Economics Playlist
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Introduction to Economics
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2
National Income
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3
Inclusive growth
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4
Inflation
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5
Money
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6
Banking
38 topics
7
Monetary Policy
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8
Investment Models
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9
Food Processing Industries
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10
Taxation
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11
Budgeting and Fiscal Policy
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12
Financial Market
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External Sector
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14
Industries
21 topics
15
Land Reforms in India
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Poverty, Hunger and Inequality
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Planning in India
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Unemployment
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Progress
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Chapter 14: Industries
Chapter Test21 topics•Estimated reading: 63 minutes
Industries in India – Introduction and Pre-Independence Scenario
Key Point
Industry is a crucial pillar of India’s economy. In FY24, industrial growth touched 9.5%, led by strong performance in manufacturing and construction. However, at the time of Independence, India’s industrial sector was extremely underdeveloped due to colonial exploitation and structural weaknesses.
Industry is a crucial pillar of India’s economy. In FY24, industrial growth touched 9.5%, led by strong performance in manufacturing and construction. However, at the time of Independence, India’s industrial sector was extremely underdeveloped due to colonial exploitation and structural weaknesses.
Detailed Notes (24 points)
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Industrial Growth in Recent Years
India’s economic growth of 8.2% in FY24 was supported by industrial growth of 9.5%.
Manufacturing and construction sectors achieved near double-digit growth.
Mining, quarrying, electricity, and water supply also recorded strong growth.
Industry supports other sectors through direct and indirect linkages.
Ensures domestic demand is met, reducing import dependence and improving current account balance.
Creates multiplier effects, generating employment. Labour-intensive sectors like textiles and construction are especially important.
Boosts related services such as banking, insurance, logistics, and trade.
Industrial GVA (Gross Value Added) has broadly matched the overall GVA since FY20.
Manufacturing contributes over 50% of industrial GVA and often grows faster than total GVA.
In FY23, industrial sector growth slowed to 4.1% compared to 10.3% in FY22, due to input cost pressures, global supply disruptions, and slowdown in world economy.
Signs of recovery are visible in manufacturing, with yearly and sequential improvements.
Nature of Indian Industrial Sector at the Time of Independence
The industrial sector in 1947 was highly underdeveloped after centuries of colonial exploitation by the British.
Key features included:
Concentration in Metropolitan Areas: Modern industries were located only in cities like Mumbai, Kolkata, Chennai; rural India was left underdeveloped.
Absence of Heavy Industries: India lacked capital goods and basic infrastructure industries such as steel, machinery, and engineering.
Limited Government Support: No active industrial policies or state-driven initiatives existed.
Private Ownership: A few business families controlled much of industry; ownership was highly concentrated.
Suspicion of Exports: Exports were viewed as harmful to India’s interests, as they mostly benefited colonial powers.
Weak Human Resources: Lack of skilled engineers, managers, and technical professionals.
Obsolete Technology: Industries relied on outdated methods and equipment.
Weak Entrepreneurial Base: Few Indian entrepreneurs had resources or incentives to expand industries.
Dependence on Foreign Capital: Much of pre-independence industrial growth was fueled by British or foreign investments, not Indian savings.
Comparison – Industrial Growth Now vs At Independence
| Aspect | FY24 Industrial Sector | At Independence (1947) |
|---|---|---|
| Growth | 9.5% growth with strong manufacturing & construction | Extremely underdeveloped |
| Support | Strong government policies, FDI, and infrastructure | Minimal government support |
| Technology | Modern & globally competitive | Obsolete and outdated |
| Ownership | Mixed – private sector, government, and FDI | Concentrated in few business families |
| Capital Base | Domestic + foreign investment support | Mostly dependent on British/foreign capital |
Mains Key Points
Industrial growth is central to India’s GDP, employment, and service sector expansion.
At Independence, industries were limited and underdeveloped due to colonial policies.
Post-independence, India focused on heavy industries and planned industrialization.
Today, India is transitioning towards modern manufacturing, construction, and global supply chains.
Challenges remain in global competition, input costs, and technology upgradation.
Prelims Strategy Tips
At Independence, India lacked capital goods industries.
Industrial GVA contributes over 50% from manufacturing.
FY24 – Industrial growth recorded at 9.5%.
Industries have strong multiplier effect on jobs and services.
Indian Industrial Policy
Key Point
After independence, India considered industrialization as the backbone of long-term growth. Since the country inherited a weak industrial base from the British, the government introduced Industrial Policies from time to time – in 1948, 1956, 1980, 1990, and 1991 – to guide how industries should grow, how much role the public and private sectors should play, and how to attract investments. The most famous was the 1991 policy which opened India to the global economy.
After independence, India considered industrialization as the backbone of long-term growth. Since the country inherited a weak industrial base from the British, the government introduced Industrial Policies from time to time – in 1948, 1956, 1980, 1990, and 1991 – to guide how industries should grow, how much role the public and private sectors should play, and how to attract investments. The most famous was the 1991 policy which opened India to the global economy.
Detailed Notes (19 points)
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Historical Background (Why Industrial Policies were needed)
At the time of independence, India had very few industries, most of them controlled by Britishers or a few Indian business families.
Heavy industries like steel, power, or machine-making were almost absent. India was importing most of these goods.
People were mostly employed in agriculture and rural handicrafts, so unemployment and poverty were very high.
Hence, the government felt the need to plan and support industrialization systematically, so that India could become self-reliant and reduce dependence on imports.
Major Industrial Policies
1948 Policy: First Industrial Policy of independent India. It provided a basic framework. Both private sector (businessmen) and public sector (government) were allowed, but the government would control key industries like railways, defense, and energy.
1956 Policy: Known as the 'Second Industrial Policy Resolution'. It gave maximum importance to the public sector. Idea was to build a 'socialist economy' where government controlled big industries like iron, steel, coal, oil, and power. Private sector was allowed in less important areas.
1980 Policy: By this time, India needed modernization. This policy encouraged competition, technology imports, and reduced licensing restrictions for industries.
1990 Policy: Allowed more freedom to private sector and invited foreign investment in some areas.
1991 Policy: A turning point. After the economic crisis of 1991, India launched reforms called LPG (Liberalization, Privatization, Globalization). Licensing was abolished for most industries, foreign companies were invited to invest, and Indian economy became more open to world markets.
Objectives of Industrial Policy
Promote Industrialization: To set up more factories, increase production, and reduce dependence on imports.
Boost Economic Growth: Industries create jobs, increase productivity, and help people earn more, raising living standards.
Achieve Self-Sufficiency: Produce goods in India itself (like steel, cement, fertilizers) instead of importing them from other countries.
Balanced Regional Growth: Set up industries in backward areas (not just in cities like Mumbai, Kolkata, or Chennai) to reduce inequality between regions.
Attract Foreign Investment: Make rules easier for foreign companies to invest, bring new technologies, and create jobs.
Encourage Innovation and Technology: Support research and modern techniques, so India’s industries become globally competitive.
Promote Sustainable Development: Growth should not harm environment. Use eco-friendly methods, renewable energy, and reduce pollution.
Timeline of Industrial Policies in India
| Year | Key Features |
|---|---|
| 1948 | First Industrial Policy – framework for growth, mix of private & public sector. |
| 1956 | Public sector dominance; aim of socialist economy; government ran key industries. |
| 1980 | Modernization, technology imports, reduced licensing. |
| 1990 | Partial liberalization; more foreign investment allowed. |
| 1991 | Major reforms: LPG (Liberalization, Privatization, Globalization). Licensing abolished for most industries. |
Mains Key Points
Industrial policy evolved from state-controlled economy (1948, 1956) to liberalized market-oriented economy (1991).
Main goals: Industrial growth, self-reliance, job creation, and balanced regional development.
1991 reforms were historic as they removed licensing, invited FDI, and globalized Indian industries.
Policies also emphasized sustainability, technology adoption, and innovation.
Challenges: uneven regional growth, unemployment, and balancing growth with environment.
Prelims Strategy Tips
First Industrial Policy – 1948, laid framework.
1956 Policy: Public sector dominance; Socialist vision.
1991 Policy: LPG reforms; opened Indian economy to world.
Objectives: Industrialization, self-sufficiency, balanced growth, foreign investment, sustainability.
Evolution of Indian Industrial Policy (Pre-1991 Phase)
Key Point
The evolution of India’s industrial policy before 1991 can be divided into the early phase of building an industrial foundation after independence. The focus was on planning, government regulation, balanced growth, and defining the roles of public and private sectors. The Industrial Policy Resolution of 1948 was the first clear statement, followed by gradual refinements.
The evolution of India’s industrial policy before 1991 can be divided into the early phase of building an industrial foundation after independence. The focus was on planning, government regulation, balanced growth, and defining the roles of public and private sectors. The Industrial Policy Resolution of 1948 was the first clear statement, followed by gradual refinements.
Detailed Notes (25 points)
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Overview
Industrial policy in India evolved in two broad phases – Pre-1991 (State-led industrialization, regulation-heavy approach) and Post-1991 (market-oriented reforms with more role for private sector).
The Pre-1991 phase started with the Industrial Policy Resolution of 1948 and continued with modifications in 1956, 1973, and 1980.
The central idea was to use industries as a tool to achieve self-reliance, planned growth, and reduce regional disparities.
Industries Conference, 1947
Held in December 1947, just after independence, to discuss how to better use existing industries and expand them for the needs of the people.
Participants: Representatives of central and provincial governments, industrialists (business leaders), and labour unions.
A 'Tripartite Agreement' was signed between management, workers, and government to ensure peace in industries. It promised a three-year truce (no strikes or disputes) so that industries could grow smoothly.
Industrial Policy Resolution (IPR), 1948
First official industrial policy of independent India.
Aim: To clarify the government’s stand on industrialization and the role of private capital (businessmen) and state participation.
Objectives:
Plan-based development of industries according to national priorities.
Encourage small-scale industries and protect them from competition.
Prevent concentration of wealth in a few hands.
Promote balanced development of different regions to reduce inequalities.
Four Categories of Industries under IPR 1948
1. Exclusive State Monopoly: Only government could run these industries. Examples: arms and ammunition, atomic energy, rail transport.
2. Mixed Sector: Both government and private players could operate. Examples: coal, iron and steel, ship building, aircraft manufacture, mineral oils, telecom equipment.
