we have seen the objectives of New Economic Policy1991. The main objective was to plunge Indian Economy in to the arena of ‘Globalization and to give it a new thrust on market orientation. Various reforms were introduced for liberalisation, privatization and globalization of the Indian economy. Social infrastructure plays an important role in the economic development of the country. The two main areas of social infrastructure are education and health. Important measures have been taken by the government for development of education and health care in India. We have also discussed the sustainable development goals adopted by United Nations. The NITI (National Institution for Transforming India)Aayog is responsible for coordinating the SDGs in India. India has made progress in SDGs by initiating and implementing various policies and programmes. Make in India is an initiative launched by the Government of India to encourage multinational, as well as national companies to manufacture their products in India. The aim of launching this campaign in India is to make India a world level manufacturing hub. Lastly we also study some of the important skill development programmes launched by the Government. 1.6 QUESTIONS Answer in brief: 1) Explain briefly the New Economic policy 1991. 2) What is globalization? What are the different policy measures undertaken to globalize the Indian economy since 1991. 3) Discuss the importance of social infrastructure. 4) Explain the role of infrastructure related to education. 5) Examine the various skill development and training programmes. 6) Discuss the measures adopted by India for implementation of sustainable development goals. 7) Discuss the Government of India’s Make in India initiative.   18  2 FOREIGN DIRECT INVESTMENT Unit Structure 2.0 Objectives 2.1 Foreign Direct Investment 2.2 Multinational Corporation and their role 2.3 Foreign Investment promotion Board 2.4 Summary 2.5 Questions 2.0 OBJECTIVES  To understand the role of Foreign Direct Investment  To explore the role of MNCs in India  To understand the role of Foreign Investment promotion Board 2.1 FOREIGN DIRECT INVESTMENT 2.1.1 Meaning of FDI A Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country. FDIs, apart from being involved in capital investment, also include the provisions of management or technology. The key feature of FDI is that it establishes either effective control of or at leasta substantial influence over the decision-making of the foreign business. The FDI can be made in various ways, including the opening of a subsidiary or associate company in a foreign country or ensuring a merger or joint venture with a foreign company. 2.1.2 Types of FDI  FDI can be categorised into horizontal, vertical or conglomerate.  A horizontal direct investment happens when an investor sets up the same type of business operation in a foreign country as it operates in its home country.  A vertical investment is one in which different, but related business activities from the investor’s main business is established or acquired in a foreign country. For instance, when a manufacturing company acquires an interest in a foreign company that supplies parts or raw materials 19 Macro Economic Aspects required for the manufacturing its finished goods, it is called vertical of India investment.  A conglomerate type of FDI is the one where a company or an individual makes foreign investment in a business that is unrelated to its existing business in its home country.  Since this type of investment involves entering a new industry where the investor has no experience, it often takes the form of a joint venture with a foreign company already operating in the country. 2.1.3 Advantages and disadvantages of FDI What are the advantages of FDI? Increase in production:Allowing FDI inflow ensures an increase in investment in key areas such as infrastructure development, which may lead to increase in capital goods production. For instance, investment in power generation can generate more electric power, which would enable the growth of more industries. Increase in capital inflow:FDI promotes more capital inflow into the countries, especially in key sectors like infrastructure.It can address the shortage of capital and materials, which can rapidly enhance the growth of the country. Increase in employment opportunities:FDIs in developing countries have enhanced the service sectors.This increased the employment opportunities within these countries, leading to an increase in economic growth.Educated unemployment has also been reduced by the FDIs as they can absorb some of the workforces. Strengthening of financial services:FDIs can enhance financial services of a country by not only entering its banking industry but also by extending other activities like merchant banking, portfolio investment etc.It has also helped the capital market within the country. Exchange rate stability:RBI has been maintaining the exchange rate in the country through its exchange control measures.However, the constant and continuous supply of foreign exchange is vital for the continuation of exchange rate stability.FDI inflow plays a crucial role in this aspect by helping RBI to have comfortable foreign exchange reserve position of more than 1 billion dollars. Economic development:FDIs, in the past, have played a crucial role in developing backward areas by starting industries.This resulted in many of these areas becoming industrial centres, with improvement in the standard of living of the people in these areas. Efficient use of natural resources:The natural resources in the country can be used efficiently by the FDI, which may otherwise have been unutilised. 