ECONOMIC PLANNING AND DEVELOPMENT

Definition-Economic Planning
•Professor Robbins defines economic planning as “collective control or supervision of private
activities of production and exchange.”
•To Hayek, planning means, “the direction of productive activity by a central authority”.
•According to Dickinson who defines planning as “the making of major economic decisions-what
and how much is to be produced, how, when and where it is to be produced, to whom it is to be
allocated, by the conscious decision of a determinate authority, on the basis of comprehensive
survey of the economic system as a whole.”
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Economic Planning In India

Economic planning in India dates back to pre-Independence period when leaders of the
freedom movement and prominent industrialists and academics got together to discuss the
future of India after Independence which was soon to come.
Noted civil engineer and administrator M. Visvesvaraya is regarded as a pioneer of economic
planning in India. His book “Planned Economy for India” published in 1934 suggested a ten year
plan, with an outlay of Rs. 1000 crore and a planned increase of 600% in industrial output per
annum based on economic conditions of the time.

Economic Planning In India

The Industrial Policy Statement published just after independence in 1948 recommended setting
up of a Planning Commission and following a mixed economic model. Here are the major
milestones related to economic planning in India:
•Setting up of the Planning Commission: 15 March 1950
•First Five Year Plan: 9 July 1951
•Dissolution of the Planning Commission: 17 August 2014
•Setting up of NITI (National Institution for Transforming India) Aayog: 1 January 2015
The Planning Commission’s top down model of development had become redundant due to
present economic conditions and NITI Aayog approaches economic planning in a consultative
manner with input from various state governments and think tanks.

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Economic Planning In India

In order that economic planning might be successful, certain essential conditions are to be
fulfilled.
•Well-Defined Aims and Objectives
•Emerge Out of the Conscious Decisions
•Purposive Direction
•Carefully Fix the Targets
•Flexibility
•Enthusiasm
•Efficient Administrative System

Objectives of Plan­ning in India

(a) Economic Growth:
Attainment of higher rate of economic growth received topmost priority in almost all the
Five-Year Plans of the country. As the economy of the country was suffering from acute poverty
thus by attaining a higher rate of economic growth eradication of poverty is possible and the
standard of living of people can be improved.
(b) Attaining Economic Equality and Social Justice:
Reduction of economic inequalities and eradication of poverty are the second group of objective
of almost all the Five Year Plans of our country particularly since the Fourth Plan. Due to the
faulty approach followed in the initial part of our planning, economic inequality widened and
poverty became acute.
Under such a situation, the Fifth Plan adopted the slogan of ‘Garibi Hatao’ for the first time. The
Seventh Plan document shows that nearly 37.4 per cent of the total population of our country
was lying below the poverty line and the plan aimed to reduce this percentage of 29.2 per cent
by 1990.

Objectives of Plan­ning in India

(c) Achieving Full Employment
Five Year Plans of India gave importance on the subject to employment generation since the
Third Plan. Employment imparts dignity to human beings and is also an important means of
reducing poverty and inequalities. The objective of planning was raising the income levels of the
poorer sections of the society.
To achieve this target the major programmes which were introduced during this Plan were
Integrated Rural Development Programme (IRDP), the National Rural Employment Programme
(NREP), the Operation Flood II Dairy Development Project, schemes in the villages and small
industries sector the national Scheme of Training Rural Youth for Self Employment (TRYSEM)
and various other components of the Minimum Needs Programme.

Objectives of Plan­ning in India

(d) Self-Reliance:
Plans also aimed at “self-reliance”. It intented to deal with the freedom from the need to import
and therefore focused on a policy of “import substitution” regardless of its cost. This objective
was to develop “ability to pay for our imports through our export earnings” and also to develop
export capacity and competitive strength in international markets.
Although India achieved self-sufficiency in respect of food-grains but it has not yet achieved self-
sufficiency in respect of edible oil. A number of import substitute industries particularly basic and
capital goods industries were developed but huge import of petroleum oil along with some other
items created a serious drain on foreign exchange reserves leading to a depletion of foreign
exchange reserves

Objectives of Plan­ning in India

(f) Industrialization & Modernisation of Various Sectors
Another very important objective of Five-Year Plans of our country was the modernization of
various sectors and more specifically the modernization of agricultural and industrial sectors.
The Sixth Plan categorically mentioned this objective of modernization for the first time where
modernization meant those structural and institutional changes in economic activities which can
transform a economy into a progressive and modern economy. Thus through modernization
economy may be diversified.
It required setting up of various types of industries and advancement of technology. In the mean
time some sort of modernization always goes against employment generation thus the country
is faced a conflict between the objective of modernization and the objective of removal of
unemployment and poverty.

First Five-year Plan: 1951- 1956

Objective:
Rehabilitation of refugees, rapid agricultural development to achieve food self-sufficiency in the
shortest possible time and control of inflation.

Assessment
Targets and objectives more or less achieved. With an active role of the state in all economic
sectors. Five Indian Institutes of Technology (IITs) were started as major technical institutions.
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Second Five-year Plan: 1956-1961

Objective:. ‘Rapid industrialisation with particular emphasis on the development of basic and
heavy industries. Industrial Policy of 1956 accepted the establishment of a socialistic pattern of
society as the goal of economic policy.
Assessment: It could not be implemented fully due to the shortage of foreign exchange. Targets
had to be pruned. Yet, Hydroelectric power projects and five steel mills at Bhilai, Durgapur, and
Rourkela were established.

Third Five-year Plan: 1961-1966

Objective:‘Establishment of a self-reliant and self-generating economy
Assessment: ’Failure. Wars and droughts. Yet, Panchayat elections were started.• State
electricity boards and state secondary education boards were formed
When the third Five Year Plan came into motion many things changed. A Sino-Indian war took
place in 1962 and the government’s focus shifted to Defense Sector. After having fought a war
with Pakistan between 1965 to 1966 India had took a major hit in the economy and soon after
that was a severe drought that further exacerbated the situation. Finally, inflation hit India which
was due the effects of war and drought,
the focus of the Planning commission was to control the prices. The government had targeted
growth rate of 5.6 percent but due to huge failure of this plan, the growth rate was around 2.4
percent only.
The government had to finally announce a Plan Holiday action plan which was a contingency
plan that ran from 1966–67, 1967–68, and 1968–69.

Plan Holidays: 1966-1969

Objective: Crisis in agriculture and serious food shortage required attention
Assessment: A new agricultural strategy was implemented. It involved the distribution of
high-yielding varieties of seeds, extensive use of fertilizers, exploitation of irrigation potential
and soil conservation measures.

Fourth Five year Plan: 1969-1974

Objective: ‘Growth with Stability’ and progressive achievement of self-reliance, Garibi Hatao
Target
Assessment: Was ambitious. Failure. Achieved growth of 3.5 percent but was marred by
Inflation. The Indira Gandhi government nationalized 14 major Indian banks and the Green
Revolution in India advanced agriculture.

Fifth Five year Plan: 1974-1979

Objective: ‘Removal of poverty and attainment of self-reliance’
Assessment: High inflation. Yet, the Indian national highway system was introduced for the first
time.
Sixth Five-year Plan: 1980-1985
Objective:‘direct attack on the problem of poverty by creating conditions of an expanding
economy’
Assessment: Most targets achieved. Growth: 5.5 percent.
Family planning was also expanded in order to prevent overpopulation.

Seventh Five year Plan: 1985-1990

Objective: Emphasis on policies and programs that would accelerate the growth in foodgrains
production, increase employment opportunities and raise productivity
Assessment: With a growth rate of 6 pc, this plan was proved successful in spite of severe
drought conditions for the first three years consecutively. This plan introduced programs like
Jawahar Rozgar Yojana.
Annual Plans : 1990–1992
The Eighth Plan could not take off in 1990 due to the fast changing economic situation at the
Centre and the years 1990–91 and 1991–92 were treated as Annual Plans. No plan due to
political uncertainties
The Eighth Plan was finally formulated for the period 1992–1997.. It was the beginning of
privatization and liberalization in India.

Eighth Five-year Plan : 1992-1997

Objective: Rapid economic growth, high growth of agriculture and allied sector, and the
manufacturing sector, growth in exports and imports, improvement in trade and current account
deficit. to undertake an annual average growth of 5.6%
Assessment :An average annual growth rate of 6.78% against the target 5.6% was achieved.
Ninth Five-year Plan : 1997-2002
Quality of life, generation of productive employment, regional balance and self-reliance. Growth
with social justice and equality. growth target 6.5%
It achieved a GDP growth rate of 5.4%, lower than the target. Yet, industrial growth was 4.5%
which was higher than targeted 3%. The service industry had a growth rate of 7.8%. An
average annual growth rate of 6.7% was reached.

Tenth Five-year Plan :2002 –2007

Objective: To achieve 8% GDP growth rate, Reduce poverty by 5 points and increase the
literacy rate in the country.
Assessment : It was successful in reducing the poverty ratio by 5%, increasing forest cover to
25%, increasing literacy rates and the economic growth of the country over 8%.

Eleventh Five-year Plan: 2007-2012

Objectives OF Eleventh Five Year Plan

The objectives for the Eleventh Five Year Plan are spelt out as under:-

• To achieve an overall growth rate of 7.6%. This is envisaged to be achieved through 5%

growth in agriculture and allied sectors, 10% growth in industry and 8% growth in service sector.
• To reduce poverty levels from 38% to 25%

• To achieve the literacy rate of 84% by the end of the Plan and reduce gender gap in literacy to
14%.
• To achieve reduction in drop out rate from 46.8% in 2003-04 to 20% by 2011-12 and eliminate
gender disparity in elementary education. • To bring down population growth rate to 1.62% by
2012.
• To improve health parameters-reduce Maternal Mortality Ratio (MMR)
• To improve the sex ratio (0–6 y years) to 950 females per 1000 males. • To reduce malnutrition
to 30% and anemia to 30%.
• To provide sustainable access to safe potable drinking water to all independent habitations.
• To empower women through their socio-economic development and increased participation in
decision making on matters that directly affect them.
• To strengthen social, economic and political empowerment of weaker sections of the society
through welfare of SCs/STs, OBCs, minorities and poor.
• To expand present irrigation facilities at least by 10.61 lakh hectares through conservation,
efficient utilization and development of water resources.

Twelfth Five year Plan: 2012-2017

Objective: “faster, sustainable and more inclusive growth”. Raising agriculture output to 4
percent. Manufacturing sector growth to 10 %
The target of adding over 88,000 MW of power generation capacity.

Planning Commission
The Planning Commission was set up by a Resolution of the Government of India in March
1950 in pursuance of declared objectives of the Government to promote a rapid rise in the
standard of living of the people by efficient exploitation of the resources of the country,
increasing production and offering opportunities to all for employment in the service of the
community.
The Planning Commission was charged with the responsibility of making assessment of all
resources of the country, augmenting deficient resources, formulating plans for the most
effective and balanced utilisation of resources and determining priorities. Jawaharlal Nehru was
the first Chairman of the Planning Commission.

Functions
The 1950 resolution setting up the Planning Commission outlined its functions as to:
a.Make an assessment of the material, capital and human resources of the country, including
technical personnel, and investigate the possibilities of augmenting such of these resources as
are found to be deficient in relation to the nation’s requirement;
b.Formulate a Plan for the most effective and balanced utilisation of country's resources;
c.On a determination of priorities, define the stages in which the Plan should be carried out and
propose the allocation of resources for the due completion of each stage;
d.Indicate the factors which are tending to retard economic development, and determine the
conditions which, in view of the current social and political situation, should be established for
the successful execution of the Plan;
e.Determine the nature of the machinery which will be necessary for securing the successful
implementation of each stage of the Plan in all its aspects;
f.Appraise from time to time the progress achieved in the execution of each stage of the Plan
and recommend the adjustments of policy and measures that such appraisal may show to be
necessary; and
g.Make such interim or ancillary recommendations as appear to it to be appropriate either for
facilitating the discharge of the duties assigned to it, or on a consideration of prevailing
economic conditions, current policies, measures and development programmes or on an
examination of such specific problems as may be referred to it for advice by Central or State
Governments.