3. Industries under Government Control: Private sector allowed but under strict government regulation. Examples: automobiles, fertilisers, cement, sugar, paper, textiles, heavy machinery, chemicals.
4. Private Sector (Open Field): All other industries not included in above categories were open to private entrepreneurs without restrictions.
Supporting Law – Industries (Development & Regulation) Act, 1951
To implement IPR 1948, the government passed this law in 1951.
It empowered government to regulate production, investment, and growth in key industries such as metals, telecom, transport, and alcohol production.
This law laid the foundation for planned regulation of industries in India.
Industrial Policy Resolution, 1948 – Key Features
| Category | Description | Examples |
|---|---|---|
| State Monopoly | Only government allowed | Arms, Atomic Energy, Railways |
| Mixed Sector | Both state and private allowed | Coal, Iron & Steel, Shipbuilding |
| Government Controlled | Private allowed but regulated | Automobiles, Fertilisers, Cement |
| Private Sector | Open for private investment | Other industries not listed above |
Mains Key Points
The IPR 1948 was India’s first attempt to provide a vision for industrial development.
It clarified roles of public and private sectors in industrialization.
Government retained control over strategic industries (arms, atomic energy, railways).
Private sector was encouraged but regulated in many key industries.
Set foundation for mixed economy model in India.
Prelims Strategy Tips
Industries Conference held in Dec 1947 to discuss post-independence industrial needs.
First Industrial Policy Resolution announced in 1948.
IPR 1948 divided industries into four categories: State Monopoly, Mixed, Controlled, Private.
Industries (Development and Regulation) Act, 1951 implemented IPR 1948.
Industrial Policy Resolution, 1956 (and Later Modifications)
Key Point
The Industrial Policy Resolution of 1956 was a landmark policy that shaped India’s industrial development after independence. Known as the 'Economic Constitution of India,' it gave primacy to the public sector, promoted heavy industries, encouraged small-scale industries, and classified industries into three schedules (A, B, and C). Later Industrial Policy Statements in 1973 and 1977 refined and adapted the 1956 policy to changing economic needs.
The Industrial Policy Resolution of 1956 was a landmark policy that shaped India’s industrial development after independence. Known as the 'Economic Constitution of India,' it gave primacy to the public sector, promoted heavy industries, encouraged small-scale industries, and classified industries into three schedules (A, B, and C). Later Industrial Policy Statements in 1973 and 1977 refined and adapted the 1956 policy to changing economic needs.
Detailed Notes (29 points)
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Background
After independence, India needed rapid industrialization to reduce poverty, unemployment, and dependence on imports.
The 1956 Industrial Policy Resolution (IPR) built on the earlier IPR 1948 and was strongly influenced by the Mahalanobis Model of economic growth (emphasized heavy industries for long-term growth).
It provided the foundation for the Second Five-Year Plan.
Objectives of IPR, 1956
Develop heavy industries and machine-building industries to support infrastructure and self-reliance.
Expand the role of the public sector in key industries.
Promote cooperatives and diffusion of ownership to avoid concentration of wealth in a few hands.
Encourage small and cottage industries to generate employment and balanced growth.
Key Features of IPR, 1956
Known as the 'Economic Constitution of India' because it comprehensively covered almost all aspects of industrial development.
Gave the State (government) the main role in developing and managing industries.
Highlighted the importance of small-scale and cottage industries in employment generation.
Stressed balanced regional development.
Became the guiding framework for industrial policies till the early 1990s.
Three Schedules of Industries (IPR 1956)
1. Schedule A – Exclusive State Monopoly: Only government could operate these industries. (17 industries such as arms, atomic energy, iron and steel, coal, mineral oils, heavy machinery, heavy electrical industries, iron ore).
2. Schedule B – Progressively State-Owned: Government would gradually expand its ownership but private players could also operate. (12 industries like chemicals, road transport, fertilisers).
3. Schedule C – Remaining Industries: All other industries left open for private enterprise, but under government regulation and guidance.
Industrial Policy Statement, 1973
Identified 'high priority industries' where big industrial houses and foreign companies were allowed to invest.
To avoid excessive monopoly, preference was given to small and medium entrepreneurs for mass-consumption goods.
Introduced a new category called 'core industries' – crucial for overall development. (Examples: iron & steel, coal, crude oil, cement, oil refining, electricity).
Encouraged large industries to set up units in rural/backward areas to promote balanced regional development.
Industrial Policy Statement, 1977
Focus shifted towards decentralization and greater role for small, tiny, and cottage industries.
Classified small-scale sector into: (1) Cottage/household industries, (2) Tiny sector, (3) Small-Scale Industries (SSIs).
Large industries were restricted mainly to: (1) Basic industries (for infrastructure), (2) Capital goods (machinery for all industries), (3) High-tech industries (fertilizers, petro-chemicals, etc.), (4) Other industries not reserved for small sector.
The aim was to spread industries widely, meet basic needs, and strengthen agriculture through supportive industries.
IPR 1956 – Industrial Classification
| Schedule | Nature | Examples |
|---|---|---|
| Schedule A | Exclusive state monopoly | Arms, Atomic Energy, Railways, Heavy Machinery |
| Schedule B | Progressively state-owned (public sector expansion) | Chemicals, Fertilisers, Road Transport |
| Schedule C | Open to private sector with regulation | All other industries not in A or B |
Mains Key Points
IPR 1956 gave primacy to public sector and heavy industries.
It classified industries into 3 schedules, ensuring state control over strategic areas.
Promoted small and cottage industries for employment.
Policy Statement of 1973 allowed FDI and large houses in priority sectors, but promoted small/medium firms in mass goods.
Policy Statement of 1977 emphasized decentralization and small-scale industries.
Prelims Strategy Tips
IPR 1956 is called the 'Economic Constitution of India'.
Influenced by Mahalanobis Model, foundation of 2nd Five-Year Plan.
Classified industries into 3 Schedules: A (State Monopoly), B (Progressively State-owned), C (Private).
Policy Statements of 1973 introduced 'core industries' category.
Policy Statement of 1977 emphasized decentralization and role of SSIs.
Industrial Policy Statement, 1980 and Pre-1991 Industrial Policy
Key Point
The Industrial Policy Statement of 1980 emphasized modernization, competition, and export promotion, while continuing the state-controlled framework of earlier policies. Pre-1991 industrial policy relied on import substitution, protectionism, licensing, and dominance of the public sector. It created self-reliance and diversified industries, but also led to inefficiency, red-tapism, and lack of global competitiveness.
The Industrial Policy Statement of 1980 emphasized modernization, competition, and export promotion, while continuing the state-controlled framework of earlier policies. Pre-1991 industrial policy relied on import substitution, protectionism, licensing, and dominance of the public sector. It created self-reliance and diversified industries, but also led to inefficiency, red-tapism, and lack of global competitiveness.
Detailed Notes (35 points)
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Industrial Policy Statement, 1980
Brought focus on modernization and upgrading technology to make Indian industries efficient and globally competitive.
Stressed the need for promoting competition within the domestic market.
Encouraged exports by creating a competitive export base and allowed foreign investment in high-technology areas.
Became the foundation of the Sixth Five-Year Plan.
Led to the introduction of MRTP Act (Monopolies and Restrictive Trade Practices Act) and FERA Act (Foreign Exchange Regulation Act, 1973).
Specific Measures under 1980 Policy
Strengthened Public Sector: Focus on efficient management and restoring credibility of public enterprises.
Economic Federalism: Creation of ‘nucleus plants’ in backward districts to attract ancillary and small industries around them.
Redefined investment limits: Tiny units limit raised from ₹1 lakh to ₹2 lakhs, SSIs from ₹10 lakhs to ₹20 lakhs, and ancillary units from ₹15 lakhs to ₹25 lakhs.
Regional Balance: Promoted dispersal of industries into backward and rural areas to reduce regional imbalance.
Alternative Energy: Non-conventional energy sources like solar, wind, tidal power and biogas were delicensed.
Export Promotion: Export-oriented units exempted from MRTP Act; allowed duty-free import of raw materials and capital goods.
Major Features of Pre-1991 Industrial Policy
State-led Development: The government reserved sectors like power and transport for the public sector.
Capital Goods Focus: Priority to steel, heavy engineering, chemicals, and machine tools to build an industrial foundation.
Inward Orientation: Belief in self-reliance. If something could be produced in India, it should not be imported, even if more expensive.
Protectionism: Heavy import duties shielded Indian industries from foreign competition.
Licensing System: Industrial growth was controlled through licenses to avoid over-capacity and to disperse industries across regions.
Restrictions on Foreign Investment: Foreign ownership was capped at 25% of total capital in an enterprise.
Encouragement to SSIs: Provided finance, subsidies, and technical support to small-scale industries.
Financial Infrastructure: Development banks like ICICI, IDBI, IFCI were created to fund industrial projects.
Achievements of Pre-1991 Industrial Policy
Helped India build a diversified industrial base with capital goods and basic industries.
Increased self-reliance and reduced dependence on imports.
Strengthened public sector enterprises which gained commanding position in economy.
Encouraged growth of new entrepreneurs and new growth centers.
Issues and Weaknesses
Industries had little incentive to modernize or improve quality.
Barriers to private entry reduced competition within the country.
Over-protection led to inefficient industries with high cost and low quality output.
Bureaucratic hurdles (licensing, red-tapism) slowed growth and encouraged corruption.
Public sector enterprises often performed poorly, with low efficiency and heavy losses.
Lack of international competitiveness due to poor technology adaptation.
These issues created the need for a shift, leading to the New Industrial Policy of 1991.
Pre-1991 Industrial Policy – Key Aspects
| Aspect | Details |
|---|---|
| Public Sector Role | Dominant, especially in strategic sectors like power, transport |
| Capital Goods Focus | Steel, heavy engineering, chemicals, machine tools |
| Orientation | Inward-looking, self-reliance, import substitution |
| Protectionism | High import duties, restrictions on foreign investment |
| Licensing | Strict control through license system |
| Support to SSIs | Finance, subsidies, technology support |
| Weakness | Inefficiency, red-tapism, lack of competitiveness |
Mains Key Points
1980 Industrial Policy balanced modernization with state control.
Pre-1991 policies created strong public sector but also inefficiency.
Protectionism initially supported domestic industry but limited global competitiveness.
