PADMASHREE DR. D.Y.

PATIL UNIVERSITY
DEPARTMENT OF BUSINESS
MANAGEMENT

ASSIGNMENT
ON
BUSINESS ENVIRONMENT

GROUP NO 4
GROUP NO 4
ROHIT SANKPAL

ARTI LAL

POORVA KEMBHAVI

PRATIBHA SHARMA

PRERNA LODHA

SANKET ASHINKAR

HINAL TEJANI

SARVESH DAMLE

RAJIV MEHRA
PIC
 INTRODUCTION

Practically all societies at early stages of their development have viewed industrialization as the main
vehicle for improving living standards. It is not surprising,therefore, that governments have played
an active role in promoting industrialization.

This project attempts to throw some light on this role and evaluates the various government policies
in support of industrialization in developing countries in general.

The project is divided into four sections:-

Section one:- Considers the conditions underwhich governments are likely to make their best
contribution to industrialization in amarket-oriented economy and puts particular emphasis on the
services that governments provide directly.

Section two:-This section takes a preliminary look at government's indirect role of intervening to
influence the way markets work.

Section three:-This draws les sons from different countries experiences.

Finally Section four summarizes the main findings of the the project.
 Section One

Government Contribution to Industrialization

The fundamental goal of economic development is to improve the welfare of the masses. Many
governments have sought to use industry as an instrument to achieve this objective. The role of the
government in accelerating industrialization varies greatly according to ideology, political structures,
administrative capacity and the level ofdevelopment. But despite this variation, governments have
often been central to the industrialization process, whether as economic ringmaster in laissez-faire
Britain of the past century or as central planner and provider in today's Soviet Union.

Mostdeveloping countries, have tended also to rely on the private sector and on markets in their
effort to industrialize.

The role of government in promoting industrial development in developingcountries is vital for the
following reasons:

1. The government has to see the rules of the game, which define the use, ownership, and
conditions of transfer of physical, financial and intellectual assets. Irrespectiveof the type of
economy - whether it favours private enterprise or is a command -economy - these rules impinge on
economic activity. The more they are certain, welldefined, and well understood, the more smoothly
the economy can work and the greaterthe chance of success of industrialization.

2. The government must play a major role in education, including providing the basic skills of literacy
and numeracy that are vital in modern industrial labour force. Lack of education, rather than
physical assets, is the main bottle neck in industrialization.

The transition from a primarily agricultural and trading economy to an industrial economy requires,
at least in the initial stages, an increase in the skills of the labourforce. To use foreign technology
effectively, producers must examine the choices available, make intelligent selections and adapt
them to local conditions. All of this callsfor education.

Also, the government can help, at least in the early period of industrialization, topromote industrial
research and technological change, for example by setting up demonstration factories. Education
spurs the process of industrialization by imparting skills, improving health, and allowing more
women to enter the labour force. Education and investment in technological knowledge go hand in
hand. Countries that neglect anyone of these forms of investment may not be efficient in
industrializing.

China, HongKong, Korea and Singapore have all achieved a significant level of economic growth. All
adapted a balanced investment strategy that included education along with increased physical
capital and technological transfer.
3. The government may have to play an important role in advancing technology which is vital to the
industrialization process. Often technological knowledge is acommodity that can be traded like many
others, but it has some peculiarities which sometimes make trade difficult. These are frequently
used to justify government intervention. Producers of technology often face high risks, since the
outcome of innovation is uncertain and technologies can sometimes be easily copied. Purchasers of
technology also face risks, because they often cannot know just what they have bought until they
acquired and used it. Thus firms may expand less technological effort than desirable if they are
unable to reap the outcome for themselves.

Governments can dealwith the externality problem in several ways.

a) The government may allow firms to register patents.

b) The government may subsidize technological effort.

c) The government may attempt to promote specialised agents for technological development,
usually publicly supported research and development institutes.

d) The government may seek to establish technology information centres which could charge private
users a small fee for access to their data bank.

4. The government must provide the physical infrastructure of industry; Transport,communications

and power systems. Although some parts of such systems can be, andare, profitably operated in the
private sector in many countries, government provision of large systems in most developing
countries is usually the only feasible option.

Government involvement in the provision of transport, communication and poweroccurs for several
reasons:

a) There is a public goods argument in cases where user fees are difficult to collect, although
governments can sometimes levy indirect user charges-they might finance roads, for example, from
the revenues derived from gasoline taxes and license fees.

b) Large projects, telecommunications, railways and electricity and gas production,for instance - may
involve economies of scale. In other words, a single investmentmight be more efficient than a
number of competing investments.

c) The preference in most countries for public enterprises may reflect a belief that control is better
exercised through ownership than through regulation.

d) For large projects, underdeveloped financial markets or political risks might deter private
investments.

5. Virtually all governments provide at least some commercial goods and services through state-
owned enterprises. These enterprises are important producers of a broadrange of industrial
products such as steel, fertilizers, automobiles and petrochemicals.
Governments have created them for a variety of reasons :-

a) To spearhead industrialization in countries with virtually no large-scale industry.

b) To promote industries deemed to be of strategic importance.

c). To save threatened jobs.

d) To reduce the presence or prevent the entry of foreign-owned firms.