GREEN REVOLUTION
•At the time of its independence, India was an agricultural dependent economy. And yet the
state of Indian agricultural sector was dismal. From the lack of investment, a dearth of
technology, low yield per acre and many such problems plagued the industry. And so, the Indian
government took steps to bring about the Green Revolution,
•The Green Revolution started in 1965 with the first introduction of High Yielding Variety (HYV)
seeds in Indian agriculture. This was coupled with better and efficient irrigation and the correct
use of fertilizers to boost the crop. The end result of the Green Revolution was to make India
self-sufficient when it came to food grains.
•After 1947 India had to rebuild its economy. Over three-quarters of the population depended on
agriculture in some way. But agriculture in India was faced with several problems. Firstly, the
productivity of grains was very low. And India was still monsoon dependent because of lack of
irrigation and other infrastructure.
•There was also an absence of modern technology. And India had previously faced severe
famines during the British Raj, who had only promoted cash crops instead of food crops. The
idea was to never depend on any other country for food sufficiency.
•So in 1965, the government with the help of Indian geneticists M.S. Swaminathan, known as
the father of Green Revolution, launched the Green Revolution.

Features of the Green Revolution

•The introduction of the HYV seeds for the first time in Indian agriculture. These seeds had more
success with the wheat crop and were highly effective in regions that had proper irrigation. So,
the first stage of the Green Revolution was focused on states with better infra – like Punjab and
Tamil Nadu.
•During the second phase, the HYV seeds were given to several other states. And other crops
than wheat were also included into the plan
•One basic requirement for the HYV seeds is proper irrigation. Crops from HYV seeds need
alternating amounts of water supply during its growth. So, the farms cannot depend on
monsoons. The Green Revolution vastly improved the inland irrigation systems around farms in
India.
•The emphasis of the plan was mostly on food grains such as wheat and rice. Cash crops and
commercial crops like cotton, jute, oilseeds etc. were not a part of the plan
•Increased availability and use of fertilizers to enhance the productivity of the farms
•Use of pesticides and weedicides to reduce any loss or damage to the crops
•And finally, the introduction of technology and machinery like tractors, harvesters, drills etc.
This helped immensely to promote commercial farming in the country.

Market Surplus
•The Green Revolution by and far was a success. But now there was another aspect to it. The
government had to ensure that the benefit of the higher productivity was passed on to the
general public. If the farmers kept the grains for themselves then the benefit of the higher
productivity would be lost.
•But thankfully this did not happen. Due to the high yield and productivity of the farms, the
farmers started selling their produce in the markets. The portion of the produce which is sold by
them is known as market surplus.
•And so, the higher output caused due to the Green Revolution started benefiting the economy.
There was a decline in the prices of grains and such food products. The common man was able
to easily afford to buy them. The government was even able to stock grains and build a food
bank in case of future food shortages.

Positive Impacts of Green Revolution

•Tremendous Increase in Crop Produce: It resulted in a grain output of 131 million tonnes in the
year 1978-79 and established India as one of the world's biggest agricultural producers.
•The crop area under high yielding varieties of wheat and rice grew considerably during the
Green Revolution.
•Reduced Import of Food-Grains: India became self-sufficient in food-grains and had sufficient
stock in the central pool, even, at times, India was in a position to export food-grains.
•The per capita net availability of food-grains has also increased.
•Benefits to the Farmers: The introduction of the Green Revolution helped the farmers in raising
their level of income.
Farmers ploughed back their surplus income for improving agricultural productivity.
The big farmers with more than 10 hectares of land were particularly benefited by this revolution
by investing large amounts of money in various inputs like HYV seeds, fertilizers, machines, etc.
It also promoted capitalist farming.
Positive Impacts of Green Revolution
•Industrial Growth: The Revolution brought about large scale farm mechanization which created
demand for different types of machines like tractors, harvesters, threshers, combines, diesel
engines, electric motors, pumping sets, etc.
•Besides, demand for chemical fertilizers, pesticides, insecticides, weedicides, etc. also
increased considerably.

•Rural Employment: There was an appreciable increase in the demand for labour force due to
multiple cropping and use of fertilizers.
•The Green Revolution created plenty of jobs not only for agricultural workers but also industrial
workers by creating related facilities such as factories and hydroelectric power stations.
•

FAILURES of Green Revolution

•Non-Food Grains Left Out : Although all food-grains including wheat, rice, jowar, bajra and
maize have gained from the revolution, other crops such as coarse cereals, pulses and oilseeds
were left out of the ambit of the revolution.
Major commercial crops like cotton, jute, tea and sugarcane were also left almost untouched by
the Green Revolution.

•Limited Coverage of HYVP: High Yielding Variety Programme (HYVP) was restricted to only
five crops: Wheat, Rice, Jowar, Bajra and Maize.
•Therefore, non-food grains were excluded from the ambit of the new strategy.
•The HYV seeds in the non-food crops were either not developed so far or they were not good
enough for farmers to risk their adoption.

Negative Impacts of Green Revolution

•Regional Disparities:
Green Revolution technology has given birth to growing disparities in economic development at
inter and intra regional levels.
•It has so far affected only 40 percent of the total cropped area and 60 per cent is still untouched
by it.
•The most affected areas are Punjab, Haryana and western Uttar Pradesh in the north and
Andhra Pradesh and Tamil Nadu in the south.
•It has hardly touched the Eastern region, including Assam, Bihar, West Bengal and Orissa and
arid and semi-arid areas of Western and Southern India.
Negative Impacts of Green Revolution
•Excessive Usage of Chemicals: The Green Revolution resulted in a large-scale use of
pesticides and synthetic nitrogen fertilisers for improved irrigation projects and crop varieties.
•However, little or no efforts were made to educate farmers about the high risk associated with
the intensive use of pesticides. Pesticides were sprayed on crops usually by untrained farm
labourers without following instructions or precautions.
•This causes more harm than good to crops and also becomes a cause for environment and soil
pollution.
•Water Consumption: The crops introduced during the green revolution were water-intensive
crops.
•Most of these crops being cereals, required almost 50% of dietary water footprint.
•Canal systems were introduced, and irrigation pumps also sucked out the groundwater to
supply the water-intensive crops, such as sugarcane and rice, thus depleting the groundwater
levels.
•Punjab is a major wheat- and rice-cultivating area, and hence it is one of the highest water
depleted regions in India.

Negative Impacts of Green Revolution

•Impacts on Soil and Crop Production: Repeated crop cycle in order to ensure increased crop
production depleted the soil's nutrients.
To meet the needs of new kinds of seeds, farmers increased fertilizer usage.
Toxic chemicals in the soil destroyed beneficial pathogens, which further led to the decline in the
yield.
•Unemployment: Except in Punjab, and to some extent in Haryana, farm mechanization under
the Green Revolution created widespread unemployment among agricultural labourers in the
rural areas.
The worst affected were the poor and the landless labourers.
•Health Hazards: The large-scale use of chemical fertilizers and pesticides such as
Phosphamidon, Methomyl, Phorate, Triazophos and Monocrotophos resulted in a number of
critical health illnesses including cancer, stillborn babies and birth defects.

Achievements of 2nd phase Green Revolution

•Started by prime minister Indira Gandhi in 1973 and ended in 1980

•The HYV seeds got nationwide extension and crops were benefited
•Extended the role of state in key areas of economic management
•Food grain produce was low (7.7%) due to droughts of 1972-73 and dependent on food grain
imports
•Increased fertilizer subsidies were provided to farmers
White Revolution In India - Operation Flood
The Government of India initiated Operation Flood known as the White Revolution after
witnessing the huge success of the Green Revolution that resulted in an immense increase in
the production of wheat and rice. White revolution in India started with a motive of increasing
milk production to make the country one of the largest producers of milk in the world.

What is the White Revolution?

•Operation Flood is the program that led to “White Revolution.” It created a national milk grid
linking producers throughout India to consumers in over 700 towns and cities and reducing
seasonal and regional price variations while ensuring that producers get a major share of the
profit by eliminating the middlemen. At the bedrock of Operation Flood stands the village milk
producers’ co-operatives, which procure milk and provide inputs and services, making modern
management and technology available to all the members.
•The revolution associated with a sharp increase in milk production in the country is called the
White Revolution in India also known as Operation Flood. White revolution period intended to
make India a self-dependent nation in milk production. Today, India is the world’s largest
producer of milk and Dr Verghese Kurien is known as the father of the White Revolution in India.

History Of White Revolution

•During the year 1964-1965, the Intensive Cattle Development Programme was introduced in
India in which the cattle owners were provided with a package of improved animal husbandry for
promoting the white revolution in the country. Later on, the National Dairy Development Board
introduced a new programme named “operation flood” to increase the speed of the white
revolution in the country.
•Operation Flood started in the year 1970 and was aimed to create a nationwide milk grid. It was
a rural development programme initiated by NDDB – National Dairy Development Board of
India.

Features Of White Revolution

•Adopting new methods for animal husbandry, and
•Altering the composition of feed ingredients in different proportions.
Objectives Of White Revolution in India
•Village milk producers cooperatives laid the foundation of the operation flood. With the optimum
use of modern technology and management, they procured milk and provided the services.
•White Revolution had the objectives as stated below:
•Creating a flood of Milk by Increase production
•Increase the incomes of the rural population
•Provide milk to consumers at fair prices
•When Operation Flood was implemented, Dr Verghese Kurien- the chairman of the National
Dairy Development Board. With his sheer management skills, Dr Kurien pushed forward the
cooperatives to empower the revolution. Thus, he is considered the architect of India’s ‘White
Revolution

ACHIEVEMENTS-WHITE REVOLUTION
White Revolution is as important to dairy development as the Green Revolution has been to
grain production. Its outcome is based on the improvement in cattle breeding and adoption of
new technology. Some of the important achievements of the White Revolution are as under
•1. The White Revolution made a profound impact on rural masses and encouraged them to
take up dairying as a subsidiary occupation.
•2. India has become the leading producer of milk in the world. The milk production that was
about 17 million tons in 1950-51 rose to over 105 million tons in 2007-08. The production of milk
has gone up by more than six times when compared with that of the Pre-Independence
situation.
•4. The import of milk and milk production has been reduced substantially.

ACHIEVEMENTS-WHITE REVOLUTION
•5. The small and marginal farmers and the landless laborers have been especially benefitted
from the White Revolution.
• 6. To ensure the success of Operation Flood Programme, research centers have been set up
at Anand, Mehsana, and Palanpur (Banaskantha). Moreover, three regional centers are
functioning at Siliguri, Jalandhar, and Erode. Presently, there are metro dairies in 10
metropolitan cities of the country, besides 40 plants with the capacity to handle more than one
lakh liters of milk.
•7. To improve the quality of livestock, extensive crossbreeding has been launched.
•8. For ensuring the maintenance of disease-free status, major health schemes have been
initiated.

PROBLEMS-WHITE REVOLUTION
•The “Operation Flood” launched in 1975 brought a ‘White Revolution’ catapulting India as the
largest producer of milk. It sounds good that in India, per capita availability of milk is over 300
grams per day against world average of 294 grams. Unfortunately, however, the human greed
has led to adulteration in milk endangering health.
•The milk that we drink is adulterated with detergents, caustic soda, hydrogen peroxide that is
used in bleach, urea that is commonly used in fertilizer, aflatoxin and paint. The nationwide
survey conducted by India’s food regulator Food Safety and Standards Authority of India
(FSSAI) covering all Indian States and UTs has shown that about 41 per cent samples, fall short
of one or another quality parameter.
•The data released by the Federation of Indian Animal Protection Organization (FIAPO) is
equally alarming and its investigative report reveals that cows raised in dairies across India are
treated like milk-producing machines, pumped with antibiotics and hormones to produce more
milk. The result is that humans who drink milk are more susceptible to developing heart disease,
diabetes, cancer, and many other ailments.

TRADING HOUSES IN INDIA

WHAT IS A TRADING HOUSE?

