Chapter 3 Industrial Development in India

Industrial Development in India

Explain the role of industrialization in economic development of India.

Industry is the backbone of the economy. Modern countries are known for their industrial development. India being LDC has less developed industry. Industrialization plays an important role in the economic development of a country. This is as follows.

1. Increase in income and betterment of living standard – Industrialization is the result of human efforts. It leads to an improvement of the standard of living, because it is always possible to use most modern techniques of production. The process of improvements in the techniques of production is a continuous and cyclical process. This accelerates the rate of capital formation, which in turn increases the level of production. All this ultimately increases the standard of living of the people. There is a close relationship between the economic development and industrialization. Countries like US, Canada, france and Belgium have made tremendous economic progress during the last hundred and fifty years. This is because the share of the industrial output in the national income of these countries in 1999 is 26%, 33%, 26% and 28% respectively. In case of India it was 15% in 1971, which rose to 25% in 1999.

2. Increase in the International Trade – When the goods are exchanged between different countries it is known as International Trade. Diversified finished products can open the new horizons for exporting. It ensures all the advantages of the division of labour and also makes the commodities available in any country. Formerly people believed that the countries engaged in primary production should produce and export only primary products and import manufactured products. But experience has proved that this is harmful to the development of international trade of countries. The demand for primary products is more or less fixed and does not increase rapidly. This makes impossible for the countries to expand their exports. The earnings from exports in terms of foreign currency can be utilized for increasing the standard of living of the people. So international trade is always beneficial to all the countries.

3. Satisfaction of Additional Demand – The internal demand for primary products continues to increase up to a certain point. Once the level is reached the further expansion seems impossible. The demand for comforts and luxuries goes on increasing after the basic necessaries are satisfied and it becomes necessary to increase the industrial output in the country. In other words to satisfy the luxurious demands industrialization is necessary.

4. The diversification of production – Every economy has to face several economic, natural or manmade calamities. It is difficult to face such calamities. If the production in the economy is diversified then it becomes easier to face such calamities. With the globalization, diversification has become still more important. It has become necessary to find out new areas of industrialization, which would be advantageous to us.

5. Increase in employment opportunities – The problem of unemployment has become very crucial. On one hand, it is necessary to provide employment to an ever-increasing population and on the other hand it is necessary to reduce the dependence of the population on agriculture. Agriculture and other primary fields of productions have proven the law of diminishing returns. It is industry, which keeps the returns constant. This makes it possible to provide greater employment opportunities by starting large and small-scale units at large.

6. Development of agriculture and other primary producing sectors – Industrialization also helps in agricultural development and other related activities. It increases the income of the people. This additional demand increases the demand of finished goods including agricultural commodities. Industrialization also provides modern machines and techniques to agricultural sector. Thus industrialization indirectly helps development of agriculture.

7. Strength and stability of the economy - Following are the ways industrialization gives strength and stability to economy. Following are the ways industrialization gives strength and stability to economy.
a) Industrialization makes it possible to undertake the research. Hence there is progress in techniques of production. This makes to construct roads, dams and railways profitable by using latest technology. Such infrastructure is the base for industrialization. b) Industrialization makes the economy more balanced and stable. c) The ability to stand in the competition is increase and optimum utilization of economic resources is possible. d) Industrialization makes it possible to supply the raw material required by the transport and communication and other sector of the economy and also provides demand for their products.

8. The sovereignty of the Nation – In order to maintain the sovereignty of the nation, it must not depend on other countries to meet its requirement of arms and ammunition. Again imports of weapons entirely depend on the international relations and conditions. Even dependence on imports for capital goods, machinery damages the sovereignty of the country. So to maintain the sovereignty of the nation, it is necessary to have industrialization.

9. Welfare functions of the state – The ability or capacity of the industries to create surplus is large. Similarly, the industrial section is always better organized. It is possible for the government to charge and collect the taxes from the industries and use the money for the welfare function of the state.

10. Social Change – Industrialization changes the society by raising the level of income, standard of living. It also leads the economy towards the aggression. The industrial society is time scheduled. They work together. This always increases the new values and ethics in the society. The society leads towards more cultured and civilized.

Explain the importance and problems of Small Scale Industries in India.

The terms, ‘small scale industries’, village industries’ and ‘cottage industries’ are used as one and the same. But for the sake of economic analysis there is difference in them. In various ways these terms can differentiate with each other. Broadly these all are the small industries having low capital investment. Cottage industries have a special phenomenon, this kind of industry belongs to a family, and in which commodities are produced without the help of machinery.