20 Improved knowledge and technology:One of the crucial benefits received Foreign Direct Investment by the host countries through the FDIs is access to new technologies and expertise from foreign companies.This can result in enhancement of the country’s growth potential. Maintenance of Balance of Payments:FDI growth can help maintain the Balance of Payments.It can also maintain the value of countries’ currencies. Disadvantages of FDI  Foreign ownership of strategically important sectors cannot favour the countries.  Foreign investors might strip the business of its value.  They could sell unprofitable portions of the company to the local, less sophisticated investors.  They can use the company’s collaterals to get low-cost, local loans.  Instead of reinvesting it, they lend the funds back tothe parent company.  The MNCs, through FDIs, can get controlling rights within the foreign countries.  FDI can also be a convenient way to bypass local environmental laws.  Developing countries are tempted to reduce environmental regulations to attract FDI inflows.  FDI does not always benefit host countries as it enables foreign multinationals to gain from ownership of raw materials and even exploit labour force by not distributing its wealth to the backward society.  MNCs are often criticised for their poor working conditions in foreign countries.  The entry of large firms can often displace local businesses and may drive them out, as these small companies cannot compete. 2.1.4 FDI policy in India New Industrial policy1991 : The Government introduced automatic approval upto 51% of foreign in 34 priority sectors. Government had the authority to raise FDI limit to 100% without prior approval of Parliament. There were 2 ways to get FDI approval in India. Automatic Route Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. 21 Macro Economic Aspects Government Route of India Under the Government Route, prior to investment, approval from the Government of India is required. Proposals for foreign direct investment under Government route, are considered by respective Administrative Ministry/ Department. FDI policy 2017: On August 28, 2017 ,DIPP announced the revised FDI policy. The following initiatives were taken.  Abolition of FIPB and establishment of Foreign Investment Facilitation portal.  Different departments were appointed to look into sector specific investments.  DIPP issued Standard operating Procedures with detailed procedures, the timelines and list of competent authorities for government approval.  Start-ups could issue equity or equity linked debt instruments to foreign venture capital investors. Trends of FDI in India  The Measures taken by the Government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country as India has attracted total FDI inflow of US$ 72.12 billion during April to January, 2021.  It is the highest ever for the first ten months of a financial year and 15% higher as compared to the first ten months of 2019-20 (US$ 62.72 billion).  The trends show that the FDI equity inflow grew by 28% in the first ten months of F.Y. 2020-21 (US$ 54.18 billion) compared to the year ago period (US$ 42.34 billion).  In terms of top investor countries, ‘Singapore’ is at the apex with 30.28% of the total FDI Equity inflow followed by U.S.A (24.28%) and UAE (7.31%) for the first ten months of the current financial year 2020-21.  Japan has been leading the list of investor countries to invest in India with 29.09% of the total FDI Equity inflows during January, 2021, followed by Singapore (25.46%) and the U.S.A. (12.06%).  The Computer Software & Hardware has emerged as the top sector during the first ten months of F.Y. 2020-21 with 45.81% of the total FDI Equity inflow followed by Construction (Infrastructure) Activities (13.37%) and Services Sector (7.80%) respectively.  As per the trends shown during the month of January, 2021, the consultancy services emerged as the top sector with 21.80% of the total FDI Equity inflow followed by Computer Software & Hardware (15.96%) and Service Sector (13.64%). 22  These trends in India’s Foreign Direct Investment are an endorsement Foreign Direct Investment of its status as a preferred investment destination amongst global investors 2.2 MULTINATIONAL CORPORATION AND THEIR ROLE 2.2.1Meaning of Multinational Companies (MNCs): A multinational company is one which is incorporated in one country (called the home country); but whose operations extend beyond the home country and which carries on business in other countries (called the host countries) in addition to the home country. Features of Multinational Corporations (MNCs): (i) Huge Assets and Turnover: Because of operations on a global basis, MNCs have huge physical and financial assets. This also results in huge turnover (sales) of MNCs. In fact, in terms of assets and turnover, many MNCs are bigger than national economies of several countries. (ii) International