•A trading house is a business that specializes in facilitating transactions between a home
country and foreign countries. A trading house is an exporter, importer and also a trader that
purchases and sells products for other businesses. Trading houses provide a service for
businesses that want international trade experts to receive or deliver goods or services.
•A trading house may also refer to a firm that buys and sells commodities on behalf of
customers and for their own accounts. Prominent commodity trading houses include Cargill,
Vitol and Glencore.
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FEATURES OF TRADING HOUSES

•Trading houses are intermediaries used by manufacturers to facilitate trade in a foreign
location.
•Trading houses offer a variety of services, from serving as agents for the manufacturer in the
foreign market to easing the import-export process through connections with local liaisons.
•Although a retailer has to pay a marked-up price for products imported or sold through a trading
house, it can avoid the hassles of importing and benefit from trading houses' expertise in foreign
markets, discounted rates, and currency exchange complications.

ADVANTAGES OF TRADING HOUSES

•ECONOMIES OF SCALE
A trading house typically has a large portfolio of clients that provide economies of scale benefits.
For example, a large trading house can use its significant buying power to receive discounts
from manufacturers and suppliers. A trading house can also reduce transportation costs if it
ships to customers in large quantities.
•INTERNATIONAL FOOTHOLD
Trading houses have an extensive network of contacts in international markets that help them
secure favorable deals and find new customers. They may also have staff working in foreign
offices to work with customs officials and manage legal issues to ensure the smooth operation
of the business.
•CURRENCY MANAGEMENT
Because a trading house is continually importing and exporting products, they have expertise in
managing currency risk. Trading houses use risk management techniques, such as hedging, to
avoid getting exposed to adverse currency fluctuations.

Trade Unions

● What is a Trade Union?

•Labour unions or trade unions are organizations formed by workers from related fields that
work for the common interest of its members.
•Help workers in issues like fairness of pay, good working environment, etc.
•Purpose is to look into the grievances of wagers and present a collective voice in front of the
management.
•Acts as a medium of communication between the workers and the management.
•These trade unions perform various other key principle functions.

● Functions of Trade Unions

Militant Functions
•Achieve higher wages and better working conditions
•Raise the status of workers
•Protect labourers against injustice
Fraternal functions
•Welfare measures to improve morale of workers
•Generate social confidence among workers
•Encourage sincerity and discipline
•Provide opportunities for promotion and growth
Social Functions
•Welfare activities
•Education
•Scheme and procedure for redressing their grievances
•Publication of periodicals
•Research
Political Functions
•Affiliation of union with political parties
•Seeking help during strikes
 ● Trade Union Act, 1926 and its Objectives

The Indian Trade Union Act, 1926, is the principle act which controls and regulates the
mechanism of trade unions. In India, political lines and ideologies influence trade union
movements.
The important objectives are:
To regulate terms and conditions of employment
To improve the working conditions at work place
To raise the living standard of the workers
To prevent exploitation of workers by the management
To help in maintenance of discipline of organization/industry
To ensure proper implementation of personnel and welfare policies
To replace managerial dictatorship by worker's democracy

● Reasons for Joining Trade Unions

Minimize Discrimination
Platform for self expression
Sense of Participation
Better training
Collective Bargaining
Betterment of self relationship
Sense of Security
Registration of Trade Unions

● Registration of trade unions

01
Mode of Registration
02
Application for Registration
03
Provisions to be contained
04
Registration
05
Certificate of Registration
06
Cancellation of Registration

● Recognition of Trade Unions

•Recognition is the process through which the employer accepts a particular trade union as
having a representative character.
•The employer agrees to negotiate with the union the matters of pay and working condition.
•Recognition may be voluntary or statutory.
•Voluntary recognition – without the use of any legal procedures.
•Statutory recognition – with the use of legal procedures.

● LAB O U R
L E G I S L AT I O N &
SOCIAL
SECURITIES

W HAT I S
LAB O U R LE G I S LAT I O N ?
Labour Legislation’ refers to all laws of the government to provide social and economic security
to the workers. These acts are aimed at reduction of production losses due to industrial disputes
and to ensure timely payment wages and other minimum amenities to workers.
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● OBJECTIVES
ONE
To protect the workers from profit seeking exploiters
TWO
To promote cordial industrial relations between employers and
employees.
THREE
To preserve the health safety and welfare of workers
FOUR
To product the interests of women and children working in
the factories

● Principles of Labour
Legislations:
1.Social justice 2.Social equality 3.Social security
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● ELEMENTS OF
L A B O U R L E G I S L AT I O N
The basic subject matter of labour law can be considered under nine broad heads: employment;
individual employment relationships; wages and remuneration; conditions of work; health,
safety, and welfare; social security; trade unions and industrial relations; the administration of
labour law; and special provisions for particular occupational or other groups.

W HAT I S
SOCIAL SECURITIES?

Social security is the protection which society provides for its members through a series of
public measure, against the economic and social distress that otherwise would be caused by
the substantial stoppage of earning resulting from Sickness, Maternity, Injury, Unemployment,
Old age and death.

● S O C I A L SECURITY BENEFITS

MEDICAL CARE
SICKNESS BENEFITS
SURVIVORBENEFITS
RETIREMENT BENEFITS
DISABIITY BENEFITS
MATE R N ITY B E N E F ITS

Types of Social Security programmes

▪Sukanya Samriddhi Yojana
▪National Pension Scheme
▪Pradhan Mantri Jan Dhan Yojana
▪Public Provident Fund (PPF)
▪National Savings Certificate (NSC)
▪Atal Pension Yojana
▪Pradhan Mantri Jeevan Jyoti Bima Yojana

International Labour Organization

The only tripartite U.N. agency, since 1919 the ILO brings together governments, employers
and workers of 187 member States , to set labour standards, develop policies and devise
programmes promoting decent work for all women and men.

INDUSTRIAL DISPUTES
 ● INDUSTRIAL DISPUTES
There are conflicts between employers and workers
These conflicts (disputes) have different forms.From the side of workers, the protests may be in
the form of: strikes, go slow, gheraos, demonstration etc.
From the side of employers, it could be in the form of : retrenchment, dismissals, lockouts etc.
Industrial disputes result in loss of production and decline in national income
It is, therefore, in interest of all, to look into factors responsible (causes) for such disputes and
the methods used to remove them.

● INDUSTRIAL DISPUTES
According to Section 2 (k) of the Industrial Disputes Act, 1947, the term ‘industrial dispute’
means “any dispute or difference between employers and employers or between employers and
workmen, or between workmen and workmen, which is connected with the employment or non-
employment or the terms of employment and conditions of employment of any person”.

● Forms of Industrial Disputes

Strikes: Strike is the most important form of industrial disputes. A strike is a spontaneous and
concerted withdrawal of labour from production. The Industrial Disputes Act, 1947 defines a
strike as “suspension or cessation of work by a group of persons employed in any industry,
acting in combi­nation or a concerted refusal or a refusal under a common understanding of any
number of persons who are or have been so employed to continue to work or accept
employment”.
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● Forms of Industrial Disputes

Lock-Outs:Lock-out is the weapon available to the employer to shut-down the place of work till
the workers agree to resume work on the conditions laid down by the employer. The Industrial
Disputes Act, 1947 defined lock-out as “the temporary shutting down or closing of a place of
business by the employer”.
Gherao:Gherao means to surround. It is a physical blockade of managers by encirclement
aimed at preventing the egress and ingress from and to a particular office or place. This can
happen outside the organisational premises too. The managers / persons who are gheraoed are
not allowed to move for a long time.

● Forms of Industrial Disputes

Picketing and Boycott:
Picketing is a method designed to request workers to withdraw co­operation to the employer. In
picketing, workers through display signs, banners and play-cards drew the attention of the
public that there is a dispute between workers and employer.
Boycott, on the other hand, aims at disrupting the normal functioning of the organisation. The
striking workers appeal to others for voluntary withdrawal of co-operation with the employer.

● Causes of Industrial Disputes

Workers demand for bonus the increase in bonus: There is an increasing feeling among workers
that they should have greater share in the profits. Non-acceptance of this fact by the employers
becomes a source of friction;
Demand for improved working conditions – such as normal working hours, lunch time, holidays
and leaves, better occupational health & safety measures at workplace, drinking water, clean
washrooms, medical facilities, canteens, restrooms, etc. – their absence or lacking may cause
workers protest.
(i) Economic causes, and
(ii) Non-economic causes.

● Causes of Industrial Disputes

Economic causes include:
(i) Wages,
(ii) Bonus,
(iii) Dearness allowance,
(iv) Conditions of work and employment,
(v) Working hours,
(vi) Leave and holidays with pay, and
(vii) Unjust dismissals or retrenchments.

● Causes of Industrial Disputes:

Non-economic causes include:
(i) Recognition of trade unions,
(ii) Ill-treatment by supervisory staff,
(iii) Sympathetic strikes,
(iv) Political causes, etc.
Labour retrenchment or dismissal: Non-implementation of Labour Acts, awards and
agreements, standing orders by the employers;
Workers indiscipline and violence resulting into lockouts. When the managements think that
labour productivity has failed to rise commensurating with the rise in wages, consequently, the
managements think that it is better to close down than pay inflated wages to undisciplined
labour force

● Prevention of Industrial Disputes

The consequences of an Industrial dispute will be harmful to the owners of industries, workers,
economy and the nation as a whole, which results in loss of productivity, profits, market share
and even closure of the plant. Hence, Industrial disputes need to be averted by all means.
Prevention of Industrial disputes is a pro-active approach in which an organisation undertakes
various actions through which the occurrence of Industrial disputes is prevented. Like the old
saying goes, “prevention is better than cure”.

● Prevention of Industrial Disputes

1. Model Standing Orders: Standing orders define and regulate terms and conditions of
employment and bring about uniformity in them. They also specify the duties and responsibilities
of both employers and employees thereby regulating standards of their behavior. Therefore,
standing orders can be a good basis for maintaining harmonious relations between employees
and employers.
Code of Industrial discipline: The code of Industrial discipline defines duties and responsibilities
of employers and workers. The objectives of the code are:
•To secure settlement of disputes by negotiation, conciliation and voluntary arbitration.
•To eliminate all forms of coercion, intimidation and violence.
•To maintain discipline in the industry.
•To avoid work stoppage.
•To promote constructive co-operation between the parties concerned at all levels.

● Prevention of Industrial Disputes

•Works Committee: Administration of welfare & fine funds.
•Educational and recreational activities.
•Safety and accident prevention
•Occupational diseases and protective equipment.
•Conditions of work such as ventilation, lightening, temperature & sanitation including toilets and
urinals.
•Amenities such as drinking water canteen, dining rooms, medical & health services.

● Prevention of Industrial Disputes

Joint Management Councils: Just to make a start in labour participation in management, the
govt: suggested in its Industrial Resolution 1956 to set up joint management councils. It consists
of equal numbers of workers and employers (minimum 6 & maximum 12) decisions of the JMC
should be unanimous and should be implemented without any delay. JMC members should be
given proper training. JMC should look after 3 main areas:-
1.information sharing
2.consultative
3.administrative

● Prevention of Industrial Disputes

Collective Bargaining: Collective Bargaining is a process in which the representatives of the
employer and of the employees meet and attempt to negotiate a contract governing the
employer-employee-union relationships. Collective Bargaining involves discussion and
negotiation between two groups.
 ● Prevention of Industrial Disputes
Labour welfare officer: The factories Act, 1948 provides for the appointment of a labour welfare
officer in every factory employing 500 or more workers. The officer looks after all facilities in the
factory provided for the health, safety and welfare of workers. He maintains liaison with both the
employer and the workers, thereby serving as a communication link and contributing towards
healthy industrial relations through proper administration of standing orders, grievance
procedure etc.

● Settlement of Industrial Disputes

Under the Industrial Dispute Act (IDA), 1947, the following arrangement exists for the prevention
and settlement of industrial disputes: -
Works Committees – these are joint committees comprising members from both, management
and the workers, and is set up in order to promote harmonious relations between the two
groups. These committees provide a forum for negotiations between workers and management
at the factory level.
Conciliation - under this, all establishments employing 50 workers or more, are required to
establish Grievance Settlement Authority (GSA). All labour disputes have to be initially referred
to it. If the decision of the GSA is not acceptable to all the concerned parties, then it is referred
to a conciliation officer appointed by the Government for the purpose.