The importance and problems SSI face can be described as follows.

1. Contribution to National income – The SSI and Cottage Industries contribute to the nation income of India on a very large scale. In the year 1998-99, the total national income was Rs. 1597416 crores and out of this Rs. 527515 crores was the contribution of SSI and Cottage Industries. In other words, SSI contributed 1/3^rd of the national income. This would not be possible without the special efforts taken by the government encouraging the SSI.

2. The Employment Potential – Most of the SSI and Cottage Industries are labour intensive. The large-scale modern industries make use of more capital than the labour. The extravagant problem of unemployment in India can be reduced with turning up the unemployed labour force into SSI. So it is essential to start SSI in large number as they have large employment potential. Out of every five persons employed in industry four are employed in small scale or cottage industries.

3. Low Capital Input and Cost of Production – The capital required for the SSI and cottage industries is comparatively small. As the capital is a scarce resource in India, it is essential to economize its use and its distribution. A large network of small scale and cottage industries created in India is therefore most welcomed. This also stabilizes the base of industry in India. Large-scale industries have per worker capital of Rs. 3-4 lacks, where as SSI needs Rs. 25 – 30 thousands.

4. Skill required – In the large-scale units a high level of technical and managerial skills are required. Where the production in the SSI is on small scale and even unskilled workers can be absorbed in it. Mostly the technical knowledge is handed over traditionally. But now a day it has become necessary to support the traditional knowledge with the modern techniques of production.

5. Marginal dispense on Imports – Large-scale industries have often to depend on imports for machinery, technical skill, raw materials, etc. The SSI has not to depend on imports. Most of the requirements of the SSI are fulfilled locally and these industries may even help to increase exports and thus serve to earn foreign exchange.

6. Decentralized nature and quick results –There is no large time-gap between the beginning of the investment and getting returns out of it. The gestation (growth) period is less in SSI. The large-scale industries are centralized in metro-cities. They develop those regions. While SSI is scattered all over the country and help in developing backward area.

7. Social Justice – As SSI is spread all over the country, there is not a concentration of wealth and economic power in any specific region. During last 100 years specific areas like Mumbai, Kolkata, and Chennai. Backward areas have a chance to develop themselves because of SSI.

8. Complementary to Large Scale Industries – Large-scale industries are always in a need of small components and subsidiaries. These are manufactured and supplied by SSI. Similarly these SSI can provide supplementary employment to the people engaged in agriculture and may also supply tools and implements required by the farmers.

9. Large source of supply of consumers goods – The SSI are most suited for producing consumers goods on a large-scale. It is comparatively easier to produce consumers goods in the small industries. As the capacity of the small-scale industries is small and so is the market, it is possible for them to cater to the needs of the consumers in a better manner.

10. Overall performance – It is observed that the overall performance of small-scale industries has continuously remained remarkable during the 90s. Not only the share of this sector in total national income is very high, but also the rate of growth has always remained in the range of 13% to 21%. The exports of this sector have also recorded a significantly high annual growth rate.

Explain the problems faced by SSI.

SSI has proven its important role in national development during the ages. It has helped in reducing the unemployment; increased exports and so on. The report of the second All India Census of Small Scale Industrial Units (1992) has identified some of the problems. They are as follows:

1. Financial Problems – The census of SSI units has found that almost 35%of the problems faced by the SSI in India is financial problems. The internal financial resources of the SSI are so insufficient that even in the time of minor strains they can’t depend upon such scanty resources. In such cases banks and other financial institutions are very cautious in lending to this sector. Considering the important role of SSI, commercial banks have included it into the priority sector. In 1998 bank finance to the SSI was Rs. 43958 crores. It was 16% of the total loans sanctioned by commercial banks. But still there are lots of problems in getting financial aid from banks. They are provision of security, timely payment of installments to the banks, withstanding the high interest costs, etc.

2. Marketing Problems – The census indicates the marketing problems faced by SSI are 14.4%. These are of various types. The traditional industries and crafts are facing the problem of absence of standardized products. Because of no standardization they find it difficult to compete with the machine-made products. Secondly the capacity of the individual SSI units is limited they can’t spend on sales promotion and advertising. Thirdly, these small firms cannot afford the network of distribution channel. Fourthly, the large-scale producers occupy the best means of transportation available; the SSI has to manage with whatever is available. Finally to attract the customers SSI can’t launch various sales schemes like large-scale industry.
The government has reserved quota for the products of small firm and it has taken several measures to ensure that the products of SSI units would get a preferential treatment. However, the problem continues.

