CHANGES IN INDUSTRIAL POLICY AND ITS EFFECTS

INTRODUCTION

  • One of the most important tasks of the government is to manage economy of the country. It has to decide the means and methods to be used towards this. However, this job was taken up by almost all countries only after great depression. In pre depression era, there was faith in laissez Faire model of economy, which literally means – no intervention and let market forces of demand and supply have free hand.
  • This is also known as capitalist mode of economy, where goods and services to be produced are decided by purchasing power of the people. In this model need of people is not deliberately considered, but it is believed that free markets will automatically take care of everyone’s need.
  • If there are any mismatches in demand and supply, then price of the products will fluctuate in order to rope in or out suppliers and consumers and consequently there will be demand supply equilibrium. This kept government intervention away till the end of great depression of 1920’s.
  • After Decolonization many countries along with India, had uphill task of socio economic development. Their economies were in past deliberately made heavily dependent on respective colonial ruling powers. Industries and markets were in infancy. New governments had to mark preferences for channelizing their scarce resources to achieve long term holistic development.
  • Due to all these factors, Industrial Policy was adopted by various countries and India was first noncommunist democratic country to have an official industrial policy.
  • Industrial Policyis a typical character of a mixed economy. It is policy of government intervention which is sector specific and is aimed at giving preferential treatment to a particular sector over others. Sector are recognized by policy makers, which are worthy of government support and targets are set.
  • We have already seen government support toward renewable energy sector, organic farming, food processing and export promotion of various products. All these are part of Industrial policy.

 

OBJECTIVES

The main objectives of the Industrial Policy of the Government in India are:

  • To maintain a sustained growth in productivity;
  • To enhance gainful employment;
  • To achieve optimal utilisation of human resources;
  • To attain international competitiveness; and
  • To transform India into a major partner and player in the global arena.

 

 

 

WHY INDUSTRIAL POLICY IS DESIRABLE?

Knowledge Spillover

  • Industries have a certain degree of knowledge spillover effect on the economy. Degree of this effect varies from sector to sector. A new industry will attract requisite skill/talent/expertise which will multiply overtime.
  • Further, there will be some ancillary industries which may come up to support such industries. In short, focusing on a certain industry can overtime result in to a whole industrial complex which derives synergies and economies from each other.
  • For e.g. Defense Industry could be benefited immensely if aviation industry, Software, Higher educational, Space exploration capacities are fully developed. So India’s space program provides synergy to defense capacity.

Infant Industry

  • At time of Independence, India’s industry was nonexistent in most of the sectors and those existing were infant. They had low capacity to adapt new technologies or to exploit economies of scale.
  • In this case government protection is desirable in initial stages, so that a competitive industry develops at latter stages. Without government support or protection many of the present competitive Industries, would never have come up.
  • In short, these industries need protection from foreign competition.

Coordination Failure

  • An industry doesn’t exist or survive in isolation. It needs other industries which feed to it raw materials at reasonable costs and quality. Further, many other industries that will act as customer are needed for survival of this industry.
  • For e.g. Iron & Steel Industry is most important sector of economy. It is must for a competitive automobile sector, construction sector, Infrastructure, Capital goods machinery sector, Defense sector.
  • On the other hand, Iron and steel sector can perform only if there is availability of coal and power. A good transport sector facilitates interaction and movement of goods in entire economy.
  • In initial stages of an economy there’s often a ‘coordination failure’, which government tries to address by industrial policy. In India this led to recognition of ‘core industries’ which have multiplier effect on the economy, these are – Iron & steel, Cement, Crude Oil, Gas, Petro Refining, Mining, Power, Fertilizers.

Informational Externalities

  • Setting up an Industry requires certain degree of confidence in future of the whole economy and that industry in particular. There is reasonable risk which results in reluctance on part of investors. This risk and uncertainty is high in case of ‘first mover’ in a newly opened sector.
  • This is because markets for new product are unchartered and untested, so there’s no reliable data or information on basis of which risk return calculus can be drawn. Consequently, governments hold hand of a few new units in that industry through industrial policy and then gradually leave them of their own. As we have seen in renewable energy sector.

 

ARGUMENTS AGAINST INDUSTRIAL POLICY

 

Influenced by Special Interests

  • There are always pressure groups in an economy that compete for resources of the government. They try to influence decisions of policy makers to corner a larger than deserved share of natural and economic resources.
  • This way, often, personal interest prevails over national interest. This obviously creates avenues for corruption, rent seeking, patronage, ‘quid pro que’ as seen in elections.