● Settlement of Industrial Disputes

If a settlement is arrived, the conciliation officer sends his report with the Memorandum of
Settlement (signed by all the parties to the dispute) to the government. If the settlement is not
arrived, the reasons for non-settlement are recorded and a report (of non-settlement) is sent to
the government, which may then constitute a Board of Conciliation (consisting of a Chairman –
an independent person, and members from both management and workers). The Board then
reports to the government about the success or failure of its efforts
Arbitration - In arbitration mechanism, the concerned parties, by mutual agreement, can refer
the dispute to an arbitrator (an external third person, acceptable to all) before the same has
been referred for adjudication.

● Settlement of Industrial Disputes

In case the matter is not solved by arbitration, it is then referred to court.
Court of Enquiry – Whenever the industrial dispute is not settled by conciliation and arbitration,
the matter is referred to a court of enquiry. The court will investigate the whole dispute and will
submit its report to the government (within a period of six months from the date of
commencement of its inquiry). The case will then be referred to either a Labour Court or an
Industrial Tribunal for adjudication
Adjudication (to deliver judgment) – Under the IDA, 1947 the adjudication mechanism is divided
into two, depending upon the type of problem - The labour Court, and the Industrial Tribunals.
The latter could be of two types, viz., State Tribunals, and National Tribunals.

● Settlement of Industrial Disputes

Labour Courts – Are set up by State governments; These decide matters (contained in the 2nd
Schedule of IDA, 1947) like disputed orders of the employers, dismissals, suspensions of
employees, legality of strikes, lock-outs etc. The labour courts decide matters speedily and
report to the government.
Industrial Tribunals – These tribunals decide matters (contained in 3rd Schedule of IDA, 1947)
related to wages, bonus, allowances, other benefits, working conditions, discipline,
retrenchment etc.).
When set up by the State governments’ they are called State Tribunals.When set up by the
Central Govt., they are called National Tribunals, and they decide upon matters of national
importance or which affect industrial establishments situated in more than one State.

STOCK EXCHANGE
A stock exchange is an exchange where stockbrokers and traders can buy and sell securities,
such as shares of stock, bonds, and other financial instruments.

It is a place where shares of pubic listed companies are traded. The primary market is where
companies float shares to the general public in an initial public offering (IPO) to raise capital.

● INTRODUCTION
It is a place where shares of pubic listed companies are traded. The primary market is where
companies float shares to the general public in an initial public offering (IPO) to raise capital.
A stock exchange is an exchange where stockbrokers and traders can buy and sell securities,
such as shares of stock, bonds, and other financial instruments.

● FEATURES
Organised Market
It is a Securities Market
It is an important constituent of Capital Market. The dealings in a Stock Exchnage are under
certain accepted code of conduct.
In a Stock Exchange, only the members can deal i.e., buy or sell securities.
The members of Stock Exchange can buy or sell securities as brokers for or on behalf of their
clients.
of stock exchange
 ● LARGEST STOCK EXCHANGE
In the world
New York Stock Exchange
National Association of Securities Dealers Automated Quotations
Tokyo Stock Exchange Shanghai Stock Exchange Euronext
Hong Kong Stock Exchange London Stock Exchange Shenzhen Stock Exchange Toronto Stock
Exchange Bombay Stock Exchange
In India
National Stock Exchange
Bombay Stock Exchange
Calcutta Stock Exchange
Metropolitan Stock Exchange
India International Exchange

● HISTORY
Security trading in India goes back to the 18th century when the East India Company began
trading in loan securities
The shift continued taking place as the number of brokers increased, finally settling in 1874 at
what is known as Dalal Street.
The simple and informal beginnings of stock exchanges in India take one back to the 1850s
when 22 stockbrokers began trading opposite the Town Hall of Bombay under a banyan tree.
The shift continued taking place as the number of brokers increased, finally settling in 1874 at
what is known as Dalal Street.

● MODERN HISTORY
In the post-independence era, the BSE dominated the volume of trading.
 the SEBI was born in 1988 as a non-statutory body. It was made a statutory body in 1992.
National Stock Exchange (NSE) was incorporated in 1992, become recognized as a stock
exchange
in 1993, and trading began on it in 1994.

● ROLES OF STOCK EXCHANGE

READY MARKET
Stock exchange is a convenient meeting place for buyers and sellers of second-hand securities.

SAFE MARKET
A stock exchange functions according to a recognised code of conduct and is subject to strict
statutory regulations.

EVALUATION OF SECURITIES
Stock exchange determines prices of various securities through the interplay of demand and
supply forces.

AGENCY OF CAPITAL FORMATION

It draws the savings of the man in the street into productive investment channels.
ROLES OF STOCK EXCHANGE

QUALITATIVE INDUSTRIAL & COMMERCIAL DEVELOPMENT

Stock exchange aids in the process of ensuring qualitative industrial and commercial
development of the economy.

STOREHOUSE OF BUSINESS
INFORMATION
Companies, whose
securities are listed with the stock exchange, are required to furnish
financial statements,
annual reports and other reports to the stock
exchange.

ACTING AS A
BAROMETER OF THE COMPANY
The stock exchange is sensitive to economic, political and social
conditions of the economy; as such
conditions affect the prices of securities

CONTROL OVER COMPANY

MANAGEMENT
Stock exchange very directly
exercises control over the
managements of companies.

● IMPORTANCE OF STOCK EXCHANGE

Formation of capital Inspiring savings
The mobility of resources Helping in industrialization Improving living standards
Strong economic base Safety of investment
Proper valuation of share and security Ready market
Proper utilization of savings

● FUNCTION OF STOCK EXCHANGE

ECONOMIC BAROMETER
Stock exchange is known as a pulse of economy or economic mirror which reflects the
economic conditions of a country.
PRICING OF SECURITIES
The stock market helps to value the securities on the basis of demand and supply factors.
CONTRIBUTES TO ECONOMIC GROWTH
The process of disinvestment and reinvestment helps to invest in most productive investment
proposal and this leads to capital formation and economic growth.
SAFETY OF TRANSACTIONS
In stock market only the listed securities are traded and stock exchange authorities include the
companies names in the trade list only after verifying the soundness of company.
PROVING
SCOPE FOR
SPECULATION
To ensure liquidity and demand of supply of securities the stock exchange permits healthy
speculation of securities.
Functions of Stock Exchange.
LIQUIDITY
The presence of stock exchange market gives assurance to investors that their investment can
be converted into cash whenever they want.
BETTER
ALLOCATION OF CAPITAL
The shares of profit making companies are quoted at higher prices and are actively traded so
such companies can easily raise fresh capital from stock market.
SPREADING OF EQUITY CULT
Stock exchange encourages people to invest in ownership securities by regulating new issues,
better trading practices and by educating public about investment.

● The stock exchange is considered to be the baronmeter of economic activity.

● Stock exchange regulates and monitors trading activity.
● The economy can affect stock prices, how many shares are bought and sold , and the
types of investments people make. On the flip side the stock market’s performance can
impact whether people think the economy is doing well or poorly
SEBI AND
CAPITAL MARKET REFORMS

● Introduction of SEBI
SEBI (Security Exchange Board of India) is a statutory regulatory body established on the 12th
of April, 1992.
It monitors and regulates the Indian
capital and securities market while ensuring to protect the
interests of the investors, formulating regulations and guidelines.
SEBI Act 1992- An Act to provide for the establishment of a Board to protect the interests of
investors in securities and to promote the development of, and to regulate, the securities
market and for matters connected therewith or incidental thereto
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● History of SEBI

SEBI was officially established by The Government of India in the year 1988 and given
statutory powers in 1992 with SEBI Act 1992 being passed by the Indian Parliament.

Initially SEBI was a non statutory body without any statutory power. However in the year of
1995, the SEBI was given additional statutory power by the Government of India through an
amendment to the Securities and Exchange Board of India Act, 1992.

● Role of SEBI in Mutual Funds and IPO

Mutual Funds
SEBI notified regualtions for the mutual funds in 1993
All mutual funds whether promoted by public sector or private sector are governed by SEBI
Initial Public Offer (IPO)
Initial public officer ( IPO )
The rules, regualtions and procedures relating to public issues in India are governed by
SEBI.
SEBI validate the IPO and make sure that the document has enough information to help
investors to take decision before applying shares in an IPO

● Functions of SEBI
SEBI is primarily set up to protect the interests of investors in the securities market.
SEBI provides a platform for stockbrokers, sub-brokers, portfolio managers, investment
advisers, share transfer agents, bankers, merchant bankers, trustees of trust deeds, registrars,
underwriters, and other associated people to register and regulate work.

It drafts regulations in its legislative capacity, it conducts investigation and enforcement action
in its executive function and it passes rulings and orders in its judicial capacity.

It prohibits insider trading, i.e. fraudulent and unfair trade practices related to the securities
market and ensures that investors are educated on the intermediaries of securities markets.

Resposibilties and Powers of SEBI

Responsibilites
To assist in the development of the capital market
To prevent unethical trading
To inform investors about the securities markets and the people that work for them.
To outlaw deceptive and unfair trading practises in the securities market and related industries.

Powers
The SEBI has three main
powers:
Quasi-Judicial
Quasi-Executive
Quasi-Legislative

● Protection Guidelines by SEBI

SEBI constructs the limit of financial backers through instruction and attention to empower a
financial backer to take educated choices.

SEBI tries to guarantee that the financial backer gets the hang of contributing.

SEBI has been putting together financial backer schooling and mindfulness workshops through
financial backer affiliations and market members, and has been urging market members to sort
out comparable projects.

SEBI has adopted disclosure based regulatory regime.

SEBI ensure that the market has systems and practices which make transactions safe.
 ● Introduction to Captial Reforms Market
The market where investments instruments like bonds and equities are traded is known as the
capital market.

The Securities and Exchange Board of India (SEBI) has introduced various guidelines and
regulatory measures for capital issues for healthy and efficient functioning of capital market in
India.

Companies are now required to disclose all material facts and specific risk factors associated
with their projects while making public issues.

SEBI has also introduced a code for advertisement for public issues for ensuring fair and true
picture.

● Recent developments in Capital Market of India

Indian capital market resulting in economic liberalisation

Promoting more private sector banks
Promotion of mutual funds
Regulation of NRI investments
Direct foreign investment
FERA companies

● Reforms in Capital Market of India

Increasing of Merchant Banking Activities
Growing Mutual Fund Industry
Introduction of Uniform KYC norms
Growing Stock Exchanges
IPO Grading

● Conclusion
To begin with, we introduced SEBI and its History, then explained the relation of it with Mutual
Funds and IPO.
In relation to that, we further
went to understand SEBI's Responsibilties and Powers, and how it protects it investors
and employees.
To end with, we understood the Capital Reforms Market, the Recent Developments of it and
some of the Reforms in it.

Thank you!
INDIAN INDUSTRIAL ENVIRONMENT

Industrial Policy in India: Pre 1991 Era

● Industrial Policy Resolution, 1948.

The resolution was issued on April 6, 1948. The resolution accepted the importance of both
private and public sectors for the development of the industrial sector.
The 1948 Resolution also accepted the importance of the small and cottage industries as they
are suited for the utilisation of local resources and are highly labour intensive.
The 1948 Resolution divided the Industries into following four categories.
 ● Industrial Policy Resolution, 1956.
The Policy Resolution of 1956, laid the following objectives for the growth of the Industrial
sector:
To accelerate the rate of growth and to speed up the pace of Industrialisation.
To develop heavy industries and machine making industries.
Expansion of Public Sector.
To reduce disparities in Income and Wealth.
Development of a competitive Cooperative Sector.
To Prevent concentration of Business in few hands and Restriction in Creation of Monopolies.

● Industrial Policy Resolution, 1956.