The state-owned enterprises would seem to operate efficiently when competitionhas been greater,
when managers have had more financial autonomy, when poorperformers have been removed and
good ones have been rewarded, and whengovernment interference with day-to-day operations has
been reduced.

6. Governments often intervene in markets to improve economic performance, tolimit abuses (such
as fraud and pollution), and to protect public health.

7. The government must take steps to increase the information available toproducers and to protect
consumer welfare. Governments have a comparative advantagein collecting and disseminating
certain kinds of information, especially in developingcountries, where information is scarce and
education is poor. All governments providebasic statistical and other information on their own
activities and on the economy ingeneral. The government may also play a useful role as a clearing
house for informationand forecasts on domestic and foreign markets and technologies.

8. Governments also need to regulate to protect welfare through various regulationssuch as

checking weights and measures, establishing health standards for food anddrugs and air, land and
water pollution, requiring product safety standards and productguarantees and imposing safety
standards in the work place.

9. The government may have to regulate financial markets to prevent abuses such asinsider trading,
to require companies to disclose more information and to require financialinstitutions to insure their
smaller depositors. Fiscal and monetary policies are oftenemployed to promote economic health
and to achieve a variety of desirable social goals.Experience suggests that the governments of
market economies which haveefficiently industrialized have, by and large, observed the hierarchy of
prioritiesdescribed above. They have established clear rules of the game, contributed judiciouslyto
the construction of an industrial infrastructure, and otherwise intervened sparinglyand carefully.

Some developing countries, however, have undermined their industrializationefforts by approaching

these choices in reverse. In the more extreme cases, publicintervention in markets has been heavy,
but fragmented and in pursuit of conflictingobjectives.
Section Two

The Indirect Role of the Government in Correcting

Market Failures

Governments intervene to ensure successful industrialization because markets fail to allocate

resources efficiently that is, in a way that equates social marginal costs with social marginal benefits.
There are many problems associated with market failure:

The rise of monopoly, misdirection of investment, externalities etc. This section will examine the
indirect role of government in correcting market failures.

1. Enhancing Competition

Monopoly exists when a single seller (pure monopoly) or a small number of them(oligopoly) can
restrict output and raise prices in the absence of competition.

Monopoly, however, is sometimes the most efficient way to allocate resources. Electricpower and
telecommunications networks, which benefit from economies of scale up to very high levels of
output, are often taken to be natural monopolies of this kind.

Governments may need to regulate prices in monopolized markets or devise policies toencourage
new entrants. Many countries have adopted price controls. Often they havefound that such controls
are difficult to enforce because black markets mushroom anddrive large sections of the economy
underground. In addition multi product firms,such as those in the textile industry tend to
compensate for price controls on one productby expanding production of uncontrolled products. As
a result fewer "essential goods"are produced in favour of more "nonessential goods". For these
reasons, governmentstry to rely more on subsidizing the consumption of essential industrial
products.

Well-targeted subsidies are preferable to price controls; although such subsidies reduceprices for
consumers, they do not lower incentives to producers. But subsidies haveoften led to budgetary
deficits and, in turn, to high inflation. Furthermore, onceinstalled, subsidies can hard to remove. In
Egypt in 1977 the government's attempt toreduce subsidies on a range of basic commodities led to
riots.
2. Directing Investment Towards industrialization

The government may have to intervene, through regulations and fiscal incentives toguide private
investment in industry. This has taken place at one time or another in manycountries, including
Benin, Brazil, Ethiopia, India, Indonesia, Liberia, Malaysia,Mauritania, Mexico, Pakistan, Sri Lanka,
Tanzania, Togo and Zambia. Thisintervention reflects the view that markets fail to allocate resources
according to nationalpriorities. These priorities are often in development plans, and the regulatory
and taxsystems are used to ensure that plan priorities are reflected in the pattern of
privateinvestment. Other objectives include the prevention of industrial concentration,
thepromotion of regionally balanced industrial development and public sector control overkey
industry. The most common tool of investment regulations is the industrial license.Under such
system governments grant licenses for the creation of new industrial capacityaccording to their
projections of future demand. The systems are often too complicatedand tend to be implemented
without previous planning. Also, licensing usually favourslarge firms over small ones because large
firms tend to be better informed and can allocatemore resources to deal with the licensing system.
Moreover, to administer the licensingsystem effectively, the country needs a large number of skilled
labour. This carries a highprice, particularly in African economies, where skilled manpower is scarce.
(14)

Furthermore, industrial licensing can engender corruption especially when theinterpretation of rules
is left to the discretion of a new officials.Instead of using rigid systems to influence the pattern of
investment, thegovernments of the developing countries should encourage new entrants and thus
putpressure on the existing inefficient producers to improve efficiency. Governmentswhich
encouraged competition and avoided using rigid systems found that resourceshave been better able
to respond to changes in incentives following trade liberalizationand to flow to industries offering
the highest financial returns.

