REGULATORY FRAME WORK

Suneel GuptaAssociate Professor

GHS-IMRKanpur

Why Government should intervene:

1. Economic historian noted that when country move towards economic development and government has greater role in it.

2. Role of planning is better with government control.3. A socialist society the government is compelled to

enter directly into industrial and commercial activities.4. Government decides patterns of price, subsides,

incentive, of different kind in order to curb consumption5. Government is responsible for social & economic well

being of people eg. Taxation6 State participation is necessary to lay strong base

for future development of Industry

Type of Intervention

Formal and Informal control

Coercive and Inductive Control

Direct and Indirect Control

Effect off Competition

Promotion and R egulatory Control

Formation Stage

Industrial policyCompanies ActI.D.R. ActFERA Act. Control of capital Issue (1951) S.E.B.I.

Financial arrangement with development banksAllotment of land by concerned state governmentSanction of factory plan by concerned state governmentImport- Export know-how F.I.P.B

.

FEMA

Construction Stage

Allotment of Iron & Steel & Allotment of cement(NA)

Sanction of electricity board

Long term loan (if required) with IDBI, IFCI, Banks And SFCIs

Machinery procurement & installation

Import good license

Opening of LC with banks

Custom clearance

Pre-production &production stage

Working capital arrangement with bank

Registration for C.S.T. & central excise

Pollution control

Patent

Purchasing

Import of raw material and component

Custom clearance

Allotment of indigenous scarce material by

concerned ministry, GOI

Financing

Financial Institution

R.B.I.

Monetary Policy

PERSONNEL

Factories ActESI ActWorkmen’s compensation ActPayment of wages ActMinimum wages ActPayment of bonus ActIndustrial dispute ActTrade union ActProvident fund ActPayment of Gratuity ActMaternity Benefit ActApprentices ActEqual Remuneration ActExist Policy

MarketingMarketingCompetition ActDrug Control ActExport Inspection agencyEssential commodities ActI.S.I.Prevention of food adulteration Act.Standard Weight & Measure ActConsumer Protection ActPatents

SIA

DEA

SIA FC

DEFENCE R&D

NRDC

CSIR

DST

DGTD

FIPB

ADMINISTRATIVEMACHINERY

PLANNING COMMISSION

COMMERCE MINISTRY

DC SSI

MINISTRY OF INDUSTRY FIPB

SIA

TECH.DEVCOMMITTEE

CABINET

SIAAPPROVAL

Large cases

Ordinary cases

Procedure for Foreign Collaboration

AND NOW

FIPB

SIA

RBI

State’s Intervention must continue for several reason

To eliminate povertyTo reduce failure in market

( success of Korea and Taiwan )

What should be the form of Intervention?

Quality interventionCareful attention in selection of interventionIntervention strategy relates to its primary orientation and goal.

( role of the government in future must be redefined but not ended. The redefinition must be in the direction of improving quality of intervention. This must be India’s agenda in future

A good Control System

It must be democraticIt must be powerful enough to make an unwilling minority obey the will of the majorityIt must “ economic coercion”It must be adaptableControl must be guided by experience or by wise experimentand lastly social control must be capable of progressively raising the level of mankind.

A PARADIGM SHIFT IS NEEDED

A case of classic clash between entrepreneurs and bureaucracy

A entrepreneurial sprit has to be displayed by government as shown for Green revolution.

Resources for development are more efficiently deployed if the central government & state government act as catalyst and Regulator –not as executor of development.

Junior engineer actually sees nothing wrong in offering another plotInstead of the one that was promised for Mr. Alok

Aslok’s experience shows how Indian entrepreneurs have to take on additional management burden called “managing the hassle factor “ It is important to get to the root cause of this hassle factor

In past entrepreneur already faced government officials but now echelons of government are promoting their state as haven of entrepreneur .

2% of officer in government workforce gets 100% of training.

Training sessions require –awareness of the meaning of the government as catalyst.

Each employees in government department see himself as a catalyst of economic development ( job opportunity for junior engineer son tomorrow)

Government structure to ensure that head of relevant department have long enough tenures to be accountable for departments.

A bit of “frontier sprits “ is needed that made America great in last century is still a key success factor in business.

CHAMPIONING REFORMS AT THE TOP IS NECESSARY ,BUT NOT SUFFICIENT. THERE IS NEED FOR COMMITMENT AND OWNERSHIP OF THE REFORMS ETHOS DOWN THE LINE

NRI COME ,NRI DESPAIRS,NRI GOES BACK, ( Indians have proved their success at world level, now wanted to return home and with their money and expertise, do something in country of their birth)

Finally a word of advice to Alok and his ilk, Do not despair, India is changing, albeit slowly Do not look for the quick buck. Come here for the long haul. You will find reward and fulfillment