Licensing and bureaucratic hurdles slowed private sector growth.
Need for reforms and efficiency led to the 1991 liberalization.
Prelims Strategy Tips
Industrial Policy Statement, 1980 emphasized modernization, export promotion, and competition.
MRTP Act and FERA were associated with 1980 policy framework.
Pre-1991 policies focused on import substitution and self-reliance.
Public sector expansion considered essential for socialism-oriented growth.
Industrial Policy (Pre-1991) in Brief
Key Point
Between 1948 and 1980, India announced a series of Industrial Policies to guide its economic growth. These policies shifted India from a mixed model with private and state participation to a socialist-inspired model dominated by the public sector. Over time, emphasis moved towards decentralisation, small industries, balanced regional development, and finally some liberalisation in 1980.
Between 1948 and 1980, India announced a series of Industrial Policies to guide its economic growth. These policies shifted India from a mixed model with private and state participation to a socialist-inspired model dominated by the public sector. Over time, emphasis moved towards decentralisation, small industries, balanced regional development, and finally some liberalisation in 1980.
Division of Industries under Different Policies
| Policy | Division of Sectors |
|---|---|
| Industrial Policy Resolution, 1948 | Divided into 4 categories – State monopoly industries, Mixed sector, Government control sectors, Private enterprises |
| Industrial Policy Resolution, 1956 | Divided into 3 schedules – Schedule A: State monopoly, Schedule B: Mixed sector, Schedule C: Private sector |
| Industrial Policy Statement, 1973 | Introduced new category – 'Core Industries' (iron & steel, cement, coal, crude oil, oil refining, electricity) |
| Industrial Policy Statement, 1977 | Emphasised 3 categories of small industries – Cottage & household industries, Tiny sector, Small-scale industries (SSIs). Large sector limited to Basic, Capital goods, and High technology industries |
| Industrial Policy Statement, 1980 | No new formal divisions created, but promoted private industries and export-oriented units |
Objectives of Different Policies
| Policy | Objectives |
|---|---|
| Industrial Policy Resolution, 1948 | Accelerate industrial development with both public and private participation. Move towards a 'socialistic pattern'. |
| Industrial Policy Resolution, 1956 | Development of heavy industries, expansion of public sector, growth of cooperatives, state-led industrialisation due to scarce private capital. |
| Industrial Policy Statement, 1973 | Develop backward and rural areas, promote small industries, prevent excessive concentration of large industrial houses. |
| Industrial Policy Statement, 1977 | Decentralisation, promotion of small-scale and cottage industries, restrict dominance of big business houses, reduce labour unrest, revival of sick units. |
| Industrial Policy Statement, 1980 | Encouraged private industry expansion, promoted exports by exempting export-oriented units from MRTP Act, and supported federal economic growth. |
Mains Key Points
Pre-1991 policies focused on state-led development with limited private role.
1948 introduced mixed economy, 1956 expanded public sector.
1970s policies shifted focus to decentralisation, small industries, and balanced growth.
1980 policy marked early signs of liberalisation and export promotion.
These policies created self-reliance but also inefficiency, paving way for 1991 reforms.
Prelims Strategy Tips
1948 policy was first attempt after Independence; introduced mixed economy model.
1956 policy called 'Economic Constitution of India' due to its detailed framework.
1973 policy introduced 'Core Industries'.
1977 policy classified SSIs into 3 categories and emphasised decentralisation.
1980 policy promoted exports and liberalisation of private sector.
Industrial Licensing and New Industrial Policy (1991)
Key Point
Industrial Licensing was a system in India where industries needed government permission to set up or expand units. It reflected a state-controlled model of development. However, due to economic crises and inefficiencies, the New Industrial Policy of 1991 introduced Liberalisation, Privatisation and Globalisation (LPG reforms), shifting India towards a market-driven economy.
Industrial Licensing was a system in India where industries needed government permission to set up or expand units. It reflected a state-controlled model of development. However, due to economic crises and inefficiencies, the New Industrial Policy of 1991 introduced Liberalisation, Privatisation and Globalisation (LPG reforms), shifting India towards a market-driven economy.
Detailed Notes (36 points)
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Industrial Licensing in India
Industrial Licensing = Written permission from the Government to manufacture certain goods.
The license specified location, type of goods, production capacity, and timeframe.
Objective: To implement Government’s Industrial Policy and prevent over-concentration of industries.
Three Acts provided the legal framework:
Industries (Development & Regulation) Act, 1951: Made registration of all scheduled industries compulsory; new industries could be established only after obtaining license.
Monopolies and Restrictive Trade Practices (MRTP) Act, 1969: Aimed to prevent concentration of economic power, control monopolistic practices, and promote competition.
Foreign Exchange Regulation Act (FERA), 1973: Controlled payments, foreign exchange dealings, and import/export of currency and bullion.
Need for New Industrial Policy (1991)
By late 1980s and early 1990s, India faced a severe Balance of Payments (BoP) crisis.
Factors: Gulf War (1990–91), collapse of USSR (India’s key trading partner), and rising imports.
Foreign exchange reserves fell to dangerously low levels (barely enough for 2 weeks of imports).
India needed urgent structural reforms → led to announcement of New Industrial Policy (NIP), 1991.
Objectives of New Industrial Policy, 1991
Continue the progress of earlier plans while correcting distortions.
Ensure long-term growth in productivity and employment.
Integrate India with the global economy by promoting competitiveness.
Introduce 'continuity with change' → maintain past strengths but reform outdated controls.
Major Policy Measures
# 1. Liberalisation of Industrial Licensing:
Industrial Licensing abolished for almost all industries except 9 strategic sectors (coal & lignite, petroleum, alcohol, sugar, cigarettes, aerospace & defence, explosives, hazardous chemicals, drugs & pharma).
Only 5 industries (atomic energy, railway transport, etc.) reserved exclusively for public sector.
# 2. Promotion of Foreign Investment:
Automatic approval route for Foreign Direct Investment (FDI) in many sectors.
FDI allowed in key industries: capital goods, electronics, food processing, metallurgical sectors.
Automatic approval for foreign technology agreements in high-priority industries.
# 3. Reforms in Public Sector:
Public sector focus limited to strategic & high-tech areas.
Sick enterprises referred to Board of Industrial and Financial Reconstruction (BIFR) for revival or closure.
Partial disinvestment started → sale of government shares to public, institutions, and workers.
# 4. MRTP Act Amendments:
Removed asset threshold limits for large business houses.
Focus shifted from controlling size to regulating unfair and restrictive trade practices.
# 5. Promotion of Small Scale Industries (SSI):
Allowed up to 24% equity participation by larger industries in SSIs.
Enabled access to capital markets, modernization, and sub-contracting opportunities.
Mains Key Points
Industrial Licensing created inefficiencies, red-tapism, and restricted private enterprise.
1991 reforms liberalised economy, promoted FDI, and modernised industry.
Public sector was rationalised with focus on strategic areas and disinvestment.
Small industries were supported through equity participation and modernization.
Marked a shift from a state-controlled model to a competitive, globalised economy.
Prelims Strategy Tips
Industrial licensing abolished in 1991 except for 9 industries.
Only 5 industries reserved exclusively for public sector after 1991.
Introduced LPG reforms (Liberalisation, Privatisation, Globalisation).
MRTP Act amended in 1991 to remove asset thresholds.
Manufacturing Sector in India
Key Point
The manufacturing sector is vital for India’s growth as it provides jobs, modernises agriculture, and supports exports. Despite its importance, its contribution to GDP has remained around 16-17%, much lower compared to successful manufacturing economies. Through policies like the National Manufacturing Policy (2011) and the Production-Linked Incentive (PLI) scheme (2020 onwards), India aims to increase the share of manufacturing in GDP to 25% by 2025 and transform into a global manufacturing hub.
The manufacturing sector is vital for India’s growth as it provides jobs, modernises agriculture, and supports exports. Despite its importance, its contribution to GDP has remained around 16-17%, much lower compared to successful manufacturing economies. Through policies like the National Manufacturing Policy (2011) and the Production-Linked Incentive (PLI) scheme (2020 onwards), India aims to increase the share of manufacturing in GDP to 25% by 2025 and transform into a global manufacturing hub.
Detailed Notes (35 points)
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Overview
Manufacturing = process of converting raw materials into finished goods with added value.
Main sub-sectors in India: food products, metals, petrochemicals, chemicals, electrical machinery, rubber, textiles, automobiles, pharmaceuticals.
Contribution: Around 16-17% of GDP for the last decade, compared to 25-30% in East Asian economies like China.
Government initiatives: National Manufacturing Policy (targeting 25% share by 2025), Production-Linked Incentive (PLI) scheme for electronics, textiles, pharma, etc.
India is moving towards Industry 4.0 (automation, digitalisation, robotics, AI in manufacturing).
Significance of Manufacturing
Modernises agriculture → machinery, fertilisers, and agro-industries boost farm productivity.
Generates employment → reduces dependence on agriculture, provides jobs in factories, logistics, services.
Reduces poverty → industrial growth creates multiplier effects, boosting services and trade.
Balanced regional growth → industries set up in underdeveloped/tribal regions reduce disparities.
Export earnings → finished goods like electronics, textiles, engineering goods add value and bring foreign exchange.
Complementarity → agriculture + industry can grow together (e.g., agro-based industries).
Contribution (Data Highlights)
Manufacturing GVA share: ~16.3% in last decade; dipped to 14.4% in 2020-21 due to Covid-19, recovered to ~15.3% in 2021-22.
Value of manufacturing GVA in Q3 FY22: ~US$ 77.47 billion.
Employment: 5.7 crore in 2017-18 → 6.24 crore in 2019-20.
Export performance (FY23 up to Sept 2022): Top 10 manufactured exports = US$ 187.2 billion (engineering goods, petroleum, pharma, textiles, rice, plastics, electronics, gems-jewellery).
Manufacturing PMI (Purchasing Managers’ Index) Sept 2022 = 55.1 (above 50 = expansion).
Challenges
Access to finance: Banks reluctant to give loans for manufacturing.
Skewed policies: More support for capital-intensive rather than labour-intensive industries.
Low productivity of MSMEs due to small scale, lack of modern tech, and absence of economies of scale.
Power sector issues: High cost of electricity due to taxes (coal cess, PAT, RPO), cross-subsidisation, poor quality of supply; India ranks 80/137 in power quality (WEF).