3. The Problem of Raw materials – Many small firms find it difficult to secure raw material, whether imported or indigenous, in time and in adequate quantities. The international team studied this problem and recommended that the small-scale sector should be allotted a specific a quota of raw materials. However several difficulties continues to persist in this field. SSI can’t secure bulk quantities of raw materials. Secondly, importing raw materials involves a number of problems like arranging for foreign exchange, obtaining samples and searching for alternative source of raw materials.

4. The problem of Technical Excellence – The technology becomes outdated within 2 t 3 years. The small firms don’t have the capacity to rationalize the unit every 2 years. Secondly it is difficult to get technically trained workers. Thirdly, the government has established a network of technical education industries and the supply of trained technicians do not match. Fourthly, the supervisory staff also does not get the skill-upgradation opportunities. Finally, while adopting a particular technology the producers themselves commit mistakes in choosing between locally available technology, market oriented technology, cost effective technology an globally competitive technology.

5. Labour Problems – SSI are labour-intensive and they provide employment on a large scale. But at the same time, this causes the problem of maintaining industrial peace. Employer-employee relations are friendly when the unit is small. But the union rivalries and growing unrest among the workers causes many disputes. This may cause the stopping of the production, which SSI can’t bare.

6. Other Problems – Besides above problems, the SSI encounter a number of other problems. They are as follows:
a) Local & state governments’ control, constraints of power supply, regulations of factories laws, etc. may cause the difficulties.
b) Pleasing all the officials representing above said authorities becomes a difficult task.
c) Many of these units are scattered in vast areas and they have to face the problems of failures of several facilities and services such as power supply, water supply, communication, transport, etc.
d) Small scale units working as ancillaries to large units have special problems. They need to supply their product on credit, which delays in recovering from main units.
e) Borrowing from non-institutional has a very high cost.
f) The holding capacity is limited. So such small units are forced to sell out their products at whatever price is ruling at the market.

Explain the role of Public Sector.

In 1954, the Indian Parliament adopted the Resolution on the ‘Socialistic pattern of society’, which broaden the concept of mixed economy. Under mixed economy government will establish ownership of and control over means of production. The government’s entry into industrial sector was the result of mixed economy. Thus the public sector was emerged. The implications of mixed economy necessitated the expansion of the public sector and the establishment of a joint sector.

Up to the adoption of liberal economic policy in 90s, public sector has played an important role in Indian economy. It can be noted as follows.

1. Capital formation – Accumulation of capital is an important determinant of economic growth. During the time of first five-year plan; depending only upon the private sector for capital formation would be dangerous for Indian economy. This may lower the rate of economic growth. The public sector, therefore, is called upon to assist the capital formation. In the first plan (1951-56) gross capital formation from public sector was 3.5%, while form private sector was 7.2%.which grew to 9.2% and 12.4% respectively in the eighth plan (1992-97)

2. Volume of sales handled – The trade of public sector during last five decades is growing. Sales of industrial units owned by the Central Government have increased from Rs. 134 crores to Rs. 3320 crores during the period 1959-60 to 1970-71; further it increased to Rs. 304994 crores in 1998-99.

3. Creation of infrastructure – Infrastructure need heavy investment and the rate of return to these investment is very low. They require longer gestation period. That is why the private entrepreneurs never turn up in creating such infrastructure. So this becomes public sector’s responsibility to create these infrastructures. The public sector in India has performed a vital service in the field of railways, passenger road transport, electric supply, telecommunication, etc.

4. Regulation and control of the economy – Developing economy suffers from shortage of various consumer products. So the control and regulation of the economy is utmost important. The public sector in India has attained a position, which can be used for directing economic activities. By 1969-70 the public sector enjoyed monopoly in the production of lignite, crude oil and supply of electricity. Half of the steel, fertilizer and petroleum products were produced by public sector. So it became the price leader. At the same time because of its growing share in the industrial investment, the public sector can be in a position to control the overall industrial activities.

5. Social Transformation – Private sector is profit oriented while public sector does not give importance to profit. They are for the benefit of society. Transportation to the remote villages are never profitable. But still public sector is engaged in making available such facilities in spite of big losses.