Knowledge Deficit

  • Any industrial policy requires prediction of future trends in an economy. Our experience tells us that an economy is toughest to predict and efforts of planning and policy making often end up being futile.
  • There are different think tanks at national and international level that come out with different economic forecasts. Hence, policy makers’ choice of forecast is a subjective one and success is only dependent upon other developments in economy. 

Distortion of markets and production patterns

  • Government support distorts prices of products. Prices are signals which tell consumers and producers – what to consume and produce. So, due to government protection and support, producers fail to adopt latest technologies, new markets etc. This makes them uncompetitive.

 

INDUSTRIAL POLICIES IN INDIA SINCE INDEPENDENCE

A) Industrial Policy Resolution of 1948

  • Industrial Policy Resolution of 1948– It defined the broad contours of the policy delineating the role of the State in industrial development both as an entrepreneur and authority.
  • It made clear that India is going to have a Mixed Economic Model.
  • It classified industries into four broad areas:
    1. Strategic Industries (Public Sector):It included three industries in which Central Government had monopoly. These included Arms and ammunition, Atomic energy and Rail transport.
    2. Basic/Key Industries (Public-cum-Private Sector):6 industries viz. coal, iron & steel, aircraft manufacturing, ship-building, manufacture of telephone, telegraph & wireless apparatus, and mineral oil were designated as “Key Industries” or “Basic Industries”.
      • These industries were to be set-up by the Central Government.
      • However, the existing private sector enterprises were allowed to continue.
    3. Important Industries (Controlled Private Sector):It included 18 industries including heavy chemicals, sugar, cotton textile & woollen industry, cement, paper, salt, machine tools, fertiliser, rubber, air and sea transport, motor, tractor, electricity etc.
      • These industries continue to remain under private sector however, the central government, in consultation with the state government, had general control over them.
    1. Other Industries (Private and Cooperative Sector):All other industries which were not included in the above mentioned three categories were left open for the private sector.
  • The Industries (Development and Regula­tion) Act was passed in 1951 to implement the Industrial Policy Resolution, 1948.

B) Industrial Policy Statement of 1956

  • Industrial Policy Statement of 1956 :Government revised its first Industrial Policy (i.e.the policy of 1948) through the Industrial Policy of 1956.
  • It was regarded as the “Economic Constitution of India” or “The Bible of State Capitalism”.
  • The 1956 Policy empha­sised the need to expand the public sector, to build up a large and growing coop­erative sector and to encourage the separation of ownership and management in private in­dustries and, above all, prevent the rise of pri­vate monopolies.
  • It provided the basic framework for the government’s policy in regard to in­dustries till June 1991.
  • IPR, 1956 classified industries into three categories
  1. Schedule A consisting of 17 industries was the exclusive responsibility of the State. Out of these 17 industries, four industries, namely arms and ammunition, atomic en­ergy, railways and air transport had Central Government monopolies; new units in the remaining industries were developed by the State Governments.
  2. Schedule B,consisting of 12 industries, was open to both the private and public sectors; however, such industries were progressively State-owned.
  • Schedule C-All the other industries not included in these two Schedules constituted the third category which was left open to the pri­vate sector. However, the State reserved the right to undertake any type of indus­trial production.
  • The IPR 1956, stressed the importance of cottage and small scale industriesfor expand­ing employment opportunities and for wider decentralisation of economic power and activity
  • The Resolution also called for efforts to maintain industrial peace;a fair share of the proceeds of production was to be given to the toiling mass in keeping with the avowed objectives of democratic socialism.
  • Criticism:The IPR 1956 came in for sharp criticism from the private sector since this Resolution reduced the scope for the expan­sion of the private sector significantly. The sector was kept under state control through a system of licenses.