Firms in thesecountries are motivated to be more competitive since there are few legal restrictions
toentry by new firms.

Governments in developing countries may also regard the regulation of foreigninvestment a

necessity for promoting industrial development. These regulations mayrequire exclusion of foreign
investment from some sectors, limitations on foreign equityparticipation, domestic content minima,
export obligations, employment quotas,establishment of research and development facilities,
training of nationals, appointmentof host-country nationals to senior managerial positions, ceilings
on repatriation ofprofits and royalties, and limits to duration of technology licensing agreements. At
thesame time, governments offer foreign investors a wide variety of incentives such as taxholidays,
tax concessions, accelerated depreciation allowances, duty-free imports ofcapital goods, investment
subsidies and guarantee against expropriation. This mixture ofrestrictions and incentives reflects an
ambivalence on the part of some developingcountries. On one hand fear that foreign direct
investment may undermine theirsovereignty, limit their tax revenues, displace domestic firms, blunt
local initiative,introduce inappropriate technology, pollute the environment and squander
exhaustibleresources.

On the other hand, they recognize that foreign direct investment augmentsdomestic investment,
transfers new technologies and avoids some of the risks ofexternal borrowing. Many of the concerns
about foreign direct investment arise whencountries use protection to stimulate local out put.
Foreign (as well as domestic)investors can then earn financial returns that are much higher than the
economic returnsto the country. Thus, protection attracts foreign direct investment. But this can
mean anet loss of foreign exchange for the developing country if the sum of repatriated profitsand
imported inputs exceeds the foreign exchange saved through local production. Insuch circumstances
foreign direct investment can even reduce a country's real income.

Many controls on foreign investors, therefore take the benefits from protection thataccrue to
foreign firms and channel them to groups within the country's such as organized labour,
shareholders or domestic entrepreneurs. But this may deter foreign firms from investing in the first
place. Controls seem to matter more than incentives to foreign investors. Most regard incentives as
volatile and transitory. Empirical studies suggest that a country's-natural resources, its recent growth
performance and its political and economic stability are the factors that attract foreign investment.
Countries that follow outward-oriented strategies tend to have fewer problems with foreign
directinvestment. Since a country following an outward-oriented strategy does not discriminate
between import substitution and exports, it tends to attract foreign firms wishing to take advantage
of its resources. Foreign investments, therefore, are more likely to align themselves with the
country's comparative advantages and to augment domestic resources in fostering efficient
industrial development.

3. The Role of Government in Coping with Externalities

Externalities occur when economic activities have spillover effects. For example, a polluting factory
inflicts a negative externality on those who live downwind. In contrast a firm which invests in
acquiring technical knowledge produces a positive externality when this knowledge passes outside
the firm. In both cases, private costs and benefits are different from social costs and benefits. Private
investors will not undertake socially desirable investments which take time to come on stream or
require a long learning process. The problem on how to finance a project in its initial, loss-making
stage especially where a learning process is involved, is a common one. This may indeed be a
problem if capital markets do not exist or do not work properly, as is frequently the case in
developing countries. Also, entrepreneurs may fail to invest in projects that generate benefits for the
rest of the economy because the investor would not be able to capture the benefits.(17) One
example of this would be investment in technical skills, embodied in individual workers who could
than take their skills to a new employer. There would be no market failure if the firm were able to
charge the workers for their training, but if this is prevented by laws, trade unions, or social
convention, the private value to firms of investment in training will be less than the social value, and
there will be underinvestment. In these situations government intervention may be warranted.
However, this intervention should attack the problem of market failure nearest to its source. This
may means policies to make financial markets work better, to provide education or to establish a
patent law rather than measures directed at particular firms or sectors. Also, the infant industry
agreement could be pushed too far. Protection may prove counter productive in several respects. In
many developing countries protection has become more or less permanent, so that the stimulus for
infant industries to mature is removed. Indeed it has always created a gap between local costs and
world prices too wide that it is unlikely ever to be bridged.

Protection raises prices and therefore reduces domestic demand for the protected goods. By the
same token, protection provides no stimulus to exports. This, in turn, inhibits the achievement of
lower costs through greater economies of scale. To be effective, infant industry protection must be
implemented with a preannounced and credible time table for withdrawal and should be selective.

4. Government Policies Affecting Capital and Labour Markets

The government intervention in the capital and labour markets tend to have a direct bearing on
industrial development in developing countries. In the majority of these
countries, governments regulate interest rates to encourage investment in some sectors.Interest
rates control also help governments finance their budget deficits, many state owned enterprises rely
on low-interest loans from the banking system and many governments require banks to buy low-
yielding government bonds or place some of
their assets in low-interest reserves with the central bank. Although interest rate controls and
selective credit policies may serve specific purposes, they tend to have broad andon the whole,
unfavourable effects on the behaviour of savers, lenders and borrowers.