The objectives were chosen carefully with the aim of creating employment and reducing poverty.
The 1956 Resolution further divided the Industries into three Categories.
1.Monopoly of the State
2.Mixed Sector
3.Private Sector
To sum up, the 1956 Resolution, emphasised on the mutual dependence and existence of the
public and private sectors. The only 4 industries in which private sector are not allowed were
Arms & Ammunition, Railways, Air Transport and Atomic Energy. In all other sector, either
private sector was allowed to operate freely or will provide help to the government sector as and
when needed.

● Monopolistic and Restrictive Trade Practice under MRTP Act, 1969

The Monopolistic and Restrictive Trade Practices Act, 1969, was enacted
To ensure that the operation of the economic system does not result in the concentration of
economic power in hands of few,
To provide for the control of monopolies, and
To prohibit monopolistic and restrictive trade practices.
The MRTP Act extends to the whole of India except Jammu and Kashmir.

● Liberalisation measures adopted in the 1980s

Exemption from Licensing.
Relaxation to MRTP Act and FERA guidelines.
Delicensing of large range of industries.
Re-endorsed of capacity: Benefits were granted under this scheme to industries who
successfully achieve capacity utilisation of 90 percent.
Broad Banding of Industries: Under this, the government branded the industries into broad
categories. For example; cars, jeeps, tractors, light and heavy commercial vehicles are branded
as Four-Wheelers.
Promotion of Economies of scale in production processes to reduce cost by allowing firms to
expand.
Development of Backward Areas.
Incentives were provided to the Exporters.
Promotion of Small Scale Industries by increasing their Investment limits.
New Industrial Policy, 1991.

● Factors which lead to 1991 economic reforms

Rise in Prices: The inflation rate increased from 6.7% to 16.7% due to rapid increase in money
supply and the country’s economic position became worse.
Rise in Fiscal Deficit: Due to increase in non-development expenditure fiscal deficit of the
government increased. Due to rise in fiscal deficit there was a rise in public debt and interest. In
1991 interest liability became 36.4% of total government expenditure.
Increase in Adverse Balance of Payments: In 1980-81 it was Rs. 2214 crore and rose in 1990-
91 to Rs. 17,367 crores. To cover this deficit large amount of foreign loans had to be obtained
and the interest payment got increased.
Iraq War: In 1990-91, war in Iraq broke, which led to a rise in petrol prices. The flow of foreign
currency from Gulf countries stopped and this further aggravated the problem.
Dismal Performance of PSUs: These were not performing well due to political interference and
became big liability for government.
Fall in Foreign Exchange Reserves: India’s foreign exchange reserve fell to low ebb in 1990-91
and it was insufficient to pay for an import bill for 2 weeks.

● New Economic Policy, 1991

India’s New Economic Policy was announced on July 24, 1991 known as the LPG or
Liberalisation, Privatisation and Globalisation model.
Liberalization- It refers to the process of making policies less constraining of economic activity
and also reduction of tariff or removal of non-tariff barriers.
Privatization- It refers to the transfer of ownership of property or business from a government to
a privately owned entity.
Globalization- It refers to the expansion of economic activities across political boundaries of
nation states.

● Liberalization
The basic aim of liberalization was to put an end to those restrictions which became hindrances
in the development and growth of the nation. The loosening of government control in a country
and when private sector companies’ start working without or with fewer restrictions and
government allow private players to expand for the growth of the country depicts liberalization in
a country.
Objectives of Liberalization Policy
To increase competition amongst domestic industries.
To encourage foreign trade with other countries with regulated imports and exports.
Enhancement of foreign capital and technology.
To expand global market frontiers of the country.
To diminish the debt burden of the country.

● Privatization
This is the second of the three policies of LPG. It is the increment of the dominating role of
private sector companies and the reduced role of public sector companies. In other words, it is
the reduction of ownership of the management of a government-owned enterprise. Government
companies can be converted into private companies in two ways:
1.By disinvestment
2.By withdrawal of governmental ownership and management of public sector companies.

● Forms of Privatization
Denationalization or Strategic Sale: When 100% government ownership of productive assets is
transferred to the private sector players, the act is called denationalization.
Partial Privatization or Partial Sale: When private sector owns more than 50% but less than
100% ownership in a previously construed public sector company by transfer of shares, it is
called partial privatization. Here the private sector owns the majority of shares. Consequently,
the private sector possesses substantial control in the functioning and autonomy of the
company.
Deficit Privatization or Token Privatization: When the government disinvests its share capital to
an extent of 5-10% to meet the deficit in the budget is termed as deficit privatization.

● Objectives of Privatization
Improve the financial situation of the government.
Reduce the workload of public sector companies.
Raise funds from disinvestment.
Increase the efficiency of government organizations.
Provide better and improved goods and services to the consumer.
Create healthy competition in the society.
Encouraging foreign direct investments (FDI) in India.

● Globalization
It means to integrate the economy of one country with the global economy. During Globalization
the main focus is on foreign trade & private and institutional foreign investment. It is the last
policy of LPG to be implemented.
Globalization as a term has a very complex phenomenon. The main aim is to transform the
world towards independence and integration of the world as a whole by setting various strategic
policies. Globalization is attempting to create a borderless world, wherein the need of one
country can be driven from across the globe and turning into one large economy.

● Outsourcing as an Outcome of Globalization

The most important outcome of the globalization process is Outsourcing. During the outsourcing
model, a company of a country hires a professional from some other country to get their work
done, which was earlier conducted by their internal resource of their own country.
The best part of outsourcing is that the work can be done at a lower rate and from the superior
source available anywhere in the world. Services like legal advice, marketing, technical support,
etc. As Information Technology has grown in the past few years, the outsourcing of contractual
work from one country to another has grown tremendously. As a mode of communication has
widened their reach, all economic activities have expanded globally.

● Disinvestment
Introduction
Investment and disinvestment are two sides of the same coin. Investment refers to conversion
of
money or cash into securities, debentures, bonds or any other claims on money.
Disinvestment invloves the conversion of money claims or securities into money or cash.

Definition
“The action of an organisation or government
selling or liquidating an asset or subsidiary”is called disinvestment

Objectives of disinvestment
•To reduce the financial burden on government
•To improve public finances
•To introduce, competition and market discipline
•To increase growth of the firm
•To encourage wider share of ownership

Reasons for disinvestment

•To meet fiscal deficit
•Expansion or diversification of the firm
•To repayment of government debts
•Implementation of government plan
•PSU's give negative rate of return on capital

Problems of disinvesment
Dilution of ownership
Disinvestment affects labour

Disinvestment Plan

FEMA Act (with background

of FERA)

● Introduction
Foreign Exchange
“Foreign exchange is the system or process of converting one national currency into another,
and of transferring money from one country to another.”
Foreign currency
Foreign currency means any currency other than Indian currency.

Foreign security
Foreign security means any security, in the form of shares, stocks, bonds, debentures or any
other instrumental denominated or expressed in foreign currency and includes securities
expressed in foreign currency but where redemption or any form of return such as interest or
dividends is payable in Indian currency.

Inception of Law
The 1973 law was created during the tenure of Prime Minister Indira Gandhi with the goal of
conserving India's foreign exchange resources. The country was facing a trade deficit, which
was followed by a devaluation of the currency and an increase in the price of imported oil. The
act specified which foreign exchange transactions were permitted, including those between
Indian residents and non-residents

● Introduction to FERA (Foreign Exchange Regulation Act)

The FERA (Foreign Exchange Regulation Act) deals with laws which relate to foreign exchange
in India. The laws were made to manage foreign investments in India. The FERA has its origin
at the time of Indian Independence. In the beginning, it was a temporary arrangement to control
the flow of foreign exchange. In 1957 the act was made permanent. As the industrialization
grew in India, there was an increase in the foreign exchange investments. As a result, there
arose a need to protect it.
Accordingly, in 1973 the Foreign Exchange Regulation Act was amended. FERA consists of 81
complex sections. Under FERA, any offence was a criminal one which included imprisonment
as per code of criminal procedure, 1973.

● Objectives of FERA
• To prevent the outflow of Indian currency
• To regulate dealings in foreign exchange and securities
• To regulate the transaction indirectly affecting foreign exchange
• To regulate import and export of currency and bullion
• To regulate employment of foreign nationals
• To regulate foreign companies
• To regulate acquisition, holding etc of immovable property in India by non- residents
• To regulate certain payments .
• To regulate dealings in foreign exchange and securities.
• To regulate the transactions indirectly affecting foreign exchange.

● Provisions of FERA
• Regulation of dealing in foreign exchange.
• Restrictions on payments.
• Restrictions regarding assets held by non-residents and import & export of certain currency &
bullion.
• Duty on persons entitled to receive foreign exchange and payment for exported goods.
• Restriction on appointment of certain persons and companies as agents or technical or
management advisers in India
• Restriction on establishment of place of business in India
• Prior permission of Reserve Bank required for taking up employment in
India by nationals of foreign state
• Restrictions on immovable property

● Amendment in the Act

Government proposed to introduce comprehensive amendments in FERA due to changes in
economic policy, especially liberalization of industrial sector and most to open up the economy
through changes in trade policy and encouragement of foreign investment. As a result, the
required changes were announced in budget speech of 1992-1993. The changes so introduced
by issue of notification by RBI or Central Government.

● Transition from FERA to FEMA

• The main objective of FERA framed against the background of severe foreign exchange
problem and controlled economic regime, was conservation and proper utilisation of the foreign
exchange resources of the country.
• FERA created flourishing black market in foreign exchange. It brought into the economic
lexicon the word “HAWALA”.
• There was a demand for a substantial modification of FERA in the light of ongoing Economic
liberalization and improving foreign exchange reserves position. Accordingly, a new act, FEMA
(Foreign Exchange Management Act) 1999 replaced the FERA.

● FEMA Replaced FERA

The older version had very strict laws (for example, a person was assumed guilty unless proven
otherwise.) All the unnecessary restrictions were removed. The rules regarding foreign
investments were simplified to encourage more foreign investment in India and consequently
ensure better foreign cash flow. However, FERA was not in accordance with the
pro-liberalization policies of the Indian Government. Finally, in 1999 the FEMA was passed
which replaced the FERA, though certain provisions of FERA 1973 still exist under FEMA 1999.

● Objective of the FEMA

• To facilitate the external trade and payment
• To promote of an orderly maintenance of the foreign exchange market In
India.
• Regulation of foreign capital in India.
• To remove imbalance of payment.
• To make strong and developed foreign exchange market.
• Regulation of employment business and investment of non-residents .
• To regulate foreign payments.
• The new law is more transparent in its application. it has laid down the areas where special
permission of the reserve bank/government of India is required.

● Salient Features of the Act

• Full freedom to a person resident in India to hold or transfer any foreign securities or
immovable property situated outside India.
• A person resident outside India is also permitted to hold shares, securities and property
acquired by him while he was resident in India.
• The EEFC account holders and RFC account holders are permitted to freely use the funds
held in EEFC\RFC accounts for payment of all permissible current account transactions .
• The limit for permitting overdraft against NRI accounts balance has been raised from 20,000 to
50,000.

● Similarities between FERA and FEMA

• The RBI and central government would continue to be the regulatory bodies.
• Presumption of extra territorial jurisdiction as envisaged in section (1) of FERA has been
retained.
• The Directorate of Enforcement continues to be the agency for enforcement of the provisions
of the law such as conducting search and seizure.

● Difference between FEMA and FERA

BASIS FOR COMPARISON
Monopolies and Restrictive Trade Practices Act

MRTP Act
The Monopolies and Restrictive Trade Practices Act, 1969, brought into force from 1st June
1970, was a very common controversial piece of legislation.

The Monopolistic and Restrictive Trade Practices Act, 1969, was enacted
1.To ensure that the operation of the economic system does not result in the concentration of
economic power in hands of few,

2.To provide for the control of monopolies, and

3.To prohibit monopolistic and restrictive trade practices.

The MRTP Act extends to the whole of India except Jammu and Kashmir.

•OBJECTIVES – Initially MRTP Act had 3 objectives :

To control monopolies and monopolistic trade practices
Prevention of concentration of economic power in few hands only.
To regulate restrictive trade practices

After amendment of act in 1984 a 4th objective was introduced: Regulation of unfair trade
practices.