Operations Through a Network of Branches: MNCs have production and marketing operations in several countries; operating through a network of branches, subsidiaries and affiliates in host countries. (iii) Unity of Control: MNCs are characterized by unity of control. MNCs control business activities of their branches in foreign countries through head office located in the home country. Managements of branches operate within the policy framework of the parent corporation. (iv) Advanced and Sophisticated Technology: Generally, a MNC has at its command advanced and sophisticated technology. It employs capital intensive technology in manufacturing and marketing. (v) Professional Management: A MNC employs professionally trained managers to handle huge funds, advanced technology and international business operations. (vi) Better Quality of Products: A MNC has to compete on the world level. It, therefore, has to pay special attention to the quality of its products. 23 Macro Economic Aspects 2.2.2 Advantages and Limitations of MNCs: of India Advantages of MNCs (i) Employment Generation: MNCs create large scale employment opportunities in host countries. This is a big advantage of MNCs for countries; where there is a lot of unemployment. (ii) Automatic Inflow of Foreign Capital: MNCs bring in much needed capital for the rapid development of developing countries. In fact, with the entry of MNCs, inflow of foreign capital is automatic. As a result of the entry of MNCs, India e.g. has attracted foreign investment with several million dollars. (iii) Proper Use of Idle Resources: Because of their advanced technical knowledge, MNCs are in a position to properly utilise idle physical and human resources of the host country. This results in an increase in the National Income of the host country. (iv) Improvement in Balance of Payment Position: MNCs help the host countries to increase their exports. As such, they help the host country to improve upon its Balance of Payment position. (vi) Technical Development: MNCs carry the advantages of technical development In fact, MNCs are a vehicle for transference of technical development from one country to another. (vii) Managerial Development: MNCs employ latest management techniques. People employed by MNCs do a lot of research in management. In a way, they help to professionalize management along latest lines of management theory and practice. This leads to managerial development in host countries. (viii) End of Local Monopolies: The entry of MNCs leads to competition in the host countries. Local monopolies of host countries either start improving their products or reduce their prices. MNCs compel domestic companies to improve their efficiency and quality. (ix) Improvement in Standard of Living: By providing super quality products and services, MNCs help to improve the standard of living of people of host countries. 24 (x) Promotion of international brotherhood and culture: Foreign Direct Investment MNCs integrate economies of various nations with the world economy. Through their international dealings, MNCs promote international brotherhood and culture; and pave way for world peace and prosperity. Limitations of MNCs (i) Danger for Domestic Industries: MNCs, because of their vast economic power, pose a danger to domestic industries; which are still in the process of development. Domestic industries cannot face challenges posed by MNCs. Many domestic industries have to wind up, as a result of threat from MNCs. Thus MNCs give a setback to the economic growth of host countries. (ii) Repatriation of Profits: MNCs earn huge profits. Repatriation of profits by MNCs adversely affects the foreign exchange reserves of the host country; which means that a large amount of foreign exchange goes out of the host country. (iii) No Benefit to Poor People: MNCs produce only those things, which are used by the rich. Therefore, poor people of host countries do not get, generally, any benefit, out of MNCs. (iv) Danger to Independence: Initially MNCs help the Government of the host country, in a number of ways; and then gradually start interfering in the political affairs of the host country. There is, then, an implicit danger to the independence of the host country, in the long-run. (v) Disregard of the National Interests of the Host Country: MNCs invest in most profitable sectors; and disregard the national goals and priorities of the host country. They do not care for the development of backward regions; and never care to solve chronic problems of the host country like unemployment and poverty. (vi) Careless Exploitation of Natural Resources: MNCs tend to use the natural resources of the host country carelessly. They cause rapid depletion of some of the non-renewable natural resources of the host country. In this way, MNCs cause a permanent damage to the economic development of the host country. (vii) Exploitation of People, in a Systematic Manner: MNCs join hands with big business houses of host country and emerge as powerful monopolies. This leads to concentration of economic power only in a few hands. Gradually these monopolies make it their birth right to 25 Macro Economic Aspects exploit poor people and enrich themselves at the cost of the poor working of India class. 