Also, government intervention in the labour markets, particularly through minimum wage
legislation, is an important influence on real wages in manufacturing. Minimum wages, in
conjunction with wage indexation can result in reducing employment and increasing the inequalities
between the formal and informal sectors. These policies can also reduce wage differentials between
skilled and unskilled workers and thereby reduce
incentives for education and training.
 Section Three

Countries' Experience with Government Role in Promoting Industrial Development

Most observers, however, stress the importance of strong, capable and honest government in these
countries, close government industry relations (with a strong national consensus on economic
goals), and domestic markets large enough to allow substantial competition.(19) They also cite the
selective use for import protection, concessional credit, policies to reorganize firms, and, in some
cases, direct private investment to promote
specific industrial activities. In some countries, intervention appears to have been the outcome of a
collective decision-making process in which government acted as an agent for the exchange of
information between firms. The pattern of public intervention has differed from country to country
and overtime; for instance, in Korea, import protection was more important up to the 1960's than it
is now.

The success of some East Asian countries can also be attributed to the fact that they have, by and
large, implemented policies that did not, in aggregate, discriminate between broad groups of
industrial activity. For instance, the net effect of the incentives is more neutral between import
substitution and export activities in Korea than in the great majority of the developing countries.
since the 1960's. Often these policies put greater emphasis on "first aid for ailing" In France
indicative planning was accorded some success in modernizing leading industrial sectors for a
decade or two after World War II. The development of civil nuclear energy and the modernization of
telecommunications are attributed to the public sector success. Intervention has been conspicuously
less successful in such sectors as machine tools and steel.

The role of government in facilitating transactions between economic agents in developing

countries, where the level of information is often deficient and the policy making process often
fragmented and ad hoc, is not an easy one. Moreover, although economic principles play a useful
role in indicating the general conditions under which
government action will be most productive, identifying the specific cases in which these principles
apply and devising effective measures are often difficult. However, a clear hierarchy of priorities
emerges for market-oriented governments seeking to industrialize effectively.

First, developing the web of complex activities and relationships that characterize a sophisticated
industrial sector becomes difficult, if not impossible, in the absence of clear, evenhanded and
predictable rules of the game. These rules must be the primary concern of governments since only
governments can provide them.

Second, an efficient and adequate supply of infrastructure services such as transport,

communications, power, and education is also vital to modern industry. Governments must make
sure these needs are effectively met, but this does not always mean that the government should be
the provider. In some cases, it may be more appropriate to regulate private monopolies in others, to
allow competition among providers.

Finally, governments also intervene to change the way markets work. For instance to prevent
abuses, to improve welfare and to improve the pattern of investment or output. It is there that the
government's task is most difficult. The dividing lines between measures that improve and those
that worsen the conditions under which the private sector operates is often fine. Governments
should use their scarce resources carefully .
 AGRICULTURE INDUSTRY

1. ABOUT INDUSTRY:

Agriculture in India has a long history dating back to ten thousand years. Agriculture is one of the
strongholds of the Indian economy and accounts for 14.6 per cent of the country's gross domestic
product (GDP) in 2009-10, and 10.23 per cent (provisional) of the total exports. Furthermore, the
sector provided employment to 58.2 per cent of the work force. The total geographical area of India
is 328.7 million hectares of which 140.3 million hectares is net sown area, while 193.7 million
hectares is the gross cropped area, according to the Annual Report 2009-10 of the Ministry of
Agriculture. The rural areas are still home to some 72 percent of the India’s 1.1 billion people, a large
number of whom are poor. Most of the rural poor depend on rain-fed agriculture and fragile forests
for their livelihoods. Agriculture may be defined as an integrated system of techniques to control the
growth and harvesting of animal and vegetables. It is an uncomplicated endeavor comprising of
technical and practical processes that helps in the maintenance of the ecological balance and
protects human resources; and most importantly it is a viable food production system.  As per the
modern definition of agriculture which would be" an aggregate of large scale intensive cultivation of
land, mono-cropping, organized irrigation, and use of a specialized labor force". It is the largest
economic sector of India.

2. PROBLEMS FACED BY THE INDUSTRY:

Slow agricultural growth is a concern for policymakers as some two-thirds of India’s people depend
on rural employment for a living. Current agricultural practices are neither economically nor
environmentally sustainable and India's yields for many agricultural commodities are low. Poorly
maintained irrigation systems and almost universal lack of good extension services are among the
factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market
infrastructure, and excessive regulation.

—World Bank "India Country Overview 2008”

Following are the problems faced in the industry:

a) Slow Down in Agricultural and Rural Non-Farm Growth:

Both the poorest as well as the more prosperous ‘Green Revolution’ states of Punjab, Haryana and
Uttar Pradesh have recently witnessed a slow-down in agricultural growth. Some of the factors
hampering the revival of growth are:

1. Poor composition of public expenditures:

Public spending on agricultural subsidies is crowding out productivity-enhancing investments such

as agricultural research and extension, as well as investments in rural infrastructure, and the health
and education of the rural people. In 1999/2000, agricultural subsidies amounted to 3 percent of
GDP and were over 7 times the public investments in the sector.