After the amendment of act in 1991, the objectives now are:

Regulating unfair trade practices.
Controlling monopolistic trade practices.

● Monopolistic Trade Practice

A monopolistic trade practice is a trade practice which has, or is likely to have, the effect of
reasonably preventing or lessening competition in the production, supply or distribution of any
goods or services; limiting technical development and capital investment to the common
detriment; or allowing the quality of goods or services to deteriorate.
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● Restrictive Trade Practice

A restrictive trade practice is a trade practice which has the effect, actual or probable of
restricting, lessening or destroying competition. Such trade practices may tend to obstruct the
flow of production or to bring about manipulation of prices or conditions of delivery etc. to the
common detriment.
 ● Unfair Trade Practice
An unfair trade practice means a trade practice, which, for the purpose of promoting any sale,
use or supply of any goods or services, adopts unfair method, or unfair or deceptive practice.

● Unfair practices may be categorised as under:

•FALSE REPRESENTATION

•BARGAIN PRICE

•OFFERING OF GIFTS AND PRIZES

•NON-COMPLIANCE OF PRESCRIBED STANDARDS

•HOARDING OR DESTRUCTION OF GOODS

● FALSE REPRESENTATION
Falsely suggests that the goods are of a particular standard quality, quantity, grade,
composition, style or model.
Falsely suggests any re-built, second-hand renovated, reconditioned
or old goods as new goods.
Makes a false or misleading representation concerning the need for, or the usefulness of,
any goods or services.
Materially misleads about the prices at which such goods or services
are available in the market.

● BARGAIN PRICE
The price stated in the advertisement in such manner as suggests that it is lesser than the
ordinary price.

The price which any person coming across the advertisement would believe to be better than
the price at which such goods are ordinarily sold.

● OFFERING OF GIFTS AND PRIZES

Creating impression that something is being offered free along with the goods, when in fact the
price is wholly or partly covered by the price of the article sold.

Offering some prizes to the buyers by the conduct of any contest, lottery or game of chance or
skill, with real intention to promote sales or business.
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● NON-COMPLIANCE OF PRESCRIBED STANDARDS

Any sale or supply of goods, for use by consumers, knowing or having reason to believe that
the goods do not comply with the standards prescribed by some competent authority, in relation
to their performance, composition, contents, design, construction, finishing or packing, as are
necessary to prevent or reduce the risk of injury to the person using such goods, shall amount
to an unfair trade practice.

● HOARDING OR DESTRUCTION OF GOODS

Any practice that permits the hoarding or destruction of goods, or refusal to sell the goods or
provide any services, with an intention to raise the cost of those or other similar goods or
services, shall be an unfair trade practice.

● MRTP COMMISSION
In accordance with the provisions of the Act, the Government of India has set up a Commission
known as the Monopolies and Restrictive Trade Commission. The Act provides that the
Commission shall consists of a chairman, and not less than two and not more than eight other
members, to be appointed by the Central Government.

INDUSTRIAL SICKNESS

● SYMPTOMS /WARNING SIGNALS OF INDUSTRIAL SICKNESS

•Shortage of Liquid funds to meet short term financial obligation
•Decreasing Rate of Return
•Underutilization of capacity
•Accumulation of Excessive Inventories

● Causes of industrial sickness

Causes of Sickness:
Causes of born sickness
•1-Wrong location
•2- Technological factors
•3-Inexperienced promoters
•4-Investment in unproductive capital assets
•5-Long gestation period

Causes of achieved sickness

•Internal causes
•External causes

EXTERNAL CAUSES
•1-POWER CUT
••Lack of power electricity support
••Shortage in electricity
•2-ERRATIC SUPPLY OF INPUTS
••Shortage of raw material
• •Lack of transportation facility
••High price

EXTERNAL CAUSES
3-DEMAND AND CREDIT RESTRAINTS
•No equal balance of demand and supply
•Lack of credit facility
•Storage expense
•Change of out of fashion

4-GOVERNMENT POLICY
•Change in government policy
•Lack of government support
•High authority to large unit

INTERNAL CAUSES
1-FAULT AT THE PLANING AND CONSTRUCTION STAGE
•Absence of market analysis •Unbalance capital structure

2-FINANCIAL PROBLEMS
•Unable to repay
•Lack of financial support from banks and financial institutions

3-DEFECTIVE PLANT AND MACHINERY

•Lack of technical and professional skills
•Lack of technology
•Lack of efficient machinery
•High maintenance

INTERNAL CAUSES
4-ENTREPRENURIAL INCOMPETENCE
•Lack of market knowledge •
Lack of inefficient professional skills
•Lack of innovation
5-MANAGEMENT PROBLEMS
•Inefficiency of management
•Lack of expertise
6-LABOUR PROBLEMS
•Lack of inefficient labour
•Lack of coordination in work
•Unsatisfied labour
 ● EFFECTS OF INDUSTRIAL SICKNESS

● Preventive Measures taken by the organization

• Well-planned project.
• Proper plant layout
• Proper allocation, utilization and management of funds.
• Updated technology.
• Proper utilization of resources.
• Cordial industrial relations.
• Effective financial structure.
• Effective human resources planning and accounting.
• Proper marketing policies.
• Trained and knowledgeable human resources.

● Corrective Measures by the organization

Here, the organization tries to look within itself to find the reasons for such a bad situation. It
looks in to its different activities/ departments so as to find out what went wrong and where it
went wrong, and why it went wrong. The organization can adopt any of the methods as well as
the approaches mentioned below to implement turnaround within the organization.

● Measures by the Government

The most important step taken by the Government in recent times is the enactment of the
comprehensive legislation namely Sick Industrial Companies (Special Provision) Act (SICA),
1985 with a view to secure timely detection of sick and potentially sick units with regard to
crucial sectors, where public money is locked up. This Act was enacted on the
recommendations of Tiwari committee (1981).
The government instituted The Appellate Authority for Industrial and Financial Reconstruction
(AAIRFR) and a board i.e., Board for Industrial and Financial reconstruction (BIFR) in 1987
under Sick Industrial Companies (Special Provisions) Act, 1985 to help revival of the sick
industries through quick and speedy determination of the preventive, remedial and other
measures which need to be taken with such sick companies and the expeditious enforcement
of measures if required. These measures are mainly legal, financial restructuring, and
managerial. The management of the sick organization has to inform about their
present/potential sickness to the Board.

COMPETITION ACT

● COMPETITION ACT
The MRTP Act has become obsolete in certain areas in the light of international economic
developments relating to competition laws and hence focus was shifted from curbing
monopolies to promoting competition
In October, Central government appointed high level committee under the chairmanship of Mr.
Raghavan, the aim of the committee was to formulate the competition law in tune with economic
reforms and international development. The committee presented its report on May 2000, The
draft competition law was presented on November 2000. After certain amendments the
Parliament passed the new law, called Competition Act 2002. The act came into force on
January 2003 .
 ● COMPETITION ACT
•The Framework of Competition Act 2002 has essentially four compartments:
•1. Anti- Competitive Agreements [ Section 3]
•2. Abuse of Dominance [ Section 4]
•3. Combination Regulation [ Section 5 & 6]
•4. Competition Advocacy [ Section 49]

● SALIENT FEATURES OF THE COMPETITION ACT, 2002

•Objective of the Act
•Facilitate & Foster Competition
•Establish a Commission to prevent practices having adverse effect on competition
•Promote and sustain competition in markets
• Protect the interests of consumers
•Ensure freedom of trade in the Indian markets
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● ANTI-COMPETITIVE AGREEMENTS [SECTION 3]

Section 3 of the Act states that no enterprise shall enter into:
1. Any agreement with respect to production, supply distribution, storage, acquisition or control
of goods/provision of services which is anti-competitive is prohibited and void.
2. Such agreements must cause or be likely to cause appreciable adverse effect on competition
(AAEC) in a relevant market in India

● ANTI-COMPETITIVE AGREEMENTS [SECTION 3]

There are Two kinds of agreements
1. Horizontal agreements
2. Vertical agreements.
Horizontal agreements:They are Agreements Between Parties in the same line of production.
Example - Agreement between Manufactures, Agreement between Distributors.
Vertical Agreements : Vertical agreement are those agreements between Non-Competition
undertaking operating at different levels of manufacturing and distribution process . EX- , the
agreement between manufacturers of components , manufactures of products, between
producers and whole- sellers or between producers, whole sellers and retailers.

● ABUSE OF DOMINANT POSITION (SECTION 4)

It means a position of strength, enjoyed by an enterprise, in the relevant market in India, which
enables it to:
• Operate independently of competitive forces prevailing in the relevant market or,
• affects its competitors or consumers of the relevant market in its favor.

● ABUSE OF DOMINANT POSITION (SECTION 4)

An Enterprise or group is said to have abused its dominant position if it directly or indirectly:
● Imposes unfair condition or price
● Predatory pricing
●Limit or restrict :
a) Production of goods or provision of services or market
b) Technical or scientific development relating to goods or services
c) Creating barriers to entry
d) Denying of market access
e) Uses its dominant position in one market to gain advantage in other market.

If the commission finds that the Act constitute Abuse of Dominant position, it can pass following
orders

1. Impose penalty not more than 10% of the average turnover of last 3 financial years
2. Modified the agreement to such extent and manner specified by CCI
3.Order for payment of cost
4.Any other orders as the CCI thinks fit

● REGULATION OF COMBINATION (SECTION 5 TO 6)

A Combination is an acquisition of one or more enterprises by one or more persons, merger or
amalgamation of enterprises, if it meets the prescribed monetary thresholds and involves:
•Any acquisition of control, shares, voting rights or assets of any enterprise
•Any acquisition of control by a person over an enterprise, where such person already has
direct/indirect control over another enterprise in a similar business
•Any merger or amalgamation of enterprises

Combinations above the defined monetary thresholds require filing and prior approval of the CCI
before they can be made effective. CCI has powers to investigate combinations and
modify/reject them.

● PROCEDURE TO BE FOLLOWED FOR THE COMBINATION

Any person or enterprise proposes to enter into combination shall give notice to competition
commission in prescribed form within 30 days to
•Approval of the Board of Directors of proposal relating to merger or amalgamation
•Execution of any agreement relating to acquisition or acquiring control

No combination shall come into effect until 210 days from the day on which notice has been
given to commission or order has been passed

COMPETITION ADVOCACY [SEC 49]

●Central government may obtain opinion of CCI on the possible effect of the policy on
competition while formulating competition policy
●The role of commission is advisory
●Opinion given by commission is not binding upon the central Government
●The commission has also been assigned the role to take following suitable measured for:
oPromotion of competition advocacy
oCreating awareness about competition
oImparting Training about competition issue

MODULE 6

BRETTON WOODS AGREEMENT AND SYSTEM

•The Bretton Woods Agreement was negotiated in July 1944 by delegates from 44 countries at
the United Nations Monetary And Financial Conference held in Bretton Woods, New Hampshire.
Thus, the name “Bretton Woods Agreement’’.
•Under the Bretton Woods system, gold was the basis for the U.S. Dollar and other currencies
were pegged to the U.S. Dollar’s value.
•The Bretton Woods System included 44 countries. These countries were brought together to
help regulate and promote international trade across borders. As with the benefits of all
currency pegging regimes, currency pegs are expected to provide currency stabilization for
trade of goods and services as well as financing.
•(Pegging is controlling a country's currency rate by tying it to another country's currency. A
country's central bank, at times, will engage in open market operations to stabilize its currency
by pegging, or fixing, it to another country's presumably more stable currency.)

BENEFITS OF BRETTON WOODS CURRENCY PEGGING

All of the countries in the Bretton Woods System agreed to a fixed peg against the U.S. Dollar
with diversions of only 1% allowed. Countries were required to monitor and maintain their
currency pegs which they achieved primarily by using their currency to buy or sell U.S. Dollars
as needed. The Bretton Woods System, therefore, minimized international currency exchange
rate volatility which helped international trade relations. More stability in foreign currency
exchange was also a factor for the successful support of loans and grants internationally from
the World Bank.
The Bretton Woods system effectively came to an end in the early 1970s when President
Richard M. Nixon announced that the U.S. would no longer exchange gold for U.S. Currency.