Logistics costs: ~14% of GDP (higher than global average 8-9%). Overdependence on roads (60% cargo) due to poor rail, port, and warehousing infrastructure.
Supply chain inefficiencies → lower labour productivity compared to China.
Skill mismatch: 62% working-age population, but only 4.7% formally trained (vs South Korea 96%, Germany 75%).
Way Forward
Relief packages for MSMEs post-pandemic; cash infusion to support raw materials and job creation.
Prioritise education & skill development: Increase R&D spending (currently ~0.7% of GDP vs 2-4% in advanced economies).
Promote labour-intensive industries (textiles, garments, footwear, toys) to absorb unskilled workers.
Support 'Network Products' (electronics, assembly goods) for export-oriented job creation.
Ensure affordable, stable power supply by reforming energy taxes and promoting renewable energy.
Strengthen MSMEs through cluster-based development, easier credit (priority sector lending), and simplified labour/tax compliance.
Invest in logistics: modern rail freight corridors, deeper ports, faster customs, better warehousing.
Mains Key Points
Manufacturing is central for growth, exports, and jobs in India.
Despite demographic advantage, India faces skill mismatch and low productivity.
High logistics and power costs reduce global competitiveness.
PLI and NMP can help India become global manufacturing hub if challenges are addressed.
Focus on labour-intensive industries is key for employment generation.
Prelims Strategy Tips
Manufacturing share in GDP ~16-17%.
National Manufacturing Policy target: 25% of GDP by 2025.
PLI Scheme introduced in 2020 to boost manufacturing.
India has 62% working-age population but only 4.7% formally trained.
Initiatives for Industrial Development and Manufacturing in India
Key Point
India has launched multiple initiatives to strengthen its industrial base and promote manufacturing. Key among them are the National Manufacturing Policy (2011) and Make in India (2014). These programs aim to raise the share of manufacturing in GDP, create millions of jobs, attract global investments, and ensure sustainable, innovation-driven growth.
India has launched multiple initiatives to strengthen its industrial base and promote manufacturing. Key among them are the National Manufacturing Policy (2011) and Make in India (2014). These programs aim to raise the share of manufacturing in GDP, create millions of jobs, attract global investments, and ensure sustainable, innovation-driven growth.
Detailed Notes (29 points)
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National Manufacturing Policy (2011)
Announced in 2011 to enhance manufacturing share in GDP from 16% to 25% within a decade.
Aim: Create 100 million additional jobs, especially in labour-intensive industries.
Focus areas: small and medium enterprises (SMEs), skill development, closure-friendly exit policy, and sustainability.
Objectives:
Enhance global competitiveness of Indian manufacturers.
Provide industrial training and skill upgradation for workers.
Simplify regulations and procedures for businesses.
Promote green, clean, energy-efficient technology.
Key instrument: National Investment and Manufacturing Zones (NIMZs).
Zones with state-of-the-art infrastructure, energy-efficient technologies, clean land use planning.
Include industrial townships functioning as self-governing bodies.
Supported by Special Purpose Vehicles (SPVs) for management.
Technology Acquisition and Development Fund for eco-friendly machinery.
Make in India (2014)
Launched in September 2014 to make India a global hub for manufacturing, innovation, and design.
Objective: attract foreign direct investment (FDI), build infrastructure, and ease regulatory environment.
Four Pillars:
1. New Process: Simplify regulations and ease of doing business.
2. New Infrastructure: Develop industrial corridors, smart cities, high-speed communication.
3. New Sectors: 25 sectors identified including defence, railways, construction, and electronics.
4. New Mindset: Government as a facilitator (partner) instead of regulator.
Key Supporting Schemes
Skill India Mission: Skilling 10 million people annually in different trades and sectors.
Startup India: Build ecosystem for startups; promote innovation and entrepreneurship with tax benefits and easier compliance.
Digital India: Transform India into knowledge-based, digitally empowered economy.
Pradhan Mantri Jan Dhan Yojana (PMJDY): Financial inclusion – ensuring affordable banking, insurance, pension for all.
Smart Cities Mission: Create 100 smart cities with modern, sustainable infrastructure.
AMRUT (Atal Mission for Rejuvenation and Urban Transformation): Upgrade basic public services in urban areas such as water, sewage, transport.
Comparison of NMP 2011 and Make in India 2014
| Aspect | NMP 2011 | Make in India 2014 |
|---|---|---|
| Objective | Raise manufacturing share in GDP to 25%, create 100m jobs | Make India a global hub of manufacturing and innovation |
| Instruments | NIMZs, SPVs, tech fund, clean energy | Ease of doing business, FDI, 25 sectors, govt as facilitator |
| Focus | SMEs, skills, sustainable industrialisation | FDI, infrastructure, startups, digital economy |
| Timeline | Long-term structural growth (10 years) | Immediate investment attraction and branding India |
Mains Key Points
NMP 2011 was long-term structural, Make in India was more branding + investment focused.
Both aim to boost manufacturing’s share in GDP and job creation.
Key difference: NMP focused on zones & SMEs; Make in India on FDI, infrastructure, and reforms.
Schemes like Skill India and Startup India are complementary to Make in India.
Challenge: Despite efforts, manufacturing share remains stuck around 16-17%.
Prelims Strategy Tips
NMP 2011 target: 25% share of manufacturing in GDP, 100m jobs.
Make in India covers 25 priority sectors.
NIMZs are core instruments under NMP.
Skill India + Startup India + Digital India support Make in India.
Foreign Direct Investment Policy and Ease of Doing Business in India
Key Point
Foreign Direct Investment (FDI) is a key driver of growth and technology transfer in India. The policy is regularly updated to remain investor-friendly. India also works on 'Ease of Doing Business' (EoDB) reforms to simplify rules, reduce compliance burden, and attract global investments.
Foreign Direct Investment (FDI) is a key driver of growth and technology transfer in India. The policy is regularly updated to remain investor-friendly. India also works on 'Ease of Doing Business' (EoDB) reforms to simplify rules, reduce compliance burden, and attract global investments.
Detailed Notes (19 points)
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Foreign Direct Investment Policy
India reviews its FDI policy regularly to make it more open, transparent, and attractive.
FDI up to 100% is permitted in most sectors under the 'automatic route' (no prior government approval required).
Government has liberalised FDI norms in recent years to attract global capital and strengthen domestic industry.
# Recent Reforms in FDI Policy:
Defence sector: FDI allowed up to 74% via automatic route (earlier 49%). Beyond 74% and up to 100% requires government approval.
Petroleum & Natural Gas: 100% FDI allowed under automatic route in PSUs where government has approved strategic disinvestment.
Telecom sector: 100% FDI permitted under automatic route.
Ease of Doing Business (EoDB)
EoDB reflects how easy or difficult it is to start and operate a business in a country.
Published earlier by the World Bank, it ranked 190 countries based on 10 parameters like starting a business, getting electricity, trading across borders, and resolving insolvency.
India’s journey: Ranking improved from 142 (2014) → 100 (2017) → 77 (2018) → 63 (2019). India was among the top 10 reformers globally in 3 consecutive reports.
Reforms that helped: Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC).
India’s Recent Steps to Improve EoDB
Over 39,000 compliances removed and 3,400+ legal provisions decriminalised.
Jan Vishwas (Amendment of Provisions) Bill, 2022: Decriminalised 183 offences across 42 laws. Focus is on monetary penalties instead of jail terms for minor violations.
Budget 2022-23 reforms: 'Make AI in India and Make AI Work for India' vision; centres of excellence for Artificial Intelligence set up.
National Data Governance Policy to allow startups and researchers access to anonymised data for innovation.
Launch of Phase III of e-Courts for faster and tech-driven justice delivery.
FDI Policy vs Ease of Doing Business
| Aspect | FDI Policy | Ease of Doing Business |
|---|---|---|
| Objective | Attract foreign capital & technology | Simplify business rules & reduce barriers |
| Coverage | Sectoral limits, automatic vs govt approval | 10 parameters like credit, tax, trade, contracts |
| Recent Reforms | Defence (74%), Telecom (100%), Petroleum (100%) | GST, IBC, Jan Vishwas Bill, e-Courts, AI centres |
| Impact | Boosts investment and job creation | Improves global ranking and encourages entrepreneurship |
Mains Key Points
India’s FDI reforms focus on liberalisation and investor confidence.
Key sectors like defence, petroleum, and telecom have been opened for higher FDI.
Ease of Doing Business reforms reduce red-tapism, improve efficiency, and attract entrepreneurs.
India’s rise in World Bank Doing Business rankings demonstrates reform success.
Future challenge: Ensure reforms benefit small businesses, not just big corporations.
Prelims Strategy Tips
FDI in defence: 74% automatic route; 100% with govt approval.
Telecom sector allows 100% FDI under automatic route.
India’s Doing Business rank improved from 142 (2014) to 63 (2019).
Jan Vishwas Bill, 2022 decriminalises 183 offences across 42 laws.
Challenges to Ease of Doing Business in India
Key Point
Ease of Doing Business (EoDB) is essential to attract investments, promote entrepreneurship, and ensure economic growth. While India has improved its global ranking, several challenges like regulatory delays, land acquisition issues, poor infrastructure, and skill gaps continue to affect business operations.
Ease of Doing Business (EoDB) is essential to attract investments, promote entrepreneurship, and ensure economic growth. While India has improved its global ranking, several challenges like regulatory delays, land acquisition issues, poor infrastructure, and skill gaps continue to affect business operations.
Detailed Notes (15 points)
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Key Challenges
Economic Slowdown: Business prospects depend on overall economic vitality. Slowdowns reduce demand, profitability, and investor confidence.
Regulatory Delays: Excessive regulations and lengthy approval processes slow down new projects. Government decision-making is often bureaucratic and time-consuming.
Power Shortages: Demand for electricity exceeds supply in many regions. Unreliable power affects manufacturing and services, raising costs for companies.
Poor Legal Implementation: The Companies Act 2013 added compliance burdens. Instead of simplifying business law, it created more hurdles for incorporation and operation.
Land Acquisition Issues: Land ownership is often disputed due to inheritance conflicts, fragmented holdings, or demand for cash payments. This delays industrial projects.
Skill Gap: India’s workforce lacks adequate skills and training. Employment laws are complex, discouraging firms from hiring flexibly.