C) Industrial Policy Statement, 1977

  • Industrial Policy Statement, 1977-In December 1977, the Janata Government announced its New Industrial Policy through a statement in the Parliament.
  • The main thrust of this policy was the effective promotion of cottage and small industries widely dispersed in rural areas and small towns.
  • In this policy the small sector was classified into three groups—cottage and household sector, tiny sector and small scale industries.
  • The 1977 Industrial Policy prescribed different areas for large scale industrial sector- Basic industries,Capital goods industries, High technology industries and Other industries outside the list of reserved items for the small scale sector.
  • The 1977 Industrial Policy restricted the scope of large business houses so that no unit of the same business group acquired a dominant and monopolistic position in the market.
  • It put emphasis on reducing the occurrence of labour unrest. The Government encouraged the worker’s participation in management from shop floor level to board level.
  • Criticism:The industrial Policy 1977, was subjected to serious criticism as there was an absence of effective measures to curb the dominant position of large scale units and the policy did not envisage any socio­economic transformation of the economy for curbing the role of big business houses and multinationals.

D) Industrial Policy of 1980

  • Industrial Policy of 1980 sought to promote the concept of economic federation, to raise the efficiency of the public sector and to reverse the trend of industrial production of the past three years and reaffirmed its faith in the Monopolies and Restrictive Trade Practices (MRTP) Act and the Foreign Exchange Regulation Act (FERA).

 

NEW INDUSTRIAL POLICY DURING ECONOMIC REFORMS OF 1991

  • The long-awaited liberalised industrial policy was announced by the Government of India in 1991 in the midst of severe economic instability in the country. The objective of the policy was to raise efficiency and accelerate economic growth.

A) Features of New Industrial Policy

  • De-reservation of Public sector:Sectors that were earlier exclusively reserved for public sector were reduced. However, pre-eminent place of public sec­tor in 5 core areas like arms and ammu­nition, atomic energy, mineral oils, rail transport and mining was continued.
    • Presently, only two sectors- Atomic Energy and Railway operations-are reserved exclusively for the public sector.
  • De-licensing:Abolition of Industrial Licensing for all projects except for a short list of indus­tries.
    • There are only 4 industries at present related to security, strategic and environmental concerns, where an industrial license is currently required-
    • Electronic aerospace and defence equipment
    • Specified hazardous chemicals
    • Industrial explosives
    • Cigars and cigarettes of tobacco and manufactured tobacco substitutes
  • Disinvestment of Public Sector:Government stakes in Public Sector Enterprises were reduced to enhance their efficiency and competitiveness.
  • Liberalisation of Foreign Investment:This was the first Industrial policy in which foreign companies were allowed to have majority stake in India. In 47 high priority industries, upto 51% FDI was allowed. For export trading houses, FDI up to 74% was allowed. Today, there are numerous sectors in the economy where government allows 100% FDI.
  • Foreign Technology Agreement:Automatic approvals for technology related agreements.
  • MRTP Actwas amended to remove the threshold limits of assets in respect of MRTP companies and dominant undertakings. MRTP Act was replaced by the Competition Act 2002.

B) Outcomes of New Industrial Policies

  • The 1991 policymade ‘Licence, Permit and Quota Raj’ a thing of the past. It attempted to liberalise the economy by removing bureaucratic hurdles in industrial growth.
  • Limited role of Public sector reduced the burden of the Government.
  • The policy provided easier entry of multinational companies,privatisation, removal of asset limit on MRTP companies, liberal licensing.
  • All this resulted in increased competition, that led to lower prices in many goods such as electronics prices. This brought domestic as well as foreign investment in almost every sector opened to private sector.
  • The policy was followed by special efforts to increase exports. Concepts like Export Oriented Units, Export Processing Zones, Agri-Export Zones, Special Economic Zones and lately National Investment and Manufacturing Zones emerged. All these have benefitted the export sector of the country.

 

LIMITATIONS OF INDUSTRIAL POLICIES IN INDIA

  • Stagnation of Manufacturing Sector:Industrial policies in India have failed to push manufacturing sector whose contribution to GDP is stagnated at about 16% since 1991.
  • Distortions in industrial pattern owing to selective inflow of investments:In the current phase of investment following liberalisation, while substantial investments have been flowing into a few industries, there is concern over the slow pace of investments in many basic and strategic industries such as engineering, power, machine tools, etc.
  • Displacement of labour:Restructuring and modernisation of industries as a sequel to the new industrial policy led to displacement of labour.
  • Absence of incentives for raising efficiency:Focussing attention on internal liberalisation without adequate emphasis on trade policy reforms resulted in ‘consumption-led growth’ rather than ‘investment’ or ‘export-led growth’.
  • Vaguely defined industrial location policy:The New Industrial Policy, while emphasised the detrimental effects of damage to the environment, failed to define a proper industrial location policy, which could ensure a pollution free development of industrial climate.