THE IMF AND WORLD BANK

•The Bretton Woods Agreement created two Bretton Woods Institutions, the IMF and the World
Bank. Formally introduced in December 1945 both institutions have withstood the test of time,
globally serving as important pillars for international capital financing and trade activities.
•The purpose of the IMF was to monitor exchange rates and identify nations that needed global
monetary support. The World Bank, initially called The International Bank For Reconstruction
And Development, was established to manage funds available for providing assistance to
countries that had been physically and financially devastated by World War II.

•By 1973 The Bretton Woods System had collapsed. Countries were then free to choose any
exchange arrangement for their currency, except pegging its value to the price of gold. They
could, for example, link its value to another country's currency, or a basket of currencies, or
simply let it float freely and allow market forces to determine its value relative to other countries'
currencies.

THE URUGUAY ROUND

The Uruguay Round was the 8th round of Multilateral Trade Negotiations (MTN) conducted
within the framework of the General Agreement On Tariffs And Trade (GATT), spanning from
1986 to 1993 and embracing 123 countries as "contracting parties". The round led to the
creation of the World Trade Organization, with GATT remaining as an integral part of the WTO
agreements.
The broad mandate of the round had been to extend GATT trade rules to areas previously
exempted as too difficult to liberalize (agriculture, textiles) and increasingly important new areas
previously not included (trade in services, intellectual property, investment policy
The round came into effect in 1995 with deadlines ending in 2000 (2004 in the case of
developing country contracting parties) under the administrative direction of the newly created
WORLD TRADE ORGANIZATION (WTO).

GOALS OF URUGUAY ROUND

THE MAIN OBJECTIVES OF THE URUGUAY ROUND WERE:
•To Reduce Agricultural Subsidies
•To Lift Restrictions On Foreign Investment
•To Begin The Process Of Opening Trade In Services Like Banking And Insurance.
•To Include The Protection Of Intellectual Property
•They Also Wanted To Draft A Code To Deal With Copyright Violation And Other Forms Of
Intellectual Property Rights.

THE URUGUAY ROUND AGREEMENT

•Although the Uruguay round officially commenced in 1986, the agreement was only
provisionally concluded in December 1993 and formally signed in Marrakesh, Morocco in April
1994.
•A major stumbling block that delayed conclusion of the round had been the dispute between
the United States and European Union over agricultural subsidies. Another difficulty was the
number of trade issues and products that were covered in the Uruguay round negotiations.
•The broad product coverage of the Uruguay round negotiations included industrial products,
agricultural products and services, with separate agreements concluded for each grouping and
for specific products in each group. The treatment of trade in services and intellectual property
had not in fact been covered by GATT prior to the Uruguay round. An additional feature of the
round was the negotiation to establish the World Trade Organization (WTO), which is the
successor to GATT.

FEATURES OF THE URUGUAY ROUND

•An agreement on agriculture to increase market access, reduce export subsidies and tariffs
and eliminate non-tariff barriers.
•An agreement on textiles that emphasizes in particular the phased removal of quota
restrictions.
• Agreements to reduce most import tariffs on industrial products by one third over the next five
years; tariffs on some products, including pulp and paper, will be eliminated completely in major
developed country markets over the next 8-10 years.
•Agreements on secured market access and trade rules for services, trade-related intellectual
property rights(TRIPs) and trade-related investment measures (TRIMs).

GATT
The GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) is a legal agreement between
many countries, whose overall purpose was to promote international trade by reducing or
eliminating trade barriers such as tariffs or quotas. According to its preamble, its purpose was
the "substantial reduction of tariffs and other trade barriers and the elimination of preferences.
It was signed by 23 nations in GENEVA on October 30th 1947,and was applied on a provisional
basis on January 1st, 1948. It remained in effect until January 1st, 1995, when the World Trade
Organization (WTO) was established after agreement by 123 nations in Marrakesh on April
15th, 1994, as part of the Uruguay Round agreements."

GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)

•The GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) was a multilateral trade
treaty between countries to regulate international trade and tariffs in accordance with specific
rules, norms or code of conduct. GATT was set up in 1948 in Geneva to follow the objectives of
free trade in order to encourage growth and development of all member countries. The principal
purpose of GATT was to ensure competition in commodity trade through the removal of or
reduction in trade barriers

•GATT served as an important international forum for carrying on negotiations on tariffs. Under
GATT, member nations met at regular intervals to negotiate agreements to reduce quotas, tariffs
and such other restrictions on international trade. GATT became a permanent international trade
institution for the multilateral expansion of trade until it was replaced by WORLD TRADE
ORGANISATION (W.T.O) in 1995.
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 ● Objectives of GATT

Expansion of international trade;

Increase of world production by ensuring full employment in the participating nations.

Development and full utilization of world resources; and

Revising standard of living of the world community as a whole.

The rules adopted by GATT are based on the following fundamental principles:

Trade should be conducted in a non-discriminatory way;

The use of quantitative restrictions should be condemned; and

Disagreements should be resolved through consultations.

● The GATT proposed to achieve the objectives through the following methods:
1) MOST FAVOURED NATION CLAUSE
The clause is also known as elimination of discrimination clause. This clause is to be adopted to
avoid discrimination in international trade. The clause implies that each country shall be treated
as the most favoured nation. Any particular trade concession offered by a member country to
her trading partner should also be available to all the members of the GATT at the same time.
Methods of achieving the objectives

Methods of achieving the objectives

2) QUANTITATIVE RESTRICTIONS ON IMPORTS
THE GATT Rules prohibited the use of import quota fixation. But two important exceptions were
allowed to this rule:
•Countries, which are facing balance of payments difficulties, may use the device of input quota
fixation.
•Developing countries may resort to quota fixation but only under procedure accepted by the
GATT.

Methods of achieving the objectives

3) TARIFF NEGOTIATIONS AND REDUCTION OF TARIFF
•The GATT recognized that tariffs are often an important obstacle to international trade. Hence,
the GATT would encourage negotiations for tariff reduction to be conducted on a reciprocal and
mutually advantageous basis, taking into consideration the varying needs of individual
contracting parties.
ROLE OF GATT
The main role of GATT in the international trade was regulating the contracting parties to
achieve the purpose of the agreement which were reducing tariffs and other barriers, and to
achieve the liberalization in international trade. The role was reflected in following aspects:
Firstly, GATT established a set of standard to guide the contracting parties to participate in
international trade practices. GATT stipulated several of basic principle to conduct the
contracting parties in international business, such as General Most-favored-nation Treatment
(Article II), Non-discriminatory Administration Of Quantitative Restrictions (Article XIII), And
General Elimination Of Quantitative Regulations (Article XI) and so on in the “GATT 1947″.
Every contracting party should obey these basic principles when they were involved in trade
relations, otherwise they would be condemned.

ROLE OF GATT
Secondly, GATT reduced the tariff on the basis of mutual benefit, accelerate the trade
liberalization after the WORLD WAR II. GATT’s major contribution was in reduction of tariffs by
sponsoring “rounds” of multilateral negotiations. By sponsoring the multilateral negotiations,
there was a significant reduction of the tariff.
Thirdly, GATT reduced the discrimination in tariff and trade which promoted to reduce other
trade barriers. According to GATT,the contracting parties cannot increase the levels of tariff as
their wish, but some countries used other non-tariff barriers to promote their protectionism.
Therefore, GATT claimed the contracting parties should not use other barriers to protect their
own industries, it requested the reduction of the non-tariff barriers and quantitative restriction to
make sure the benefit from the reduction of tariff not be erased by the non-tariff barriers.

ROLE OF GATT
Fourthly, GATT protected the benefits of the developing countries to a certain extent to
international trade. One of the basic objectives of GATT was that “raising of standards of living
and the progressive development of the economies of all contracting parties , and considering
that the attainment of these objectives is particularly urgent for less-developed contracting
parties.”
Finally, GATT acted as the “court of international trade”, by providing a platform for contracting
parties to negotiation and talk to settle disputes in international trade. One of the objectives of
GATT was to settle the disputes between two or more parties.

WORLD TRADE ORGANIZATION (WTO)

The WORLD TRADE ORGANIZATION (WTO) is an intergovernmental organization that
regulates and facilitates international trade between nations. Governments use the organization
to establish, revise, and enforce the rules that govern international trade. it officially commenced
operations on 1 January 1995, post the 1994 Marrakesh agreement, thus replacing the
GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) that had been established in
1948. The WTO is headquartered in Geneva, its top decision-making body is the ministerial
conference, which is composed of all member states.
Ministerial Conference :The highest decision-making body of the WTO, the Ministerial
Conference, usually meets every two years. The ministerial conference can take decisions on
all matters under any of the multilateral trade agreements.

FUNCTIONS OF IMF
EXCHANGE STABILITY:
The first important function of IMF is to maintain exchange stability and thereby to discourage
any fluctuations in the rate of exchange.
ELIMINATING BOP DISEQUILIBRIUM:
The fund is helping the member countries in eliminating or minimizing the short-period
equilibrium of balance of payments either by selling or lending foreign currencies to the
members. The fund also helps its members towards removing the long period disequilibrium in
their balance of payments.
STABILIZE ECONOMIES:
The IMF has an important function to advise the member countries on various economic and
monetary matters and thereby to help stabilize their economies.
•CREDIT FACILITIES:
IMF is maintaining various borrowing and credit facilities so as to help the member countries in
correcting disequilibrium in their balance of payments
•TECHNICAL ASSISTANCE:
The IMF is also performing a useful function to provide technical assistance to the member
countries. Such technical assistance in given in two ways, i.e., Firstly by granting the members
countries the services of its specialists and experts and secondly by sending the outside
experts.
•GENERAL WATCH:
The IMF is also keeping a general watch on the monetary and fiscal policies followed by the
member countries to ensure no flouting of the provisions of the charter

What is World Bank?

• An international organization dedicated to providing financing, advice and research to
developing nations to aid their economic advancement.
OBJECTIVES 1. To provide long-run capital to member countries for economic reconstruction
and development. 2. To induce long-run capital investment for assuring Balance of Payments
(BoP) equilibrium and balanced development of international trade. 3. To provide guarantee for
loans granted to small and large units and other
projects of member countries. 4. To ensure the implementation of development projects so as to
bring about a
smooth transference from a war-time to peace economy.
5. To promote capital investment in member countries by the following ways;
(a) To provide guarantee on private loans or capital investment. (b) If private capital is not
available even after providing guarantee, then
IBRD provides loans for productive activities on considerate conditions.

FUNCTIONS
Granting reconstruction loans to war devastated countries.
Granting developmental loans to underdeveloped countries. Providing loans to governments for
agriculture, irrigation, power,
transport, water supply, educations, health, etc
Providing loans to private concerns for specified projects. Promoting foreign investment by
guaranteeing loans provided by
other organisations. Providing technical, economic and monetary advice to member
countries for specific project. Encouraging industrial development of underdeveloped countries
by promoting economic reforms .

● SOUTH ASIAN ASSOCIATION FOR REGIONAL COOPERATION (SAARC)

The South Asian Association For Regional Cooperation (SAARC) is an economic and political
organization of eight countries in South Asia. It was established in 1985 when the heads of state
of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan And Sri Lanka formally adopted the
charter. Afghanistan joined as the 8th member of SAARC in 2007.

OBJECTIVES
•SAARC aims to promote economic growth, social progress and cultural development within the
South Asia region. The objectives of SAARC, as defined in its charter, are as follows:
•Promote the welfare of the peoples of South Asia and improve their quality of life
•Accelerate economic growth, social progress and cultural development in the region by
providing all individuals the opportunity to live in dignity and realise their full potential
•Promote and strengthen collective self-reliance among the countries of South Asia
•Contribute to mutual trust, understanding and appreciation of one another’s problems
•Promote active collaboration and mutual assistance in the economic, social, cultural, technical
and scientific fields
•Strengthen co-operation with other developing countries
•Strengthen co-operation among themselves in international forms on matters of common
interest; and
•Cooperate with international and regional organisation with similar aims and purposes.