2. Over-regulation of domestic agricultural trade:

While economic and trade reforms in the 1990s helped to improve the incentive framework, over-
regulation of domestic trade has increased costs, price risks and uncertainty, undermining the
sector’s competitiveness

3. Government interventions in labor, land, and credit markets:

More rapid growth of the rural non-farm sector is constrained by government interventions in factor
markets -- labor, land, and credit -- and in output markets, such as the small-scale reservation of
enterprises

4. Inadequate  infrastructure and services in rural areas

b) Weak Framework for Sustainable Water Management and Irrigation:

1. Inequitable allocation of water:

Many states lack the incentives, policy, regulatory, and institutional framework for the efficient,
sustainable, and equitable allocation of water.

2. Deteriorating irrigation infrastructure:

Public spending in irrigation is spread over many uncompleted projects. In addition, existing

infrastructure has rapidly deteriorated as operations and maintenance is given lower priority

c) Inadequate Access to Land and Finance:

1. Stringent land regulations discourage rural investments:

While land distribution has become less skewed, land policy and regulations to increase security of
tenure (including restrictions or bans on renting land or converting it to other uses) have had the
unintended effect of reducing access by the landless and discouraging rural investments.

2. Computerization of land records has brought to light institutional weaknesses:

State government initiatives to computerize land records have reduced transaction costs and
increased transparency, but also brought to light institutional weaknesses.

3. Rural poor have little access to credit:

While India has a wide network of rural finance institutions, many of the rural poor remain
excluded, due to inefficiencies in the formal finance institutions, the weak regulatory
framework, high transaction costs, and risks associated with lending to agriculture.

d) Weak Natural Resources Management:

One quarter of India’s population depends on forests for at least part of their livelihoods.

1. A purely conservation approach to forests is ineffective:

Experience in India shows that a purely conservation approach to natural resources management
does not work effectively and does little to reduce poverty.

2. Weak resource rights for forest communities:

The forest sector is also faced with weak resource rights and economic incentives for communities,
an inefficient legal framework and participatory management, and poor access to markets.

e) Weak delivery of basic services in rural areas:

1. Low bureaucratic accountability and inefficient use of public funds:

Despite large expenditures in rural development, a highly centralized bureaucracy with low
accountability and inefficient use of public funds limit their impact on poverty. In 1992, India
amended its Constitution to create three tiers of democratically elected rural local governments
bringing governance down to the villages. However, the transfer of authority, funds, and
functionaries to these local bodies is progressing slowly, in part due to political vested interests. The
poor are not empowered to contribute to shaping public programs or to hold local governments
accountable

3. ROLE OF WORLD BANK:

a) Enhancing agricultural productivity, competitiveness, and rural growth:

1. Enhancing productivity:
Creating a more productive, internationally competitive and diversified agricultural sector would
require a shift in public expenditures away from subsidies towards productivity enhancing
investments. Second it will require removing the restrictions on domestic private trade to improve
the investment climate and meet expanding market opportunities. Third, the agricultural research
and extension systems need to be strengthened to improve access to productivity enhancing
technologies. The diverse condition across India suggests the importance of regionally differentiated
strategies, with a strong focus on the lagging states.

2. Improving Water Resource and Irrigation/Drainage Management:

Increase in multi-sectoral competition for water highlights the need to formulate water policies and
unbundle water resources management from irrigation service delivery. Other key priorities include:
(i) Modernizing Irrigation and Drainage Departments to integrate the participation of farmers and
other agencies in irrigation management; (ii) Improving cost recovery; (iii) Rationalizing public
expenditures, with priority to completing schemes with the highest returns; and (iv)Allocating
sufficient resources for operations and maintenance for the sustainability of investments.

3. Strengthening rural non-farm sector growth: 

Rising incomes are fueling demand for higher-value fresh and processed agricultural products in
domestic markets and globally, which open new opportunities for agricultural diversification to
higher value products (e.g. horticulture, livestock), agro-processing and related services. The
government needs to shift its role from direct intervention and overregulation to creating the
enabling environment for private sector participation and competition for agribusiness and more
broadly, the rural non-farm sector growth. Improving the rural investment climate includes
removing trade controls, rationalizing labor regulations and the tax regime (i.e. adoption of the value
added tax system), and improving access to credit and key infrastructure (e.g. roads, electricity,
ports, markets).

b) Improving access to assets and sustainable natural resource use:

1. Balancing poverty reduction and conservation priorities: 

Finding win-win combinations for conservation and poverty reduction will be critical to sustainable
natural resource management. This will involve addressing legal, policy and institutional constraints
to devolving resource rights, and transferring responsibilities to local communities.

2. Improving access to land:

States can build on the growing consensus to reform land policy, particularly land tenancy policy and
land administration system. States that do not have tenancy restrictions can provide useful lessons
in this regard. Over the longer term, a more holistic approach to land administration policies,
regulations and institutions is necessary to ensure tenure security, reduce costs, and ensure fairness
and sustainability of the system.