2.3 FOREIGN INVESTMENT PROMOTION BOARD The Foreign Investment Promotion Board (FIPB) was an inter-ministerial body under the Department of Economic Affairs in the Ministry of Finance. It was set up in the early 1990s for single window clearance of FDI in India. Earlier if the Foreign Direct Investment (FDI) amount exceeds Rs3,000 crore then it must be approved by the Finance Minister and subsequently by the Cabinet Committee on Economic Affairs (CCEA) on the recommendations of the FIPB. FIPB was chaired by the economic affairs secretary and other permanent members includes; secretary, Department of Industrial Policy and Promotion (DIPP), commerce secretary etc. Various functions of Foreign Investment Promotion Board  To review the execution of the foreign investment proposals  To approve quickly the foreign investment proposals  To communicate with industry bodies, non- government, and government agencies on issues that help in increasing the flow of Foreign Direct Investment into the country  To establish transparent guidelines that help in promoting FDI into the country  To take up activities that promote investment into the country such as establishing contact with leading international companies and to encourage them to invest in India  To communicate with the Foreign Investment Promotion Council (FIPC)  To identify the various sectors in the country in which FDI may be wanted  To take up various other activities that help in encouraging foreign direct investment into the country Ex Finance Minister Arun Jaitley announced in the budget speech in Lok Sabha that FIPB will be abolished and government issued notification to abolish the FIPB on 5th June 2017.The FIPB was replaced by the Foreign Investment Facilitation Portal (FIFP) in May 2017.After the abolition of the FIPB now individual departments of the government have been empowered to clear FDI proposals in consultation with Department of policy and Promotion (DIPP) which will also issue the Standard Operating Procedures (SOPs) for processing applications. Now timeline will be fixed for approving FDI proposals by the competent authorities. The rejection of 26 the application is made tougher as it will now mandatorily require Foreign Direct Investment concurrence of DIPP. 2.4 SUMMARY In this unit, we have studied the foreign Direct Investment. A Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. There are three types of foreign Direct Investment. The government has adopted two routes for FDI in India. Automatic and Government Route. Due to the various policy initiatives taken by the Government, India is one of the top destinations for attracting FDI. We have also discussed the role of multinational corporations. MNCs have many advantages like large scale employment opportunities , Inflow of Foreign Capital,Technical and managerial Development. However MNC also have many disadvantages like danger for domestic industries, repatriation of profits etc. 2.5 QUESTIONS Answer in brief: 1) Discuss the Foreign Direct policy adopted by the Government of India. 2) What are the various advantages of the foreign direct investment 3) What are the costs of FDI to the host country 4) Write a note on Foreign Investment promotion Board (FPIB). 5) Explain the role of MNCs in India. 6) What are the advantages and disadvantages of MNCs?  27  Module II 3 AGRICULTURE DURING POST REFORM PERIOD Unit Structure 3.0 Objectives 3.1 Introduction 3.2 National Agriculture Policy, 2000 3.3 Agricultural Pricing 3.4. Summary 3.5. Questions 3.0 OBJECTIVES  To study objectives of National Agricultural Policy 2000.  To study features of National Agricultural Policy 2000.  To study the implication of NAP 2000.  To study the need for agricultural price policy and the evaluation of Agricultural pricing. 3.1 INTRODUCTION Agriculture sector plays an important role in Indian agriculture as Indian Indian economy was earlier relied and known as an agrarian economy. Even today, India’s more than 50 percent of population depend upon agriculture for its livelihood. The first agricultural reform took place in the form of Green Revolution which contributed tremendously in Indian economy. In this unit, we will study the post reform agriculture policy. 3.2 NATIONAL AGRICULTURE POLICY 2000 INTRODUCTION National agricultural policy declared by the Government on July 28, 2000 for raising agricultural production and productivity with raising the level of income of farmers. It is useful to rising standard of living of farmers within a definite time frame. This policy is formulated for all round and comprehensive development of the agricultural sector. 28  3.2.1 OBJECTIVES Agriculture During Post Reform Period The following are some of the important objectives of India’s national agricultural policy: 1. Attaining a growth rate above 4.0 per cent per annum in the agricultural sector; 2. Attaining a growth which is based on efficient use of resources and also makes provision for conservation of our soil, water and bio- diversity; 3. Attainment of growth with equity, i.e., attaining a growth whose impact would be widespread across regions and different classes of farmers; 4. Attaining a growth that is demand-driven and cater to the need of domestic markets and ensuring maximization of benefit from exports of agricultural products in the face of challenges from economic liberalization and globalization; 5. Attaining a growth that is sustainable technologically, environmentally and economically. 