STRUCTURE AND PROCESS

Cooperation in SAARC is based on respect for the five principles of sovereign equality, territorial
integrity, political independence, non-interference in internal affairs of the member states and
mutual benefit.
Regional cooperation is seen as a complement to the bilateral and multilateral relations of
SAARC member states. SAARC summits are held annually and the country hosting the summit
holds the chair of the association. Decisions are made on an unanimity basis while bilateral and
contentious issues are excluded from the deliberations of SAARC.
In addition to the eight member states, nine observer states join SAARC summits: China, The
US, Myanmar, Iran, Japan, South Korea, Australia, Mauritius And The European Union.

AREAS OF COOPERATION AMONG SAARC NATIONS

➢AGRICULTURE AND RURAL DEVELOPMENT
➢HUMAN RESOURCE DEVELOPMENT AND TOURISM
➢ECONOMIC, TRADE AND FINANCE
➢SOCIAL AFFAIRS
➢ENVIRONMENT, NATURAL DISASTERS AND BIOTECHNOLOGY
➢EDUCATION, SECURITY AND CULTURE AND OTHERS
➢INFORMATION AND POVERTY ALLEVIATION
➢ENERGY, TRANSPORT, SCIENCE AND TECHNOLOGY

ACHIEVEMENTS OF SAARC
1.A free trade area is established by the member countries to increase their internal trade and
lessen the trade gap of some states considerably. SAARC is comparatively a new organization
in the global arena.
2.SAARC free trade agreement – SAFTA was signed to reduce customs duties of all traded
goods to zero by the year 2016. The agreement was confined to goods but excluding all
services like information technology.
3.South Asia Preferential Trading Agreement – SAPTA for promoting trade amongst the
member countries came into effect in 1995.
4.SAARC Agreement On Trade In Services – SATIS is following the approach for trade in
services liberalization.
5.SAARC University – establish a SAARC university in India, a food bank, and an energy
reserve in Pakistan.

● NAFTA
THE NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) is an international agreement
signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade
bloc in North America. The agreement came into force on January 1, 1994. The goal of NAFTA
is to eliminate all tariff and non-tariff barriers of trade and investment between the UNITED
STATES, CANADA AND MEXICO.

● HISTORY
In June 1990, Mexican President Carlos Salinas De Gortari requested a free trade agreement
with the U.S. IN SEPTEMBER 1990, REAGAN’S successor, President George H.W. Bush,
began negotiations with President SALINAS for a liberalized trade.
IN 1992, NAFTA was signed by outgoing President George H.W. Bush, Mexican President
Salinas, And Canadian Prime Minister Brian Mulroney.
NAFTA was ratified by the legislatures of the three countries in 1993.
President BILL CLINTON signed it into law on December 8, 1993; it took effect on January 1,
1994.

● PURPOSE OF NAFTA
Article 102 Of The NAFTA Agreement Outlines Its Purpose. There Are Seven Specific Goals:
1.Grant The Signatories (The Countries That Signed It) A "Most-favored-nation" Status.
2.Eliminate Barriers To Trade And Facilitate The Cross-border Movement Of Goods And
Services.
3.Promote Conditions Of Fair Competition.
4.Increase Investment Opportunities.
5.Provide Protection And Enforcement Of Intellectual Property Rights.
6.Create Procedures For The Resolution Of Trade Disputes.
7.Establish A Framework For Further Trilateral, Regional, And Multilateral Cooperation To
Expand The Trade Agreement's Benefits.

● NAFTA FULFILLED ITS PURPOSE

•NAFTA fulfilled all seven of its goals, establishing the region's largest free trade zone in terms
of gross domestic product. It also increased foreign investment in the three countries.
•By the time the last of its changes went into effect in 2008, NAFTA had lowered or eliminated
tariffs among the three countries and allowed trade to triple.
•Most importantly, it increased the competitiveness of the three countries in the global
marketplace.

● BENEFITS OF NAFTA
QUADRUPLED TRADE
BETWEEN 1993 AND 2019, TRADE BETWEEN THE THREE MEMBERS QUADRUPLED
FROM $290 BILLION TO $1.23 TRILLION. THAT BOOSTED ECONOMIC GROWTH,
PROFITS, AND JOBS FOR ALL THREE COUNTRIES.IT ALSO LOWERED PRICES FOR
CONSUMERS.
LOWERED PRICES
LOWER TARIFFS ALSO REDUCED IMPORT PRICES. THAT LESSENED THE RISK OF
INFLATION AND ALLOWED THE FEDERAL RESERVE TO KEEP INTEREST RATES LOW.
CREATED JOBS
NAFTA EXPORTS CREATED 5 MILLION NET NEW U.S. JOBS. MOST OF THOSE JOBS
WENT TO 17 STATES, BUT ALL STATES SAW SOME INCREASES. U.S. MANUFACTURERS
ADDED MORE THAN 800,000 JOBS BETWEEN 1993 AND 1997.
 ● BENEFITS OF NAFTA
INCREASED FOREIGN DIRECT INVESTMENT
SINCE NAFTA WAS ENACTED, U.S. FOREIGN DIRECT INVESTMENT (FDI) IN CANADA
AND MEXICO HAS MORE THAN TRIPLED TO $500.9 BILLION. IN 2017, U.S. INVESTORS
POURED $391.2 BILLION INTO CANADA AND $109.7 BILLION INTO MEXICO.
THAT BOOSTED PROFITS FOR U.S. BUSINESSES BY GIVING THEM MORE
OPPORTUNITIES TO DEVELOP AND MARKETS TO EXPLORE.
INCREASED ECONOMIC GROWTH
NAFTA BOOSTED U.S. ECONOMIC GROWTH BY AS MUCH AS 0.5% A YEAR. THE
SECTORS THAT BENEFITED THE MOST WERE AGRICULTURE, AUTOMOBILES, AND
SERVICES.

● USMCA
DESPITE THESE ADVANTAGES, THE UNITED STATES, MEXICO, AND CANADA
RENEGOTIATED NAFTA ON NOV. 30, 2018.
THE NEW DEAL IS CALLED THE UNITED STATES-MEXICO-CANADA AGREEMENT.
(USMCA). MEXICO RATIFIED THE AGREEMENT IN 2019. THE AGREEMENT WAS SIGNED
BY DONALD TRUMP ON JAN. 29, 2020. CANADA'S PARLIAMENT RATIFIED IT ON MAR. 13,
2020.

● ASEAN
THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS, OR ASEAN, was established on 8
AUGUST 1967 in BANGKOK, THAILAND, with the signing of the ASEAN DECLARATION
(BANGKOK DECLARATION) by the founding fathers of ASEAN, NAMELY INDONESIA,
MALAYSIA, PHILIPPINES, SINGAPORE AND THAILAND. BRUNEI DARUSSALAM THEN
JOINED ON 7 JANUARY 1984,
VIETNAM ON 28 JULY 1995, LAOS and MYANMAR ON 23 JULY 1997, and CAMBODIA on 30
APRIL 1999, making up what is today the ten member states of ASEAN.

● ASEAN
ASEAN organs always strive to achieve ASEAN's goals and objectives. The Secretary-General
of ASEAN and the ASEAN Secretariat shall be functioned as coordinating Secretariat to help
facilitate effective decision-making within and amongst ASEAN bodies. in addition, each
member states shall appoint a permanent representative to liaise with the Secretary-General of
ASEAN and ASEAN secretariat.
In conducting Asean's external relations, the ASEAN foreign ministers meeting may confer on
an external party the formal status of dialogue partner, development partner, special observer,
guest or other status.

Purposes of ASEAN are:

•Accelerate the economic growth, social progress and cultural development in the region
through joint endeavours in the spirit of equality and partnership in order to strengthen the
foundation for a prosperous and peaceful community of Southeast Asian nations;
•Promote regional peace and stability through abiding respect for justice and the rule of law in
the relationship among countries of the region and adherence to the principles of the United
Nations charter;

•Promote active collaboration and mutual assistance on matters of common interest in the
economic, social, cultural, technical, scientific and administrative fields;

•Provide assistance to each other in the form of training and research facilities in the
educational, professional, technical and administrative spheres;

Purposes of ASEAN are:

•Collaborate more effectively to encourage further growth in the agriculture and industry, and
trade sectors. This includes improving transportation and communications facilities and
conducting studies on international commodity trade with the overarching goal of raising the
living standards of ASEAN people;

•Promote Southeast Asian studies; and

•Maintain close and beneficial cooperation with existing international and regional organisations
with similar aims and purposes and explore all avenues for even closer cooperation among
themselves.

● The European Union

● The EU symbols
The motto:
United in diversity
The EU anthem: Ode to Joy
The euro
The EU flag
The EU day: 9 May

● The EU symbols
Motto: ‘United in diversity’ – the EU countries are committed to peace and prosperity while
respecting Europe's different cultures and languages

Anthem: ‘Ode to Joy’ by Ludwig van Beethoven. The poem "Ode to Joy" expresses Schiller's
idealistic vision of the human race becoming brothers - a vision Beethoven shared. In 1972, the
Council of Europe adopted Beethoven's "Ode to Joy" theme as its anthem. In 1985, it was
adopted by EU leaders as the official anthem of the European Union. There are no words to the
anthem; it consists of music only. In the universal language of music, this anthem expresses the
European ideals of freedom, peace and solidarity.

Euro: The euro is the most tangible proof of European integration – the common currency in 19
out of 27s EU countries and used by some 338.6 million people every day. The euro was
launched on 1 January 1999. Banknotes and coins were introduced on 1 January 2002. The
benefits of the common currency are immediately obvious to anyone travelling abroad or
shopping online on websites based in another EU country.

Flag: The European flag symbolises both the European Union and, more broadly, the identity
and unity of Europe.
It features a circle of 12 gold stars on a blue background. They stand for the ideals of unity,
solidarity and harmony among the people of Europe.

9 May: 9 May celebrates peace and unity in Europe. The date marks the anniversary of the
historical 'Schuman declaration'. At a speech in Paris in 1950, Robert Schuman, the then
French foreign minister, set out his idea for a new form of political cooperation in Europe, which
would make war between Europe’s nations unthinkable.

● European Union
•According to the European Union's official website, the union's purpose is to promote peace,
establish a unified economic and monetary system, promote inclusion and combat
discrimination, break down barriers to trade and borders, encourage technological and scientific
developments, champion environmental protection, and, among others, promote goals like a
competitive global market and social progress.
•Established in 1993, the European Union's headquarters are currently located in Brussels,
Belgium.

● MEMBERS OF EU
European Union is a coalition of 28 (now 27 following Britain's bow out from the union in 2019)
European countries, designed to tear down trade, economic and social barriers and promote
flourishing in these areas. As of 2018, the European Union had 28 members - all European
countries. The countries comprising the European Union are Austria, Belgium, Bulgaria, Croatia,
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania,
Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
However, in 2019, Britain left the European Union, bringing the total down to 27 countries.

● Structure of EU
•The European Union is governed by three main bodies - the EU Council, the EU Parliament
and the EU Commission.
•The Council's main job is to create and propose new policies and legislation for the European
Union
•The Parliament then debates and passes the laws proposed by the Council
•Finally, the Commission enforces and operates the laws for the European Union
•Additionally, the European Central Bank services the EU's financial needs and manages things
like inflation rates and foreign exchange reserves.

● Aims of the EU
The Treaty of Lisbon set out the aims of the European Union:
•To promote peace and the well-being of EU citizens
•To offer EU citizens freedom, security and justice, without internal borders, while also
controlling external borders
•To work towards the sustainable development of Europe, promoting equality and social justice
•To establish an economic union, with the euro as its currency
•To contribute to the sustainable development, peace and security of the Earth

● Values of the EU
The Treaty of Lisbon (and the EU Charter of Fundamental Rights) also sets out the values of the
EU:
•Human dignity
•Freedom
•Democracy
•Equality
•Rule of law
•Human rights