3. Improving access to rural finance:

It would require improving the performance of regional rural banks and rural credit cooperatives by
enhancing regulatory oversight, removing government control and ownership, and strengthening
the legal framework for loan recovery and the use of land as collateral. It would also involve creating
an enabling environment for the development of micro-finance institutions in rural areas.

c) Strengthening institutions for the poor and promoting rural livelihood:

1. Promoting Community-Based Rural Development:

State Government efforts in scaling up livelihood and community-driven development approaches

will be critical to build social capital in the poorest areas as well as to expand savings mobilization,
promote productive investments, income generating opportunities and sustainable natural resource
management. Direct support to self-help groups, village committees, user’s associations, savings and
loans groups and others can provide the initial ’push’ to move organizations to higher level and
access to new economic opportunities. Moreover, social mobilization and particularly the
empowerment of women’s groups, through increased capacity for collective action will provide
communities with greater "voice" and bargaining power in dealing with the private sector, markets
and financial services.

2. Strengthening Accountability for Service Delivery:

As decentralization efforts are pursued and local government is given more prominence in the basic
service delivery, the establishment of accountability mechanisms becomes critical. Local
governments’ capacity to identify local priorities through participatory budgeting and planning needs
to be strengthened. This, in turn, would improve the rural investment climate, facilitating the
involvement of the private sector, creating employment opportunities and linkages between farm
and non-farm sectors.

4. ROLE OF INDIAN GOVERNMENT:

The biggest step taken by government to improve agricultural conditions in India is National Bank for
Agriculture & Rural Development [ NABARD]

About NABARD:

NABARD is set up as an apex Development Bank with a mandate for facilitating

credit flow for promotion and development of agriculture, small-scale industries,
cottage and village industries, handicrafts and other rural crafts. It also has the
mandate to support all other allied economic activities in rural areas, promote
integrated and sustainable rural development and secure prosperity of rural areas.
In discharging its role as a facilitator for rural prosperity NABARD is entrusted with:

1.Providing refinance to lending institutions in rural areas

2.Bringing about or promoting institutional development and

   
3.Evaluating, monitoring and inspecting the client banks

   

  Besides this pivotal role, NABARD also:

   

• Acts as a coordinator in the operations of rural credit institutions

   

• Extends assistance to the government, the Reserve Bank of India and other
organizations in matters relating to rural development

   

• Offers training and research facilities for banks, cooperatives and organizations
working in the field of rural development

   

• Helps the state governments in reaching their targets of providing assistance to

eligible institutions in agriculture and rural development

   

  Steps taken by NABARD:

• Refinance disbursement under ST-Agri & Others and MT-Conversion/ Liquidity

support aggregated Rs.16952.83 crore during 2007-08.

   

• Refinance disbursement under Investment Credit to commercial banks, state

cooperative banks, state cooperative agriculture and rural development banks,
RRBs and other eligible financial institutions during 2007-08 aggregated
Rs.9046.27 crore.

   

• Through the Rural Infrastructure Development Fund (RIDF) Rs.8034.93 crores

were disbursed during 2007-08. With this, a cumulative amount of Rs.74073.41
crore has been sanctioned for 280227 projects as on 31 March 2008 covering
irrigation, rural roads and bridges, health and education, soil conservation,
drinking water schemes, flood protection, forest management etc.

   

• Under Watershed Development Fund with a corpus of Rs.613.71 crore as on 31

March 2008, 416 projects in 94 districts of 14 states have benefited.

   
• Farmers now enjoy hassle free access to credit and security through 714.68 lakh
Kisan Credit Cards that have been issued through a vast rural banking network.

   

• Under the Farmers' Club Programme, a total of 28226 clubs covering 61789
villages in 555 districts have been formed, helping farmers get access to credit
technology and extension services.

AVIATION INDUSTRY

A mammoth logistical exercise,is being carried out involving an electorate of more than 700
million, will determine the make-up of the next government that will lead the world’s second
most populous nation. The fractured nature of Indian politics means that the outcome is still
unclear. But one thing is certain, the new Minister of Civil Aviation will have a busy agenda ahead.
India’s booming airline industry will see further consolidation by 2010 amid growing competition, rising
costs and over-capacity along key routes, an industry body said on 13 June.

At least fourteen new airlines such as Easy Air, Trans India and Star Air are seeking government
approval to launch operations.

From just three private airlines in 2003, the number has jumped to ten, including low-cost carriers such
as Spice Jet, Go Air, Paramount Airways and Indi Go. India’s low-cost carriers (LCCs) captured 35% of
market share in this year.

These budget carriers are likely to double their market share by 2010 -- one of the highest in the world,
the CAPA said in a recent report on the Indian subcontinent.

The performance of two new LCCs -- Air India Express and JetLite (formerly Air Sahara) -- in the
domestic market is likely to be closely watched.
“The overall picture in India for present is one of growth, but against a backdrop of extreme, and
mounting, unprofitability,” the CAPA report said.

India’s airline industry lost 500 million dollars in the year ending March 2007, spurring domestic players
to buy rivals.

The country’s largest domestic carrier Jet Airways bought competitor Air Sahara for nearly 340 million
dollars in April, followed by a deal between Kingfisher and Air Deccan airlines in May.