6. Foundation for industrialization – Though public sector is always an issue of criticism, it’s a fact that during the first two decades after independence it has laid a sound foundation for the industrialization. Government has also accepted the responsibility of starting or expanding the basic and key industries in public sector and paved the way of industrial diversification and self-reliance.

7. Export promotion – Right from the beginning public sector has a vision of export promotion. State Trading Corporation (STC) and Minerals and Metals Trading Corporation (MMTC) have helped in increasing the export trade of India. The foreign exchange earnings of the public sector enterprises stood at just Rs. 35 crores in 1955-56 increased to Rs. 18827 crores in 1998-99.

8. Import substitution – Many enterprises in the public sector have been started with the intension of producing goods, which India has to import. Drug companies like Hindustan Antibiotics Limited and many petroleum companies and BEL, BHEL are some of the examples. In recent years India has demonstrated her strength in import-substitution.

9. Raising internal resources – With the expansion of the public sector it was expected to generate resources not only for its won expansion but also for contributing something to the development of other priority sectors. By creating depreciation, development and reserve funds as well as through retained profits, the public sector was able to mobilize larger and larger quantities of internal resources in course of five-year plans. During eighth plan public sector undertakings generated internal resources of Rs. 101212 crores, which averages annually Rs. 20242.4 crores.

10. Contribution to the Central Exchequer – It is a matter of dispute that the public sector being facilitated by government may not increase the revenue. But the fact is public sector units are paying corporate taxes, excise duty, customs duty and other duties so as to agreement the tax revenue of the government. The total contribution made by the public sector in this way during the sixth plan was Rs. 27570 crores and in the year 1998-99 it was Rs. 44608 crores.

The above analysis shows that the public sector in India has grown to occupy a prominent place in the economy.

Drawbacks of the Public Sector

Acceptance of mixed economy gave importance to public sector. Public sector has played a very important role in the developing Indian economy. However, this sector demonstrated some drawbacks. They are as follows.

1. Delays and Red-tapism – Public sector have to go by rules and practices laid down for every purpose. This causes delays in implementation and procedural delays. This creates a number of problems in decision-making as well as timely action. This has been found commonly from Trombay Fertilizer Project to the Bokaro and Salem steel plants. Procedural delays and red-tapism result into loss of market, financial losses, etc. this can be avoid by adhering to proper planning and time scheduling and a degree of autonomy to the plant level management.

2. Political elements in economic decisions – One of the fall-outs of the democratic system as operated in India is the political consideration interfering with the national decision-making. The location or other decisions about public sector units are taken more upon the constituency of the ministers or political leaders instead of national gain. All these have resulted in rising costs, deteriorating the quality and an overall mismanagement.

3. Over capitalization – Many of the public sector units are said to be over-capitalized. The report of the Study Team on Public Sector Undertakings (1967) have criticized the public sector for over-capitalization and have blamed inadequate planning, delays in implementation, avoidable expenditures during construction, surplus machine capacity, tied aid leading to compulsory purchase of equipment without testing, bad location and liberal provision of facilities to the employees as cause of over-capitalization.

4. Over staffing – Public bodies like Public Accounts Committee have pointed out that most public enterprises have recruited manpower in excess of the actual requirement. At the same time this poor manpower planning reflected through inadequate training and refresher facilities for the workers. In fact, there are sever lacunas in personal management in the PSUs including lack of skill up-gradation programmes for technicians, want of incentives for research and development, poor management, labour relations, labour indiscipline, etc.

5. Under utilization of capacity – This is one of the notable drawbacks of public sector. Due to negligence on the part of management the PSUs have suffered form under utilization of capacity. Thus during 1998-99 about 51% of all the manufacturing PSUs recorded a capacity utilization of more than 75% while 20% operated at 50% to 75% of their capacity and the remaining 29% operated at below 50% of the capacity. This is highly unsatisfactory situation in view of the over-growing global competition.

6. Improper control mechanism – Public sector units are accountable to the public. Hence it has several controls such as finance ministry, the in charge ministry of the undertaking and the Parliament. It is a high time that the PSUs are given greater functional autonomy and their governance is left more to professional experts rather than to the political bosses.