 

INITIATIVES TAKEN BY THE GOVERNMENT FOR INDUSTRIAL
DEVELOPMENT

A) Disinvestment

  • Owing to several shortcomings, the functioning of the public sector has often been questioned.
  • It has been argued that the public sector works well only when it is protected by state measures. Some also argued that the public sector had entered in too many areas and, therefore, it must withdraw itself by giving entry to private players. Thus, privatization of some PSUs was advocated and disinvestment was the process through which this privatization could take place.
  • Various reasons given for the disinvestment were as follows:
    • It will release a large amount of public resources locked up in non-strategic PSUs. Then these resources can be redeployed in areas that are much higher on social priority such as health, education, etc.
    • Reduction in the public debt.
    • Transferring the commercial risk to private sector where it is willing to share it.
  • Releasing manpower and other intangible resources for redeployment in high priority social sectors.
  • Enabling public having ownership or say in management of some PSUs.
  • But, the critics questioned the way in which disinvestment happened. Private sector took part in the disinvestment of only profit making PSUS. They totally neglected the loss making PSUs.
  • Thus, the aim of sharing risk with the private sector was diluted.
  • The critics also questioned the disinvestment of profit making PSUs. But, the government used disinvestment as a tool to reduce fiscal deficit. In other words, to cover its inefficiency in the economic management of the country the government lost a profit making and revenue generating entity.

Proceeds of Disinvestment

  • The proceeds of disinvestment go into National Investment Fund (NIF), which was setup in 2005. The purpose of the fund was to receive disinvestment proceeds of central public sector enterprises and to invest the same to generate earnings without depleting the corpus. The earnings of the Fund were to be used for selected Central Social Welfare Schemes. This fund was kept outside the Consolidated Fund of India.
  • In 2013, NIF was restructured and it was decided that the entire disinvestment proceeds will be credited to the existing ‘Public Account’ under the head NIF and they would remain there until withdrawn/invested for the approved purpose. The allocations out of the NIF will be decided in the annual Government Budget.
  • Proceeds from NIF are utilized for following purposes:
    • Subscribing to the shares being issued by the CPSE including PSBs and Public Sector Insurance Companies, on rights basis so as to ensure that 51% ownership of the Government in those CPSEs/PSBs/Insurance Companies, is not diluted.
    • Preferential allotment of shares of the CPSE to promoters as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 so that Government shareholding does not go down below 51% in all cases where the CPSE is going to raise fresh equity to meet its Capex programme.
    • Recapitalization of public sector banks and public sector insurance companies.
    • Investment by Government in RRBs/IIFCL/NABARD/Exim Bank.
    • Equity infusion in various Metro projects.
    • Investment in Bhartiya Nabhikiya Vidyut Nigam Limited and Uranium Corporation of India Ltd.
  • Investment in Indian Railways towards capital expenditure.
  • There are various ways for disinvestment like Strategic Sales, warehousing, buy-back equity, private placement and other instruments of capital market etc.

Recent changes in management of Disinvestment Proceeds

  • The Department of Disinvestment was set up as a separate Department in 1999 and since 2004 it has been made as one of the Departments under the Ministry of Finance. The Department of Disinvestment was renamed as Department of Investment and Public Asset Management (DIPAM) in the 2016-2017 Budget and was assigned the following functions:
    • It was responsible for all matters relating to management of Central Government investments in equity including disinvestment of equity in Central Public Sector Undertakings.
    • All matters relating to sale of Central Government equity through offer for sale or private placement or any other mode in the erstwhile Central Public Sector Undertakings.
    • Decisions on the recommendations of Administrative Ministries, NITI Aayog, etc. for disinvestment including strategic disinvestment.
    • Decisions in matters relating to Central Public Sector Undertakings for purposes of Government investment in equity like capital restructuring, bonus, dividends, disinvestment of government equity and other related issues.
    • Advise the Government in matters of financial restructuring of the Central Public Sector Enterprises and for attracting investment in the said Enterprises through capital market

B) Ease of Doing Business in India

  • The Ease of Doing Business (EoDB) is an index created by the World Bank.
  • It presents quantitative indicators on business regulations and the protection of property rights based on 10 parameters that can be compared across 190 economies.
  • Higher rankings indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • India’s rank in Doing Business Report, 2018 jumped to 100th in comparision to 130th rank in Doing Business Report, 2017.