India’s airlines have expanded aggressively in recent years, with about 480 aircraft on order for delivery
through to 2012.

The Last Five Years

The current government, after setting a blistering pace in aviation sector reform during the first half
of its term, lost momentum in the last couple of years, during which more could have been achieved.
The first three years of Civil Aviation Minister, Praful Patel's tenure were remarkable, and the speed
and direction of change was unlike anything that India has seen before.

Genuine deregulation of the domestic skies; liberal bilateral agreements with all key markets,
including open skies with the US, modernisation of Delhi / Mumbai airports; fleet purchase orders
and a merger of the national carriers; allowing domestic airlines to fly overseas; open skies in cargo
and many other initiatives created a solid platform for further growth and for the development of a
world class aviation industry in India.
This initial burst ideally needed to be strengthened by further reforms and policy initiatives. Instead,
the pace slackened and several important issues were left unaddressed, in particular:
 the New Civil Aviation Policy.
 Foreign Direct Investment regulations in the airline sector.
 abolition of the 5 year/20 aircraft rule to allow more private airlines to fly international.
  delays in setting up the Aviation Economic Regulatory Authority.
 city side development of non-metro airports.
 postponement of the ground handling policy.
 under investment in ATM and CNS infrastructure.

The disappointment of the last couple of years is in large part driven by the expectations set by the
first three years, which were genuinely historic in their impact on the industry. The political
environment in India can make it difficult for such momentum to be sustained. The new government
will take charge at a time when the aviation industry is faced with an extremely challenging
environment on many fronts. However, a number of key issues which require urgent attention
include:
 Securing the future of Air India.
 Ensuring that airlines have adequate access to capital.
 Establishing an economic regulator for airports.
 Moving ahead with the development of second airport in Mumbai.
 Allowing Indian carriers to compete on international routes.

The airline industry fights for survival

Air India’s malaise is but one element of a financial crisis facing the wider Indian airline industry.
Industry net losses for the 12 months ended 31 March 2009 are expected to be in the region of
USD1.3-1.4 billion. As a
benchmark, IATA estimates that the combined net losses of airlines globally for 2008 at USD8.5
billion – India’s contribution to this is significantly higher than the 2% of world air traffic for which it
accounts.
The market debt of the three major airline groups – Air India, Jet Airways and Kingfisher Airlines –
currently stands at USD8 billion and could reach USD10 billion by the end of the current financial
year (equivalent to up to 1% of India’s GDP). The huge interest burden this creates at a time of
declining revenue is weighing heavily on these carriers. CAPA believes that the Indian market is not
large enough to support three large full service
carriers operating and competing on similar footprints, and that rationalisation is inevitable and
desirable for the health of the industry.

Domestic Airline Market Share

The over-aggressive expansion of the big three carriers is partly responsible for the fiscal demise of
the sector, however some blame can also be apportioned to the structural costs facing the industry
in the form of high
taxation and inadequate infrastructure. It is unfortunate that the airport modernisation program
currently underway may itself suffer if airport revenues continue to fall below projections due to the
contraction in traffic. Indian banks and financial institutions now have significant exposure to the
aviation sector and it is uncertain how much more they will be willing to take. With local sources of
capital drying up, the ability to tap foreign investors will be key to the survival of several airlines over
the next 12-18 months. The new administration should take the long awaited step of permitting
foreign airlines to take a strategic investment of up to 49% in Indian carriers. It is imperative that the
airline industry be turned around to a position of viability and the new government must take
effective measures to address this issue.

Regulation of Airports

In order to build a modern, world class airport system in India, almost USD30 billion of investment
will need to have been committed in the 15 years through to 2020. The government acknowledges
the important role of the private sector, but in order to attract its participation, the first prerequisite
is an economic regulatory framework which provides clarity and certainty to investors on the
commercial potential of any specific airport operation. The absence of a clear set of guidelines for
airport operators ensures that their revenue models remain subject to national debate and
controversy. Resources are allocated inappropriately, further reducing investor confidence in future
projects, denying India access to critical expertise and capital. The end result is likely to be under-
construction – and, ultimately, continued suppression of economic expansion and consumer
benefits. India’s airport modernisation program is at a critical phase, particularly at the two premier
gateways, Delhi and Mumbai, over the next 12-18 months, and ensuring airport pricing transparency
will be extremely important at this time. The government first stated its intention to establish the
Airport Economic Regulatory Authority (AERA) more than 3 years ago. The relevant bill was finally
passed in both houses of parliament in late 2008 and the panel was due to be appointed by February
2009. That target has been missed AERA. In order to avoid further inefficiencies in capital allocation,
it is imperative that the new government addresses the establishment of AERA as a matter of
urgency.

Bilateral Agreements
The current administration has pursued a very liberal stance on bilateral air services agreements,
taking into account India’s economic, political and strategic requirements. However, it may be time
to reflect on the issue of market access and to ensure that India’s carriers are able to effectively
leverage the international market potential that exists. With Indian airlines suffering huge financial
losses, their expansion plans are on hold, while a number of foreign carriers continue to expand
aggressively into India and claim market share.