Way Forward
Simplify and reduce regulatory requirements to speed up approvals.
Ensure tariffs are predictable and transparent for investors.
Reduce paperwork and adopt digital-first governance.
Invest in infrastructure, especially electricity and transport networks.
Reform labour and corporate laws to make them simpler and business-friendly.
Open new sectors like railways and defence gradually to private participation.
Complete land reforms and digitisation of land records to make acquisition faster and transparent.
Challenges vs Solutions in Ease of Doing Business
| Challenge | Impact | Suggested Solution |
|---|---|---|
| Economic Slowdown | Low demand, reduced investments | Boost growth through stimulus and reforms |
| Regulatory Delays | Slow project approvals, higher costs | Simplify regulations, digitise processes |
| Electricity Shortage | Unreliable supply, higher production costs | Invest in power infrastructure and renewable energy |
| Land Acquisition Issues | Project delays and litigations | Digitisation of land records, fair compensation |
| Skill Gap | Low productivity, hiring difficulties | Expand skill development and vocational training |
Mains Key Points
India’s EoDB reforms have improved rankings but ground challenges persist.
Regulatory burden, land laws, and compliance requirements discourage investors.
Infrastructure gaps (electricity, logistics) affect business competitiveness.
Skill mismatch reduces productivity and affects labour market flexibility.
Way forward lies in regulatory simplification, digitisation, skill development, and better infrastructure.
Prelims Strategy Tips
Companies Act 2013 increased compliance burden instead of simplifying.
Land acquisition is a major hurdle due to fragmented ownership and disputes.
India ranks poorly in electricity reliability; stable power is vital for manufacturing.
Skill gap: Only 4.7% of India’s workforce is formally trained.
Atmanirbhar Bharat Abhiyaan, Make in India 2.0 and Startup India
Key Point
These flagship initiatives aim to make India self-reliant, boost domestic manufacturing, create jobs, reduce import dependency, and strengthen India's position as a global hub for innovation, startups, and production.
These flagship initiatives aim to make India self-reliant, boost domestic manufacturing, create jobs, reduce import dependency, and strengthen India's position as a global hub for innovation, startups, and production.
Detailed Notes (26 points)
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Atmanirbhar Bharat Abhiyaan (2020)
Announced during COVID-19 pandemic with a ₹20 lakh crore package (about 10% of India’s GDP).
Aim: Make India and its citizens self-reliant across all sectors.
Five pillars: Economy, Infrastructure, System, Vibrant Demography, Demand.
Focus: Reduce imports, promote local products, improve safety & quality standards, and increase global competitiveness.
Approach: Not isolation, but helping hand to the world by building resilient supply chains.
Reforms: Agricultural supply chain reforms, rational tax system, simplified laws, skilled human resource, and strong financial system.
Make in India 2.0
Launched to strengthen domestic manufacturing & services.
Covers 27 sectors (15 manufacturing + 12 services).
Focus areas: import substitution, export promotion, employability.
PLI Scheme (Production-Linked Incentives):
Encourages industries to increase production in India by offering financial incentives.
Objective: Attract investments, create jobs, reduce imports, and make India a global manufacturing hub.
Expected investment: ₹3 lakh crore in 5 years.
Employment potential: 60 lakh jobs.
Focus sectors: electronics, pharmaceuticals, telecom, food processing, white goods, 5G manufacturing ecosystem.
Startup India (2016)
Launched to promote innovation, entrepreneurship, and job creation.
Objective: Transform India from 'job seekers' to 'job creators'.
Key pillars:
Simplification & Handholding: Easier compliance, faster patent process, easier exit for failed startups.
Funding & Incentives: Tax exemptions, capital gains tax relief, fund of funds, credit guarantee.
Incubation & Partnerships: Incubators, innovation labs, industry-academia collaboration.
Recognition by DPIIT gives startups benefits like tax exemptions, funding access, and IPR support.
Challenge: Many startups move overseas (‘Flipping’) due to favorable tax and legal policies abroad.
Comparison of Major Initiatives
| Initiative | Year | Objective | Key Features |
|---|---|---|---|
| Atmanirbhar Bharat | 2020 | Self-reliance in all sectors | ₹20 lakh crore package, 5 pillars, local products, reforms |
| Make in India 2.0 | 2014 (Phase 2 in 2019-20) | Boost manufacturing & jobs | 27 sectors, PLI scheme, global hub focus |
| Startup India | 2016 | Promote startups & innovation | Simplification, tax incentives, incubation, IPR support |
Mains Key Points
Atmanirbhar Bharat is not isolationist; it focuses on reducing imports and strengthening domestic capabilities.
Make in India 2.0 with PLI scheme aims to turn India into a global manufacturing hub.
Startup India addresses job creation, innovation, and entrepreneurship but faces challenges like 'flipping'.
Together, these initiatives can boost GDP, create employment, and improve India’s competitiveness globally.
Prelims Strategy Tips
Atmanirbhar Bharat package: ₹20 lakh crore (10% of GDP).
Make in India 2.0 covers 27 sectors (15 manufacturing + 12 services).
PLI scheme aims at ₹3 lakh crore investment & 60 lakh jobs.
Startup India launched in 2016; DPIIT recognition key for benefits.
Industry 4.0 and SAMARTH Udyog Bharat 4.0
Key Point
Industry 4.0, the fourth industrial revolution, integrates technologies like AI, IoT, cloud computing, and machine learning into manufacturing to create smart, efficient, and interconnected industries. India is preparing for large-scale adoption through initiatives like SAMARTH Udyog Bharat 4.0.
Industry 4.0, the fourth industrial revolution, integrates technologies like AI, IoT, cloud computing, and machine learning into manufacturing to create smart, efficient, and interconnected industries. India is preparing for large-scale adoption through initiatives like SAMARTH Udyog Bharat 4.0.
Detailed Notes (31 points)
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What is Industry 4.0?
Industry 4.0 means the Fourth Industrial Revolution, a major shift in how industries work.
It uses technologies like Artificial Intelligence (AI), Internet of Things (IoT), Cloud Computing, Robotics, Big Data, and Machine Learning.
Aim: To make factories 'smart' — machines, humans, and processes connected digitally, working with higher efficiency.
Example: A car factory where machines can 'predict' when parts will break down, order replacements automatically, and reduce downtime.
Importance for India
India’s manufacturing currently contributes about 16–17% to GDP; goal is to raise this to 25% by 2025.
Digital penetration and internet growth in India provide a foundation for Industry 4.0.
Semiconductor self-reliance efforts will strengthen India’s position in global value chains.
Government views Industry 4.0 as crucial for Atmanirbhar Bharat and global competitiveness.
Government Initiatives
SAMARTH Udyog Bharat 4.0: A flagship programme by the Ministry of Heavy Industries.
Aim: Create awareness, demonstrate new technologies, and hand-hold industries (especially SMEs) for Industry 4.0 adoption.
Focus: Competitiveness in the capital goods sector.
Stakeholders: Manufacturers, vendors, customers.
Centre for Fourth Industrial Revolution (India): Established in 2018 with support from World Economic Forum, to design policies for emerging technologies.
SAMARTH Udyog Bharat 4.0 Features
Awareness campaigns across India.
Training 'Master Trainers' who can later train others.
Supporting Startups and Incubators working in Industry 4.0 technologies.
Consultancy services for SMEs (Small & Medium Enterprises).
Collaboration with Universities for internships and training.
Special Purpose Vehicle (SPV) model for sustainability.
Emphasis on e-waste management.
Encouraging industry clusters to adopt smart technologies.
Demonstration Centres under SAMARTH
1. C4i4 Lab, Pune
2. IITD–AIA Foundation for Smart Manufacturing
3. I4.0 India at IISc (Factory R&D Platform)
4. Smart Manufacturing Demo & Development Cell at CMTI
5. Industry 4.0 CoE at IIT Kharagpur
Industry 4.0 vs Previous Industrial Revolutions
| Phase | Key Features | Technology |
|---|---|---|
| Industry 1.0 | Mechanisation | Steam engines, textile machines |
| Industry 2.0 | Mass Production | Electricity, assembly lines |
| Industry 3.0 | Automation | Electronics, computers, IT |
| Industry 4.0 | Smart & Connected Systems | AI, IoT, Cloud, Big Data |
Mains Key Points
Industry 4.0 can make Indian manufacturing globally competitive.
SAMARTH Udyog Bharat 4.0 bridges the gap for SMEs by providing awareness and consultancy.
E-waste management and sustainability are crucial for responsible adoption.
India’s digital ecosystem and skill development are vital enablers.
Challenges: High cost of adoption, lack of skilled workforce, and low awareness among MSMEs.
Prelims Strategy Tips
Industry 4.0 = Fourth Industrial Revolution (AI, IoT, Cloud, Big Data).
SAMARTH Udyog Bharat 4.0 is a Ministry of Heavy Industries initiative.
India aims for 25% GDP contribution from manufacturing by 2025.
Centre for Fourth Industrial Revolution (India) established in 2018.
Industries: Classification
Key Point
Industries in India are divided into different groups based on who owns them. Broadly, they are owned either by private individuals, the government, or jointly. Public Sector Enterprises (PSEs) are special government-owned companies that are further divided into Maharatna, Navratna, and Miniratna categories depending on how big they are, how much profit they make, and how much freedom (autonomy) they have in decision-making.
Industries in India are divided into different groups based on who owns them. Broadly, they are owned either by private individuals, the government, or jointly. Public Sector Enterprises (PSEs) are special government-owned companies that are further divided into Maharatna, Navratna, and Miniratna categories depending on how big they are, how much profit they make, and how much freedom (autonomy) they have in decision-making.
Detailed Notes (38 points)
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Classification of Industries by Ownership
Private Sector: These industries are owned and run by individuals or private companies. Their main aim is to earn profit. Example: Reliance Industries, Infosys. These businesses raise their own money and take risks themselves.
Public Sector: These industries are owned and managed by the Government (either Central or State). Their main aim is not just profit but also public welfare like providing electricity, steel, energy, or infrastructure. Example: ONGC, BHEL, Indian Railways.
Joint Sector: These are industries where both government and private individuals/companies share ownership and management. The idea is to combine government resources with private efficiency. Example: Maruti Suzuki (initially started as a joint venture between Government of India and Suzuki, Japan).