Steps taken by India to improve its EODB Index ranking on the 10 parameters:

  • Speeding up process: such as company’s registration within 1-2 working days, issuing of PAN in a day, providing electricity connections in 15 days with online application etc.
  • Digitisation: It makes various processes easier for businesses and their employees such as digitization of property records and land records, ShramSuvidha Portal for filling returns for ESIC and EPFO etc.
  • Facilitating trade across borders: through ‘Indian Customs Single Window Project’ as well as reducing the number of mandatory documents required by customs.
  • Enacting or amending laws & rules: such as Enactment of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015,the Insolvency and Bankruptcy Code, 2016 for speeding the exit procedure etc.
  • Protecting minority investors through the Companies (Amendment) Act, 2015.
  • Though India has performed well on parameters like getting electricity, getting credit and protecting minority investors, on some other parameters like construction permits, resolving insolvency, paying taxes, enforcing contracts etc. it has performed poorly. However, the government has plotted an eight-point strategy and firmed up a 295-point reform agenda for states to improve India’s ranking.

 

 

C) E- Biz Project

  • E-Biz is one of the integrated services projects and a part of the 27 Mission Mode Projects (MMPs) under the National E-Governance Plan (NEGP) of the Government of India.
  • The focus of E-Biz is to improve the business environment in the country by enabling fast and efficient access to Government-to-Business (G2B) services through an online portal.This will help in reducing unnecessary delays in various regulatory processes required to start and run businesses.
  • This project aims at creating an investor-friendly business environment in India by making all regulatory information – starting from the establishment of a business, through its ongoing operations, and even its possible closure – easily available to the various stakeholders concerned. In effect, it aims to develop a transparent, efficient and convenient interface, through which the government and businesses can interact in a timely and cost effective manner, in the future.
  • The eBiz portal was conceptualized with support from National Institute of Smart Governance (NISG) and developed by Infosys Technologies Limited (Infosys) in a Public Private Partnership (PPP) model for a period of 10 years.

 

 

 

MAKE IN INDIA CAMPAIGN

  • Despite India becoming the first nation to successfully send a satellite into orbit around Mars on its maiden attempt, it is well understood that the world would still be judging the country, solely on the basis of its economic prowess.
  • Timely, it may be that just a day after, the Government of India launched the ambitious, ‘Make in India’ initiative to promote India as a global manufacturing hub nationally and abroad; thereby boosting the country’s economic prospect.
  • This is a great opportunity for the government to position India as a manufacturing powerhouse able to match dominance of the developed countries on the world stage. To create conditions for encouraging entrepreneurship, creating employment for over 10 million people, and attracting Foreign Direct Investment (FDI) will be the prime concern of this project.
  • ‘Make-in-India is a lion’s step,’ was the announcement made by the GoI after launching the logo of his ambitious campaign to attract companies to India. The logo is the silhouette of a lion on the prowl, made entirely of cogs, symbolizing manufacturing, strength and national pride.
  • The lion logo adorns the brand new website – makeinindia.com – for the campaign and all its brochures. The website is a ready reckoner for data on 25 sectors that are looking to attract companies to India. It also lists new initiatives of the government, facts on Foreign Direct Investment and intellectual property rights.
  • The government is pulling out all the stops for ensuring a smooth sailing for investors, by setting up a dedicated cell to answer queries of business entities within 72 hours. It will also closely monitor all regulatory processes to make them simple and reduce the burden of compliance.

A) Make in India Reforms and Issues:

  • India has always been a pivotal part of the world’s manufacturing community and the issues that plague its rise is that of economic reforms which remains largely unresolved. The urgent need is to reform archaic laws to facilitate economic growth and infrastructure growth. Policymakers must avoid partisan politics for the sake of swift reforms.
  • Another issue of concern is protection of foreign investor’s interests. For example the government must address intellectual property rights regulations and enforce the rule of law whenever it is being violated which will protect foreign investors investing resources, technologies and business know-how in India.
  • Ensuring higher volume of FDI in industries, infrastructure and pharmaceutical sectors for providing proper environment in not going to be easy as well. Not only this, several long entrenched issues such as ease of doing business, labour reforms and urbanization are all going to prove as major obstacles in drawing FDI.
  • According to World Bank, India ranks 134 out of 189 countries in the category, ‘ease of doing’ business. There is a clear disconnect between the government’s ambition to attracting FDI and the reality of doing business in India. The country is largely encumbered with poor governance. India scores poorly when its governmental departments deal with companies on matters like obtaining licenses, permits, paying taxes, etc. The ‘Make in India’ will address many of these issues to a certain degree.
  • Labour reforms remain a very sensitive topic politically in India, yet, with China experiencing a surge in labour unrest amid economic slowdown, this is India’s opportunity to position itself as an alternative to China and deliver on its promise of economic growth and employment.
  • The government has already began making progress on this front with proposed changes to allow businesses to make greater use of apprentices, allowing workers to work overtime and allow women to work night shifts. It is estimated that two thirds of all Indians live in villages. Should the ‘Make in India’ drive be successful it has to cater to the millions of workers expected to work in the manufacturing sectors based in cities.