3.2.2 The main features of the National Agricultural Policy are: 1. Privatisation of agriculture and price protection of farmers in the post QR (Quantitative Restrictions) regime would be part of the government’s strategy to synergise agricultural growth. 2. Private sector participation would be promoted through contract farming and land leasing arrangements to allow accelerated technology transfer, capital inflow, assured markets for crop production especially of oilseeds, cotton and horticultural crops. 3. The policy envisages evolving a ‘National Livestock Breeding Strategy’ to meet the requirement of milk, meat, egg and livestock products and to enhance the role of draught animals as a source of energy for farming operations. 4. High priority would be accorded to evolve new location-specific and economically viable improved varieties of farm and horticulture crops, livestock species and aquaculture. 5. The restrictions on the movement of agricultural commodities throughout the country would be progressively dismantled. The structure of taxes on food grains and other commercial crops would be reviewed. 6. The excise duty on materials such as farm machinery and implements and fertilizers used as inputs in agricultural production, post-harvest stage and processing would be reviewed. 7. Rural electrification would be given high priority as a prime mover for agricultural development. 29 Macro Economic Aspects 8. The use of new and renewable sources of energy for irrigation and of India other agricultural purposes would be encouraged. 9. Progressive institutionalisation of rural and farm credit would be continued for providing timely and adequate credit to farmers. 10. Endeavour would be made to provide a package insurance policy for the farmers, right from sowing of crops to post-harvest operations including market fluctuations in the prices of agricultural produce. 3.2.3 Implications of the New Agricultural Policy: The New Agricultural Policy (2000) has been considered as a balanced one considering the present requirement. The new policy has adopted a coordinated approach for bringing Green Revolution, White Revolution (related to milk and dairy products) and Blue Revolution (related to aqua/fish culture). Therefore, the policy has been termed as a policy of promising Rainbow Revolution. 1. Considering the growing requirement of food for attaining food self- sufficiency and to attain food security for the millions of people of the country the policy has faced a great challenge. To fulfil this requirement attainment of 4 per cent growth rate in agricultural output is a must. But the New Policy has not spelt out any such target in quantitative terms. 2. The New Policy has also failed to identify those backward states which are still lagging in utilizing their agricultural potential. Therefore, a balanced approach should be undertaken to remedy these loopholes. 3. The New Policy argued in favour of encouraging private investment in agriculture which would help the big farmers, but the large numbers of small farmers are not going to be supported by such private investment which needs to be promoted by public investment. 4. The New Policy argued in favour of private sector participation through contract farming by land leasing arrangements. But introduction of such a step in a labour- surplus economy is highly questionable. 5. Lastly, there is a lack of co-ordination between the Central and State Governments in implementing various promotional steps for the development of agricultural sector. Thus, the centre and the states should co-ordinate in implementing various provisions of new policy and should develop a monitoring mechanism to evaluate the implementation of the policy in a most ratio. 30 3.3.4 In order to fulfil this strategy, the following measures are Agriculture During Post suggested in the new policy: Reform Period 1. To use unutilized barren wastelands for agriculture and afforestation. 2. To contain biotic pressures on land and to control indiscriminate division of agricultural lands for non-agricultural uses. 3. To enhance cropping intensity through multi-cropping and inter- cropping. 4. To emphasize rational use of ground and surface water so that over- exploitation of ground water resources can be checked. To adopt better technologies such as drip and sprinkler irrigation system so as to arrange more economic and efficient use of water. 5. To adopt vigorously a long-term perspective plan for sustainable rain-fed agriculture by adopting watershed approach and water harvesting method for development of two-thirds of cropped area of the country which is dependent on rainfall. 6. Involvement of farmers and landless labourers will be sought in the development of pastures/ forestry programmes on huge public wasteland by providing adequate financial incentives and entitlement of trees and pastures. 