7. Lack of professional management – IAS officers who are transferred from one posting to another head Most of the PSUs. Efficiency in business decisions requires prompt operational decisions. The PSUs therefore need some more autonomy and flexibility. Delegation of authority rather than the present practice of passing the buck of responsibility to higher authorities is the mantra of efficiency. Every officer should have a clear idea of his role in the mission of the unit; unfortunately responsibilities are neither clearly defined nor properly understood. These enterprises are criticized as colonies for bureaucrats.

8. Providing employment – Provision of employment was one of the intensions of public sector. But unfortunately it has given more importance rather than the productivity of the enterprise. Automation of the enterprise has been left aside wherever it would be possible. Many times it was suggested that wherever it is possible to atomize the production process with due employment it should be done. But public sector has ignored it.

9. Pricing Policies – There are different pricing principles, but public sector never follows them. Because these enterprises are non-profit oriented. Each PSU has its own objective and its own role in the overall economic development which can be variously termed as basic, key, vital, crucial, etc. Each one of them has a bearing on the pricing policy which pulls the price away from cost coverage and towards the direction of losses.

10. Mounting losses – Most of the public sector units are bearing losses. The performance of the central public sector is relatively much better, but most of the state government public enterprises have made continuous losses. The great loss-makers are the irrigation projects, State Electricity Board and State Road Transport.

The Causes of the Unbalanced Regional Industrial Development in India

Industrial development of India is unbalanced. According to RBI Report (1995-96) Maharashtra is advanced in industrial Development having 13.8% factories and 14.7% of industrial employment of India. Only six states i.e. Maharashtra, TN, Gujarat, W.Bengal, A.P. and Karnataka; have 62.7% factories, providing 57.7% employment and 59.9% output. Rests of the states are not having that much industrial development. This shows that India has unbalanced industrial development. The following are the main reasons responsible for the unbalanced regional development of India.

1. Geographical Factors – It is possible to overcome the geographical hurdles in the industrial development. Countries like Switzerland or Japan, in spite of hilly or uneven nature of the land they have succeeded in industrial development. But this needs a huge amount of capital investment. In case of India, it has not been possible to overcome this kind of geographical hurdles not only because of unavailability of funds but also lack of strong desire. One more reason is the availability of suitable land elsewhere in the rest of the country.

2. Historical Factors – Whatever industrialization found in India before independence was rooted by the British companies as a part of then government’s policies. Europeans had factories in Mumbai, Kolkata, Chennai, Hubli, Surat, etc; more over Europeans settled these cities. Naturally, these cities developed with industrial area and also the states having these cities came up as industrial states. Also British policy ruined the indigenous industries and concentrated some cities with modern industries.

3. Location Factors – Location of the particular industry some times decided by the availability of raw material. As India had poor transportation facilities, industries like jute situated in West Bengal, Steel and coal in Bihar & Jharkhand, Fabric in Maharashtra & Gujarat and so on.

4. The Infrastructure - Other facilities like banking, insurance, power and water supply, communications also decide the location of the industrial area. At the same time this facilities should be easily available and cheap.

5. Unwise Policies during the Planning Period – After independence, it was expected that several efforts would take place to reduce this industrial imbalance. Since 1956, balanced industrial development is the main objective of industrial policies during planning period; was declared frequently. But unfortunately nothing could happen in this regard. What ever was the ‘productive investment’, made in already developed cities like Mumbai, Kolkata, Chennai, Banglore, etc. This investments made such areas more developed and the rest of the part of the country remained undeveloped. Central and state governments started many PSUs in backward areas in Punjab, Hariyana, and Gujarat, which helped developing those regions. But many of the PSUs in other parts of India failed to develop that region.

Explain the measures adopted by the Government to remove Regional imbalances.

One of the major problems in industrialization in India has been the large amount of regional imbalance. This imbalance had led to problems like over crowding, migration of people, and development of slum, etc. it is essential that there should be a balanced regional development.

The government has taken various steps to remove the regional imbalances. The government has been taking special efforts in the five-year plan. In the second five-year plan, it was mentioned that the balanced regional development of economy must be achieved and special efforts were adopted for this purpose. This includes programmes like decentralization of industries and programmes for rural development.

Under the third five-year plan development of SSI, construction of roads, providing electricity and establishment of industrial estates were undertaken.

Under the fourth five-year plan again special efforts were undertaken to remove regional imbalance this includes –

1. Special financial assistance to economically backward states. The amount of assistance to be given was based on population and backwardness of the state.