Cooperative Sector: These are owned and managed collectively by producers, suppliers, or workers. Here, the main purpose is not only profit but also welfare of members. Example: Amul (dairy cooperative run by farmers).
Maharatna, Navratna, and Miniratna – What Do They Mean?
Public Sector Enterprises (PSEs) are government-owned companies. But not all PSEs are equal in size. Some are very big and profitable, while others are smaller. To give more power to the bigger and better-performing PSEs, the Government of India created three special categories: Maharatna, Navratna, and Miniratna.
# Maharatna – The Biggest and Most Powerful PSEs
These are the largest public sector companies in India.
Eligibility conditions:
Must already have 'Navratna' status.
Should be listed on Indian stock exchange with minimum public shareholding (as per SEBI rules).
Average annual turnover must be more than ₹25,000 crore in the last 3 years.
Average annual net profit must be more than ₹5,000 crore in the last 3 years.
Net worth must be more than ₹15,000 crore.
Benefits: These companies can take major financial decisions themselves without waiting for government approval, such as investing up to ₹5,000 crore in a single project or starting joint ventures in India or abroad.
Examples: Bharat Heavy Electricals Limited (BHEL), Bharat Petroleum Corporation Limited (BPCL), Coal India Limited, GAIL (India) Limited, ONGC, NTPC.
Recent Addition: Rural Electrification Corporation (REC) got Maharatna status in 2022. REC finances power projects and acts as nodal agency for big schemes like SAUBHAGYA (electricity for all) and DDUGJY (rural electrification).
# Navratna – The Middle Giants
These are also large and important PSEs, but not as big as Maharatnas.
Eligibility conditions:
The company must already be a 'Miniratna Category-I' and a 'Schedule A' company.
It should have scored 'Excellent' or 'Very Good' in its MoU ratings in at least 3 of the last 5 years.
Benefits: They get more financial freedom than Miniratnas but less than Maharatnas. They can make investments up to ₹1,000 crore without government approval.
Examples: Bharat Electronics Limited (BEL), Hindustan Aeronautics Limited (HAL), National Aluminium Company (NALCO), Engineers India Limited (EIL), NBCC (India) Limited.
# Miniratna – The Smaller Yet Profitable PSEs
These are smaller PSEs compared to Maharatnas and Navratnas but still important.
They are further divided into two categories:
Category-I:
Must have made profit in the last 3 years continuously.
Must have earned at least ₹30 crore pre-tax profit in 1 of the last 3 years.
Must have a positive net worth.
Examples: Airports Authority of India (AAI), Bharat Dynamics Ltd, BEML Ltd, Antrix Corporation.
Category-II:
Must have made profit in the last 3 years continuously.
Must have positive net worth.
Should not have defaulted in loan repayments or depend on government budgetary support.
Examples: Artificial Limbs Manufacturing Corporation of India (ALIMCO), Broadcast Engineering Consultants India Ltd (BECIL), Central Railside Warehouse Company (CRWC).
Classification of Industries by Ownership
| Type | Description | Example |
|---|---|---|
| Private Sector | Owned by individuals/groups | Reliance, Infosys |
| Public Sector | Owned by Government | ONGC, BHEL |
| Joint Sector | Shared by Govt + Private | Maruti Suzuki (initial JV) |
| Cooperative Sector | Owned by producers/employees | Amul |
Maharatna, Navratna, and Miniratna – Comparison
| Category | Eligibility Criteria | Examples |
|---|---|---|
| Maharatna | Navratna status + turnover > ₹25,000 Cr + net profit > ₹5,000 Cr | BHEL, Coal India, GAIL, REC |
| Navratna | Miniratna-I + Schedule A + Excellent MoU ratings | BEL, HAL, NALCO |
| Miniratna-I | Profit 3 yrs + pre-tax profit > ₹30 Cr in 1 yr | AAI, BEML, Bharat Dynamics |
| Miniratna-II | Profit 3 yrs + positive net worth, no govt loan defaults | ALIMCO, BECIL, CRWC |
Mains Key Points
Public Sector Enterprises (PSEs) are classified into Maharatna, Navratna, and Miniratna to give them financial and operational autonomy.
This system reduces bureaucratic delays and helps companies expand quickly.
It encourages investment in big projects in India and abroad.
Maharatna companies like ONGC and Coal India are crucial for energy security.
Challenges: Many PSEs face inefficiency, over-staffing, and political interference.
Prelims Strategy Tips
Maharatna = highest autonomy, can invest up to ₹5,000 crore without approval.
REC got Maharatna status in 2022.
Navratna = Miniratna-I + Schedule A + high MoU ratings.
Miniratna = divided into Category-I and II, focus on profitability.
Industries: Privatisation and Disinvestment
Key Point
Privatisation means reducing or removing government ownership and control over public enterprises. Disinvestment is a type of privatisation where the government sells part of its shares in a public company to private investors. The aim is to improve efficiency, reduce the financial burden on government, and bring in private sector participation.
Privatisation means reducing or removing government ownership and control over public enterprises. Disinvestment is a type of privatisation where the government sells part of its shares in a public company to private investors. The aim is to improve efficiency, reduce the financial burden on government, and bring in private sector participation.
Detailed Notes (23 points)
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What is Privatisation?
Privatisation means that a company owned and run by the government is handed over partly or fully to private individuals or businesses.
This can happen in two main ways:
1. Government withdraws from managing or owning the public sector company.
2. Government sells the company outright to private owners.
What is Disinvestment?
Disinvestment is a specific form of privatisation where the government sells part of its equity (shares) in a public sector enterprise (PSE).
It does not always mean full sale – sometimes government only reduces its shareholding but still remains a part-owner.
Example: Selling part of Air India, BALCO, or Hindustan Zinc shares to private companies.
In India, disinvestment is managed by the Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance.
Why Does the Government Do Disinvestment?
To reduce financial burden: Government-owned companies require huge funds. Selling part of them raises money for the government to spend on healthcare, education, and infrastructure.
To promote competition: Private players are often more efficient. Allowing them to enter ensures better services and lower costs for consumers.
To raise liquidity: By selling shares in the market, more people get a chance to invest, which increases money circulation and boosts demand.
To fund long-term projects: Government uses the money from disinvestment to build roads, hospitals, schools, and invest in poverty reduction schemes.
Objectives of Disinvestment in India
Reduce fiscal burden: Helps in lowering fiscal deficit and improving financial stability of the country.
Improve efficiency of PSEs: Private ownership often brings innovation, modern technology, and better management.
Promote private ownership: Shifts companies from political influence to market-based operations.
Encourage competition: Breaks monopoly of government enterprises and gives space to private companies.
Fund social and development programs: Revenue raised is used in welfare schemes, infrastructure, healthcare, and education.
Depoliticise essential services: Ensures public services (like telecom, airlines) are run on business principles, not political decisions.
Expansion and diversification: Private investment helps companies grow and explore new opportunities.
Mains Key Points
Privatisation and disinvestment are key reforms for reducing government burden and improving efficiency.
They help in raising funds for social sectors while promoting private participation.
Disinvestment brings transparency and professionalism but can also lead to job losses if not managed properly.
Strategic disinvestment (complete transfer to private) is more controversial than partial disinvestment.
Balancing public welfare and private efficiency is the main challenge.
Prelims Strategy Tips
Privatisation = transferring ownership/management to private sector.
Disinvestment = reducing government stake in PSEs by selling shares.
DIPAM manages disinvestment in India.
Famous examples: Air India, BALCO, Hindustan Zinc.
Types of Disinvestment
Key Point
Disinvestment is when the government or a company reduces or sells its ownership in a business. It can be done in many ways – from selling shares in the market to handing over management control. Disinvestment helps raise money, improve efficiency, and reduce financial burden.
Disinvestment is when the government or a company reduces or sells its ownership in a business. It can be done in many ways – from selling shares in the market to handing over management control. Disinvestment helps raise money, improve efficiency, and reduce financial burden.
Detailed Notes (16 points)
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Types of Disinvestment Strategies
Market segmentation: If a division of the company is not performing well but still consumes equal resources as profitable divisions, the company may sell that part. This way, resources can be focused on divisions that generate more growth and profits.
Asset offloading: Sometimes, companies acquire assets (like factories, land, or brands) which later do not match their long-term goals. In such cases, they sell these assets to concentrate on their strengths.
Social and legal considerations: Disinvestment may be required for ethical or legal reasons. Example: A fund might stop investing in polluting industries due to environmental concerns, or a company may sell a unit if it holds too much market share (to maintain fair competition).
Methods of Disinvestment in India
Initial Public Offering (IPO): When a government-owned company (unlisted CPSE) offers its shares to the public for the first time.
Further Public Offering (FPO): When a listed CPSE or government sells more shares to the public after already being listed on the stock exchange.
Offer for Sale (OFS): A quick method where government promoters auction shares of CPSEs directly on stock exchange platforms. Widely used since 2012.
Strategic Sale: Government sells 50% or more of its ownership in a CPSE and transfers management control to private owners. This is a permanent type of disinvestment. Example: Air India sale.
CPSE Exchange Traded Fund (ETF): Like a basket of stocks. Government bundles shares of several CPSEs and sells them to investors at once. This spreads risk and attracts retail investors.
Cross-holding: One PSU buys government’s stake in another PSU, reducing the direct burden on the government to find private buyers.
Institutional Placement: Government directly sells shares to large financial institutions (like LIC, mutual funds, or banks).
Disinvestment vs Divestment
Disinvestment: Permanent reduction in ownership. Example: Government selling majority shares in Air India.
Divestment: Usually temporary. Done due to financial, social, or political reasons. Example: A fund withdrawing from a tobacco company because of health concerns, but not selling it forever.
Key difference: Disinvestment is long-term and permanent, while Divestment may be short-term or temporary.
Comparison: Disinvestment vs Divestment
| Aspect | Disinvestment | Divestment |
|---|---|---|
| Meaning | Permanent reduction in ownership or stake | Temporary withdrawal or reduction in stake |
| Reason | Government/companies need funds, efficiency, competition | Ethical, financial, or political pressures |
| Nature | Usually long-term or permanent | Usually short-term |
| Example | Government selling majority stake in Air India | Fund pulling out from tobacco industry due to health concerns |
Mains Key Points
Disinvestment is a major reform tool to raise funds, reduce fiscal burden, and promote efficiency.