3.3 AGRICULTURAL PRICING 3.3.1 INTRODUCTION Movement of price is a common feature. But rapid and violent movement or fluctuations in the prices of agricultural commodities have serious consequences on the economy of the country. As the sudden steep fall in the price of a particular crop, result in huge loss to the farmers producing that crop as their income declines. This will force the farmers not to cultivate the crop next year leading to a serious shortage in the supply of that food item and that may force the government to import that food crop from foreign countries. Price policy plays a pioneer role in the economic development of a country. It is an important instrument for providing incentives to farmer for motivating them to go in for production-oriented investment and technology. In a developing country like India where majority of the population is engaged in agricultural sectors, prices affect both income and consumption of the cultivators. 3.3.2 OBJECTIVES 1. “To protect or insure the producer through guaranteed minimum support price , which as a stabilization measure, reduces the variability in product prices and therefore price risk of the farmers. The impact of the risk reduction is expected to induce farmers to undertake larger investments. 31 Macro Economic Aspects 2. To induce farmers to part with a larger proportion of foodgrains of India production as a marketed surplus. 3. To induce the desired outputs of different rops according to growth targets. 4. To revenue maximization seeks to maximize revenue from the sale of products without regard to profit. 5. To quality of leadership used to signal product quality to the consumer by placing prices on products that convey their quality. 3.3.3 FEATURES 1. Setting up Institutions: The Government of India has set up some institutions for the implementation of agricultural price policy in the country. Accordingly the agricultural price commission was set up in 1965 which announced the minimum support prices and procurement prices for the agricultural products. 2. Minimum Support price: The government fixes the minimum support prices of agricultural products like wheat, rice ,maize,cotton, sugarcane, pulses etc. regularly for safeguarding the interest of farmers. The FCI also make their purchase of food grains at the procurement prices so as to maintain a rational price of foodgrains in the interest of farmers. 3. Protecting the Consumers: In order to safeguard the interest of the consumers, the agricultural price policy has made provision for buffer stock of foodgrains for its distribution among the consumers through public distribution systems. 4. Fixation of Maximum Price: In order to have a control over the price of the essential commodities the government usually determines the maximum price of agricultural products so as to protect the general people from exorbitant rise in prices. 3.3.4 SUGGESTIONS FOR RATIONALISATION OF AGRICULTURAL PRICING 1. Establishment of Some More Agencies: Apart from Food Corporation of India, some more agencies should be set up for ensuring rational prices of other agricultural products. In the meantime the government has already set up Cotton Corporation and Jute Corporation, which needs to be further, strengthened. 32 2. Extension of the Price Policy : Agriculture During Post Reform Period The agricultural price policy should be extended to cover more commodities over and above the 15 commodities covered at present. The commodities like pulses, potato, onion and other important vegetables and fruits may also be covered. 3. Rationalisation of Price Fixation: The price of agricultural commodities should be fixed in the most rational manner so that it could cover the entire cost of production. While fixing the price, the increasing cost of agricultural inputs should be taken into consideration. 4. Protection of Consumers: The agricultural price should be so determine that it can also protect the interest of the general consumer. 5. Modernisation: The agricultural price policy should be framed in such a manner so that it can induced the farmers to go for modernization of their agricultural practice. 3.3.5 CONCLUSION The agricultural price policy has relied too heavily on and price incentives in the form of assured crop prices for achieving increase in production. The non-price factors such as efficient technology, financial inputs, land reforms and improved human resources are all very significant in expanding the volume of aggregate output and productivity. The scarce state’s economic resources should be used in improving social and economic infrastructure in the rural area rather than providing subsidized agriculture output to the public at large. The price policy cannot produce desirable effects of improving agricultural productivity if the agricultural infrastructure is weak. It is desirable that the agricultural prices are announced for few commodities as it is commercially unsustainable for government to procure foodgrains at higher price and allow off take at subsidized price. 3.4 SUMMARY 1. National agricultural policy declared by the Government on July 28, 2000 for raising agricultural production and productivity with raising the level of income of farmers. This policy is formulated for all round and comprehensive development of the agricultural sector. 2. The new policy has adopted a coordinated approach for bringing Green Revolution, White Revolution (related to milk and dairy products) and Blue Revolution (related to aqua/fish culture). Therefore, the policy has been termed as a policy of promising Rainbow Revolution.