B) Make in India Upcoming Five Challenges

  • Creating healthy business environment will be possible only when the administrative machinery becomes efficient. India has been very stringent when it comes to procedural and regulatory clearances. A business-friendly environment will only be created if India can signal easier approval of projects and set up hassle-free clearance mechanism.
  • India should also be ready to tackle elements that adversely affect competitiveness of manufacturing. To make the country a manufacturing hub the factors of non-tax barriers, such as various quotas must be removed. India should also be ready to give tax concessions to companies who come and set up unit in the country.
  • India’s small and medium-sized industries can play a big role in making the country take the next big leap in manufacturing. India should be more focused towards novelty and innovation for these sectors. The government has to chart out plans to give special sops and privileges to these sectors.
  • India’s ‘Make in India’ campaign will be constantly compared with China’s ‘Made in China’ campaign. The dragon launched the campaign at the same day as India, seeking to retain its manufacturing prowess. India should constantly keep up its strength so as to outpace China’s supremacy in the manufacturing sector.
  • India must also encourage high-tech imports; research and development (R&D) to upgrade ‘Make in India’ give edge-to-edge competition to the Chinese campaign. To do so, India has to be better prepared and motivated to do world class R&D. The government must ensure that it provides platform for such research and development.

 

 

 

STEPS TAKEN FOR PROMOTION AND DEVELOPMENT OF MSMES

  • Realizing the importance of the MSME sector, the government has undertaken a number of schemes/programmes like
  • the Prime Minister’s Employment Generation Programme (PMEGP)
  • Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE)
  • Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation
  • Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
  • Micro and Small Enterprises Cluster Development Programme (MSECDP) for the establishment of new enterprises and development of existing ones.
  • Some of the new initiatives undertaken by the government for the promotion and development of MSMEs, are as follows:
  • Udyog Aadhar Memorandum (UAM): The UAM scheme (2015) is a pathbreaking step to promote ease of doing business for MSMEs. Under the scheme, MSME entrepreneurs just need to file an online entrepreneurs’ memorandum to instantly get a unique Udyog Aadhaar Number (UAN).
  • Employment Exchange for Industries: To facilitate match-making between prospective job seekers and employers an employment exchange for industries was launched in June 2015 in line with Digital India.
  • Framework for Revival and Rehabilitation of MSMEs: Under this framework, banks have to constitute a Committee for Distressed MSME enterprises at zonal or district level to prepare a Corrective Action Plan (CAP) for these units.
  • A scheme for Promoting Innovation and Rural Entrepreneurs (ASPIRE): ASPIRE was launched with the objective of setting up a network of technology centres and incubation centres to accelerate entrepreneurship and promote start-ups for innovation and entrepreneurship in rural and agricultural industry
  • The India Aspiration Fund has also been set up under the Small Industries Development Bank of India (SIDBI) for venture capital financing of newly set-up or expanding units in the MSME sector.
  • SIDBI Make in India Loan for Small Enterprises (SMILE) has been launched to offer quasi-equity and term-based short-term loans to Indian SMEs with less stringent rules and regulations and a special focus on 25 thrust sectors of Make in India.
  • Micro Units Development Refinance Agency (MUDRA) Bank has been set up to provide development and refinance to commercial banks/ NBFCs/cooperative banks for loans given to micro-units. MUDRA Bank would follow a credit-plus approach while also providing financial literacy and addressing skill gaps, information gaps, etc.
  • Startup India campaign is based on an action plan aimed at promoting bank financing for start-up ventures to boost entrepreneurship and encourage start ups with jobs creation, with focus on MSME sector.

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