Methods range from IPO and FPO to strategic sales of CPSEs.
Difference between Disinvestment and Divestment should be clearly understood.
Strategic sales are politically sensitive but can bring large efficiency gains.
Need to balance government revenue goals with safeguarding workers and national interest.
Prelims Strategy Tips
IPO, FPO, OFS, Strategic Sale, ETF are common methods of disinvestment.
Disinvestment = Permanent reduction in stake; Divestment = Temporary withdrawal.
DIPAM handles disinvestment process in India.
Core Industries of India & Index of Industrial Production (IIP)
Key Point
India’s economy has eight key 'core industries' which form the backbone of industrial growth. These sectors together account for more than 40% of the Index of Industrial Production (IIP). IIP is an important measure that tracks the overall industrial performance and shows how the manufacturing sector is growing.
India’s economy has eight key 'core industries' which form the backbone of industrial growth. These sectors together account for more than 40% of the Index of Industrial Production (IIP). IIP is an important measure that tracks the overall industrial performance and shows how the manufacturing sector is growing.
Detailed Notes (26 points)
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Core Industries of India
In India, there are 8 industries considered as ‘core industries’ because they are fundamental to industrial and economic growth.
These include: Electricity, Steel, Refinery Products, Crude Oil, Coal, Cement, Natural Gas, and Fertilizers.
Together, these industries contribute 40.27% weightage to the Index of Industrial Production (IIP).
Weightage of Core Industries in IIP
Petroleum & Refinery Products – 28.04%
Electricity Generation – 19.85%
Steel Production – 17.92%
Coal Production – 10.33%
Crude Oil Production – 8.98%
Natural Gas Production – 6.88%
Cement Production – 5.37%
Fertiliser Production – 2.63%
Recent Performance
In FY23 (till September 2022), the combined index of the eight core industries stood at 142.8.
Growth was mainly driven by coal, refinery products, fertilizers, steel, electricity, and cement industries.
Index of Industrial Production (IIP)
IIP is a monthly indicator that measures changes in the volume of production in different industries.
It shows the level of industrial activity and is a key economic indicator for the manufacturing sector.
Tracks data for 23 subgroups under manufacturing (e.g., textiles, electrical equipment, motor vehicles, wearing apparel, etc.).
Helps policymakers and economists assess growth trends, plan economic strategies, and adjust policies.
Importance of IIP
Reflects health of industrial sector in short-term.
Provides useful data for GDP estimation and policy formulation.
Shows sectoral trends – whether manufacturing is expanding, stagnating, or contracting.
Helps identify strong and weak areas of the economy.
Core Industries and Their Weightage in IIP
| Industry | Weightage (%) |
|---|---|
| Petroleum & Refinery Products | 28.04 |
| Electricity | 19.85 |
| Steel | 17.92 |
| Coal | 10.33 |
| Crude Oil | 8.98 |
| Natural Gas | 6.88 |
| Cement | 5.37 |
| Fertilizers | 2.63 |
Mains Key Points
Core industries form the backbone of India’s industrial growth and directly affect IIP.
Any slowdown in these sectors impacts overall GDP and employment.
IIP is a leading indicator for policymakers to track economic health.
Energy-related sectors (petroleum, electricity, coal) dominate the core industries.
Need for reforms in coal, oil, and natural gas to reduce import dependency and strengthen IIP.
Prelims Strategy Tips
There are 8 core industries with 40.27% weightage in IIP.
Highest weight: Petroleum & Refinery (28.04%).
Lowest weight: Fertilisers (2.63%).
IIP covers manufacturing, mining, and electricity; provides data for 23 subgroups.
Government Initiatives in Steel, Crude Oil and Natural Gas Sector
Key Point
The Government of India has introduced several policies and reforms to promote growth, attract foreign investment, and enhance competitiveness in the steel, crude oil, and natural gas sectors. These initiatives aim to reduce import dependence, boost domestic production, encourage recycling, and prepare India for growing energy demand.
The Government of India has introduced several policies and reforms to promote growth, attract foreign investment, and enhance competitiveness in the steel, crude oil, and natural gas sectors. These initiatives aim to reduce import dependence, boost domestic production, encourage recycling, and prepare India for growing energy demand.
Detailed Notes (21 points)
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Initiatives in the Steel Sector
100% FDI allowed under the automatic route in the steel sector, making India attractive for global investors. Between April 2000 and September 2022, Indian metallurgical industries attracted US$ 17.09 billion FDI.
New Industrial Policy Regime: Removed iron and steel from public sector reservation and compulsory licensing, opening the industry for private players.
Steel Scrap Recycling Policy (2019): Introduced to reduce imports by encouraging recycling of scrap steel. Supported by the Vehicle Scrappage Policy, which helps recycle old vehicles to reduce steel costs.
National Steel Policy (NSP) 2017: Aims to make India globally competitive by focusing on domestic consumption, high-quality production, and capacity addition. Key goals include:
Encouraging capacity expansion and cost-efficient production.
Ensuring raw material availability (iron ore, coking coal, natural gas).
Facilitating foreign investment and raw material asset acquisition.
Enhancing domestic steel demand.
Research & Development: Policies like Domestically Manufactured Iron and Steel Products (DMI&SP) and Quality Control Orders (QCO) for carbon steel, alloy steel, stainless steel, tin plate, etc. ensure higher quality standards.
RoDTEP Scheme: Steel products were included in the Remission of Duties and Taxes on Exported Products scheme, boosting steel exports and consumption in engineering goods.
Initiatives in Crude Oil and Natural Gas Sector
Oil & gas are part of India’s 8 core industries, crucial for energy security and economic growth. India is the 3rd-largest consumer of oil globally (as of 2021).
Crude Oil Production: Declined by 1.1% in Jan 2023 (year-on-year), with cumulative output dropping 1.3% between April–Jan FY23. India produced 29.7 million metric tonnes (MMT) in FY22.
Natural Gas Production: Increased by 5.3% in Jan 2023 (year-on-year), with cumulative output rising by 1.4% between April–Jan FY23.
Future Projections:
Oil demand projected to double to 11 million barrels per day by 2045.
Diesel demand expected to reach 163 MT by 2029–30, with diesel & gasoline covering 58% of oil demand by 2045.
Natural gas demand expected to grow by 25 BCM with 9% annual growth until 2024.
ONGC Investments: In May 2022, ONGC announced plans to invest US$ 4 billion (FY22–FY25) to expand exploration in India.
FDI in Oil & Gas: In July 2021, 100% FDI under automatic route was allowed in oil & gas Public Sector Units (PSUs) for projects approved by the Government.
Key Government Initiatives in Steel Sector
| Initiative | Objective |
|---|---|
| 100% FDI in Steel | Attract foreign investment |
| Steel Scrap Recycling Policy (2019) | Reduce imports and recycle steel |
| National Steel Policy (2017) | Enhance domestic demand, global competitiveness |
| DMI&SP Policy & QCO | Promote quality and R&D |
| RoDTEP Scheme | Boost steel exports and consumption |
Performance of Crude Oil and Natural Gas
| Commodity | Weight in IIP (%) | FY23 Performance |
|---|---|---|
| Crude Oil | 8.98 | Declined by 1.1% (Jan 2023) |
| Natural Gas | 6.88 | Increased by 5.3% (Jan 2023) |
Mains Key Points
Steel and energy sectors are key drivers of India’s industrial growth and core to IIP.
Policies like NSP 2017 and Steel Scrap Recycling Policy aim to reduce imports and improve competitiveness.
Crude oil and natural gas are critical for India’s energy security; India remains import-dependent.
Government has liberalised FDI norms to attract capital in steel and energy sectors.
Future challenge: balancing energy security with sustainability and environmental concerns.
Prelims Strategy Tips
100% FDI allowed in steel and oil & gas PSUs under automatic route.
National Steel Policy 2017 – Focus on global competitiveness and domestic demand.
Crude oil weight in IIP: 8.98%; Natural Gas: 6.88%.
India is 3rd largest oil consumer globally (2021).
Challenges and Government Initiatives in Oil and Gas Sector
Key Point
India’s oil and gas sector is the backbone of its energy needs. But India depends too much on imports, faces weak infrastructure, and uses old technology. The Government is taking steps like cutting fuel taxes, promoting ethanol blending, building a national gas pipeline network, and launching new policies such as HELP to boost domestic production.
India’s oil and gas sector is the backbone of its energy needs. But India depends too much on imports, faces weak infrastructure, and uses old technology. The Government is taking steps like cutting fuel taxes, promoting ethanol blending, building a national gas pipeline network, and launching new policies such as HELP to boost domestic production.
Detailed Notes (28 points)
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Challenges in Oil and Gas Sector
Dependence on Imports: India imports more than 80% of its crude oil. This means if global oil prices rise, India has to spend more, which increases inflation and trade deficit.
Low Domestic Production: Even though India has reserves, the oil and gas production inside the country is not enough to meet rising demand from industry, transport, and households.
Old Technology: Many oil fields in India were discovered decades ago. They now produce less and need modern drilling and extraction technology to increase efficiency.
Weak Infrastructure: Pipelines, refineries, storage tanks, and distribution systems are limited. This makes transportation costly and slows down energy supply.
Environmental Concerns: Oil and gas cause air pollution, greenhouse gas emissions, and land degradation. The sector faces global pressure to reduce its carbon footprint.
Government Initiatives to Overcome Challenges
Cutting Fuel Taxes: In May 2022, excise duty on petrol was reduced by ₹8/litre and diesel by ₹6/litre to lower consumer prices.
Ethanol Blending Policy: The target of mixing 20% ethanol with petrol was advanced from 2030 to 2025-26. Ethanol is cleaner, reduces pollution, and cuts import bills.
Refinery Expansion: In October 2021, the Numaligarh Refinery project was approved at ₹28,026 crore to increase capacity from 3 to 9 MMTPA, reducing import dependence.
100% FDI in Oil & Gas PSUs: In July 2021, full foreign investment under the automatic route was allowed to bring global funds and technology.
Compressed Biogas (CBG) Plants: The Government plans to set up 5,000 CBG plants by 2023. CBG is eco-friendly and can reduce oil use.
One Country, One Gas Network
By June 2022, 21,946 km of gas pipelines were operational and 13,262 km were under construction.
Target: Expand to 34,500 km by 2024–25, ensuring all states are connected by 2027.