2. Various facilities and concessions were given to the entrepreneurs who wanted to start industries in the balanced areas. This incentive includes tax incentives and subsidies. The facilities given included fully developed plots of land with power, water facility at nominal rates.

3. The state governments also started their own industrial development corporations. Eg. The MIDC was started to develop industrial estes in the backward areas of Maharashtra.

During the sixth five-year plan a committee was formed known as ‘National Committee for Development of Backward Areas’, which made recommendations regarding how to solve this problem of regional imbalance. These recommendations were adopted in planning process.

The seventh and eighth five-year plans gave importance to agricultural development and human resource development (HRD) as instruments, which would help to remove the regional imbalance.

The ninth five-year plan gave importance to the development of infrastructure in the less developed states. The planning commission has also recommended the large transfer of funds from the Central Government to backward states. Special area development programmes and promotion of private investment in the backward areas has been recommended in order to remove the regional imbalance.

Although many measures have been adopted through the planning period in order to remove the regional imbalance, this has helped in the development of certain balanced areas. However the steps taken to remove regional imbalance are not sufficient as a result the regional imbalance continues to a great extent. Unless this problem of regional imbalance is solved effectively it is difficult for a country to have full industrialization.

Explain the Recent Policy Initiatives of Industrial Liberalization

The liberalization process in India started in 1991. New reforms have been introduced as a part of liberalization process. Introducing and adopting certain policy initiatives have carried out these reforms. Some of the recent policy initiatives are as follows.

1. Industrial Licensing – As a part of liberalization process the licensing system was abolished for all industries except a few important one. The removal of this system has made it easy for the private sector to enter into the market. It is expected that this will lead to more competition, which will be beneficial to the consumers.

2. Location Policy – The location policy has been framed in such a way that approval is not required. If the industrial location is not falling within 25 kms of the cities having a population of more than 10 lakhs it does not need any approval. If they are near the cities they are permitted to start their activity only if they located in specified areas.

3. Special Policy Package for North East Region – The North East Region of India was neglected for a long time and in order to remove imbalance a special package has been adopted in 1997-98for this region. Thee objective are to see that this region gets industrially and economically developed in comparison to other parts of the country.

4. Foreign Direct Investment Policy – This is one of areas where major policy reforms have taken place. This is to attract foreign capital, which will help in capital formation. The government has set up Foreign Invest Promotion Board (FIPB), which is headed by a minister to clear the application for FDI. The FDI is allowed in most of the areas except agricultural and real estate.

5. Infrastructure – The government has given high priority for the development of infrastructure. It has allowed private participation and competition in infrastructure sector. The infrastructure includes setting up of power projects, construction of roads, etc.

6. Housing Policy –Many changes have been undertaken in order to promote the housing sector in the country. Various tax incentives are given if loans are taken for housing constructions. E.g. the interest paid on housing loan is deductible item from the taxable income of a person. Due to such incentives more people have been attracted towards housing loans.

7. Small Scale Industries – Certain policy programmes have also been announced for SSI. One major problem for SSI has been early recovery of their money from large-scale industries that are the customers of SSI units. A rule has been passed that if there is such delay in the payment is has to be mentioned in the annual accounts and reports of the large-scale industries. It is expected that this will help the SSI units to receive early payments, which is required for their working capital needs. Also the limits of the SSI units for calculation of their working capital has been increased which will ensure that such units have adequate working capital. One of the important reasons for the failure of SSI units has been the shortage of working capital. It is expected that these policy changes will help to solve their problems.

8. Tiny Sector – The tiny sector is the part of SSI. Certain specific policy changes have been announced for the tiny sector. Enhancing or increasing the ceiling limit from Rs. 5 lakhs to Rs. 25 lakhs revises the definition of tiny sector. It is expected that the increase in the limit will help the tiny sector to modernize and to adopt new technology. Similarly the banks have been advised to transfer the 60% of the their SSI credits to tiny sector.

9. Industrial Policy – The budget of 1999-2000 has made various changes to improve the development of the country. It includes making changes in the excise structures, providing tax incentives for mergers and amalgamation, takeovers, positive change in the custom duty and providing further incentives to the infrastructure projects within the country. In the budget of the year 2001 further liberalization has been allowed. With this Indian companies are allowed to invest in abroad up to a particular limit.

Thus in the recent years the government has taken various policy initiatives in order to further liberalize the Indian economy and to ensure that the Indian economy is integrated with the global economy. Such integration will help in the economic development of the country.