CNG supply has already started in 221 geographical areas (GAs) as of Sept 2022.
Hydrocarbon Exploration and Licensing Policy (HELP), 2016
Goal: Reduce oil import by 10% and boost production.
Key Features:
Uniform Licence: One licence for exploring all hydrocarbon types (oil, gas, shale).
Open Acreage Licensing (OAL): Companies can study digital data and pick blocks any time without waiting for Government bidding rounds.
Revenue Sharing: Instead of profit-sharing (which led to disputes), companies now directly share revenue with Government. This is faster and more transparent.
National Data Repository (NDR)
A digital library of geological data started in 2017 under Directorate General of Hydrocarbons (DGH).
Both Indian and foreign companies can study this data and submit Expressions of Interest (EOI) anytime to bid for oil and gas blocks.
Expanding the National Gas Grid
At present, India has 16,788 km of pipelines operating and 14,239 km under development.
Goal: Build a connected network across the country so industries, power plants, and households can easily access natural gas at low cost.
Key Challenges in Oil and Gas Sector
| Challenge | Explanation |
|---|---|
| Import Dependence | Over 80% of oil needs imported, vulnerable to price hikes. |
| Low Domestic Output | Production not enough despite reserves. |
| Old Technology | Aging oil fields need modern tech for efficiency. |
| Infrastructure Gap | Limited pipelines and storage facilities. |
| Environmental Issues | Pollution and climate change concerns. |
Major Government Policies
| Policy/Initiative | Objective |
|---|---|
| Excise Duty Cut (2022) | Reduce fuel prices for consumers. |
| Ethanol Blending Policy | 20% blending by 2025-26 for cleaner fuel. |
| HELP (2016) | Boost oil & gas exploration with revenue sharing model. |
| National Data Repository | Digital data bank for exploration studies. |
| One Nation One Gas Grid | Connect all states via 34,500 km pipeline by 2027. |
Mains Key Points
India’s energy security is at risk due to heavy reliance on imports.
Government initiatives like HELP, ethanol blending, and biogas plants are steps towards self-reliance.
National Gas Grid expansion is crucial for inclusive energy access.
100% FDI liberalisation aims to attract global technology and capital.
The biggest long-term challenge is balancing growth with environmental sustainability.
Prelims Strategy Tips
India imports over 80% of crude oil – a key fact for exams.
HELP 2016 replaced NELP and introduced revenue-sharing model.
Ethanol blending target of 20% is now 2025–26, earlier 2030.
National Data Repository (NDR) launched in 2017 under DGH.
Fertilizers in India
Key Point
Fertilizers are chemical or organic substances that provide essential nutrients to plants. India is the second-largest consumer of fertilizers in the world after China, but it depends heavily on imports. The government has launched many schemes like Neem Coated Urea, Nano Urea, Nutrient-Based Subsidy, and One Nation One Fertilizer to ensure better use, reduce imports, and improve soil health.
Fertilizers are chemical or organic substances that provide essential nutrients to plants. India is the second-largest consumer of fertilizers in the world after China, but it depends heavily on imports. The government has launched many schemes like Neem Coated Urea, Nano Urea, Nutrient-Based Subsidy, and One Nation One Fertilizer to ensure better use, reduce imports, and improve soil health.
Detailed Notes (25 points)
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What are Fertilizers?
Fertilizers are natural (organic) or artificial (inorganic/chemical) substances added to soil or crops to provide nutrients needed for plant growth.
The three key nutrients are: Nitrogen (N), Phosphorus (P), and Potassium (K).
In India, fertilizers used are mainly Urea, DAP (Diammonium Phosphate), and MOP (Muriate of Potash).
India’s Fertilizer Usage
India uses about 25.6 million tonnes of fertilizers every year.
Nitrogen: 17 million tonnes
Phosphorus: 6 million tonnes
Potassium: 2.5 million tonnes
Urea is the most dominant fertilizer: 86% of production, 74% of consumption, and 52% of imports.
India is the 2nd largest consumer of Urea in the world after China.
India’s Fertilizer Market value in 2022 = USD 28.56 billion; expected to reach USD 41.08 billion by 2028 with 6.25% growth.
Challenges in Fertilizer Sector
Import Dependence: Almost 50% of fertilizers are imported. P & K fertilizers (Phosphatic and Potassic) are mostly fully imported.
High Subsidies: India spends nearly ₹1 lakh crore per year on subsidies, especially on Urea and DAP.
Soil Health Issues: Overuse of nitrogen fertilizers reduces micronutrients and makes soil less productive over time.
Government Initiatives
Neem Coated Urea (NCU): All Urea in India is mandatorily Neem coated. Benefits: improves yield, reduces pest attacks, lowers need for pesticides, and improves soil health.
New Urea Policy 2015: Aim is to maximize domestic production, improve energy efficiency, and reduce subsidy burden.
New Investment Policy 2012 (amended in 2014): Encourages new investments in Urea sector to make India self-reliant.
PM Krishi Sinchayee Yojana: Promotes efficient fertilizer use with micro-irrigation (like drip irrigation).
PM Kisan Samridhi Kendra (PMKSK): Existing fertilizer shops are being upgraded into one-stop shops for farmers, providing seeds, soil testing, and advice.
Nutrient Based Subsidy (NBS) Scheme: Subsidies given based on nutrient content (N, P, K, S) instead of per bag, to promote balanced use.
Nano Urea: A liquid form of urea that reduces import cost and increases crop yield. A bottle of nano urea can replace a big bag of normal urea.
One Nation One Fertilizer (ONOF): Introduced in 2022. All fertilizers (Urea, DAP, MOP, NPK) are sold under a single brand name 'Bharat Urea', 'Bharat DAP', etc., with common government logo. Aim is to ensure uniform branding and reduce confusion among farmers.
Mains Key Points
Fertilizer subsidies are high and put pressure on the fiscal budget.
India is import-dependent for Phosphatic and Potassic fertilizers.
Overuse of nitrogen fertilizers harms soil health.
Schemes like NBS, Neem-Coated Urea, and Nano Urea aim to reduce misuse and improve efficiency.
ONOF policy ensures standardization and transparency in fertilizer distribution.
Prelims Strategy Tips
Urea is the most used fertilizer in India – 74% of consumption.
India is the 2nd largest consumer of Urea after China.
Neem Coated Urea is compulsory in India.
NBS aims for balanced N:P:K ratio of 4:2:1.
One Nation One Fertilizer was introduced in 2022.
National Technical Textiles Mission (NTTM)
Key Point
NTTM is a Government of India initiative launched in 2020 with an outlay of ₹1480 crores for 4 years (2020–21 to 2023–24). It focuses on promoting technical textiles – special types of textiles used for functional purposes like medical, agriculture, sports, infrastructure, and defence – rather than for fashion or looks. The mission aims to boost India's domestic technical textile market and make India a global leader.
NTTM is a Government of India initiative launched in 2020 with an outlay of ₹1480 crores for 4 years (2020–21 to 2023–24). It focuses on promoting technical textiles – special types of textiles used for functional purposes like medical, agriculture, sports, infrastructure, and defence – rather than for fashion or looks. The mission aims to boost India's domestic technical textile market and make India a global leader.
Detailed Notes (34 points)
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What are Technical Textiles?
Technical textiles are materials and products manufactured primarily for performance and functionality, not for decoration or fashion.
Examples: medical bandages, crop protection nets, airbags in cars, fire-proof uniforms, sports gear, geotextiles used in road and dam construction.
These are widely used in agriculture, defence, sports, health, infrastructure, and environmental protection.
Categories of Technical Textiles (12 Types)
1. Agrotech – for agriculture (e.g., crop covers, shade nets).
2. Buildtech – for construction (e.g., roofing materials, concrete reinforcement fabrics).
3. Clothtech – for clothing components (e.g., interlinings, zip tapes).
4. Geotech – for soil, roads, dams (e.g., geogrids, geonets).
5. Hometech – for home furnishings (e.g., mattress fabrics, blinds).
6. Indutech – for industrial uses (e.g., conveyor belts, filtration fabrics).
7. Mobiltech – for automobiles, aerospace (e.g., airbags, seat belts).
8. Meditech – for healthcare (e.g., surgical gowns, masks, bandages).
9. Protech – for personal protection (e.g., fire-proof clothing, bulletproof vests).
10. Sportstech – for sports (e.g., sports shoes, artificial turf).
11. Oekotech – for environment (e.g., waste treatment fabrics, oil absorbent materials).
12. Packtech – for packaging (e.g., flexible packaging, sacks).
Key Features of NTTM
Approved in 2020 for 4 years (2020–21 to 2023–24).
Outlay: ₹1480 crores.
Ministry of Textiles is implementing the mission.
23 strategic research projects worth ~₹60 crores cleared in Specialty Fibres, Sustainable Textiles, Geotextiles, Mobiltech, and Sports textiles.
Objectives of NTTM
Increase penetration level of technical textiles in India from current 5–10% to match advanced countries (30–70%).
Expand India’s domestic technical textiles market from USD 40 billion to USD 50 billion by 2024.
Position India as a global leader in manufacturing and exporting technical textiles.
Promote innovation, R&D, and skill development in technical textiles sector.
Why Technical Textiles are Important
Support modern agriculture and reduce crop losses (Agrotech).
Strengthen infrastructure like roads, dams, and railways (Geotech).
Improve healthcare safety through medical disposables and PPE (Meditech, Protech).
Enhance defence and security with bulletproof jackets, fire-resistant uniforms (Protech).
Boost sports performance and industry growth (Sportstech).
Help in environment protection and waste management (Oekotech).
Mains Key Points
Technical textiles are critical for modern agriculture, healthcare, defence, and infrastructure.
India lags in penetration compared to developed countries (5–10% vs 30–70%).
NTTM aims to boost domestic market and global competitiveness.
Key challenge: low awareness, lack of domestic R&D, and dependence on imports.
Opportunity: India can become a global hub for technical textiles through innovation, skill development, and policy support.
Prelims Strategy Tips
NTTM launched in 2020 for 4 years with ₹1480 crore outlay.
India’s penetration of technical textiles = 5–10% (vs 30–70% in developed countries).
Objective: Expand domestic market from USD 40 bn to USD 50 bn by 2024.
There are 12 categories of technical textiles (Agrotech, Geotech, Meditech etc.).
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