Other issues for the government to consider include:

 Civil Aviation Policy: Although frequently promised, there has not been a formal civil
aviation policy since 1993. The industry is expected to attract investment of over USD120
billion by 2020 and it is important for the growing importance of aviation to be recognised
with the ratification of a sectoral policy;
 Restructuring of the Ministry: As aviation becomes an increasingly important sector of the
Indian economy, consideration must be given to developing an aviation policy and
governance framework that is aligned with the needs of the industry. The focus should be on
creating an environment that is equitable, efficient, transparent and in the national interest.
At present the Ministry of Civil Aviation is responsible for both policy formulation and
regulation. A possible alternative model to follow would be the UK Civil Aviation Authority
which is funded by the key stakeholders in the industry, is responsible for both technical and
economic regulation, and rather than being a civil service department, is run independently
by the leading specialists in their field. Such an approach would relieve the Ministry of Civil
Aviation of its regulatory responsibilities, allowing it to focus on policy development to
facilitate long term growth
 Renewed Focus on Safety: The Directorate General of Civil Aviation needs to be adequately
resourced and trained to focus on technical regulation, with a strengthened capability in
managing safety and air worthiness, and the ability to act in an independent CAPA May
2009: An Aviation Agenda for the Next Indian Government and transparent manner. Indian
aviation must have safety as a paramount objective. Apart from being an ideal in its own
right, it is essential for the long term growth and reputation of the industry, the country can
ill afford a mishap at this nascent stage of its development. The recent warning from the FAA
regarding its concerns about the safety oversight mechanisms in India should act as a
catalyst for addressing this issue;
 Corporatisation of Air Traffic Management: There has been underinvestment in airspace
issues in India with implications for both safety and efficiency. Implementation of a more
accountable corporate structure would assist in supporting investment and improved
performance;
 Role of Government Organisations: As the private sector become increasingly active in both
airline and airport operations, it is important to outline a long term plan for the role of state-
owned organisations such as Air India and the Airports Authority of India;
 Airport Modernisation: Embarking on the airport modernisation program was a major
success of the current administration, however it is important that the momentum be
sustained and not reduced as a result of the market slow down. The fact that the AAI plans
to raise approximately USD1 billion is encouraging. But there needs to be greater
coordination between the states and central government to plan airport development in line
 with commercial logic. Independent initiatives pursued without consideration are likely to
impact the viability of projects, which in turn could damage investor confidence and interest
in the sector;

Conclusion
Indian aviation has made significant strides in the last five years. The challenges which it currently
faces stem from a combination of the external market environment and the growing pains of what
after all is a relatively young industry – the majority of airlines operating in India today did not even
exist at the time of the last general election. The task for the new administration will be to create an
environment which is efficient, transparent and viable for both operators and investors. It will not be
an easy process, but the opportunity exists to create a world class industry that will play a critical
role in driving India’s economic development.

Sports Industry

The Sports Authority of India (SAI), a successor organization of the IXth Asian Games
held in New Delhi in 1982, was set up as a Society registered of Societies Act, 1860 in
pursuance of the Resolution No. 1-1/83/SAI dated 25th January 1984 of the Department
of Sports, Govt. of India with the objective of promotion of Sports and Games as detailed
in the Resolution. It is also entrusted with the responsibility of maintaining and utilizing,
on the behalf of Ministry of Youth Affairs & Sports, the following Stadia in Delhi which
were constructed/renovated for the IX Asian Games held in New Delhi in 1982 :-

1. Jawaharlal Nehru Stadium

2. Indira Gandhi Stadium (Indoor) and Yamuna Velodrone
 3. Major Dhyan Chand National Stadium
4. Dr. Shyam Prasad Mookherjee Swimming Pool Complex
5. Dr. Karni Singh Shooting Ranges
Subsequently, in order to adopt an integrated approach towards promotion and
development of sports consciousness, the erstwhile Society for National Institutes of
Physical Education & Sports (SNIPES) consisting of NSNIS Patiala at its centers and the
two LNCPEs located at Gwalior and Thiruvananthapuram were merged with SAI w.e.f. 1st
May 1987. The LNCPE Gwalior was however, delinked from SAI in September 1995 on
attaining the status of a “Deemed University”.

Sports Development in India

Today sports is considered integral to all-round development of one's personality. Making an

international mark in the field of sports also has a great bearing on national morale and
prestige. In order to meet the increasing demands of the changing times, at national as well as
international level, the government has taken upon itself to implement programmes to
promote excellence in sports.
Programs and Policies
 

The Sports Authority of India (SAI) was established by the Govt. in 1984 as a Society
under the Societies Registration Act, 1860, with the twin objective of broad-basing of
sports and to achieve excellence at the national and international level.  Over the years,
SAI has emerged as a field arm of sports of the Ministry of Youth Affairs & Sports
(MYAS).  

Aims & Objectives of SAI:

         To promote and broad-base sports in the country.

         To implement schemes/programmes for achieving excellence in sports in

different disciplines at international level in order to establish India as a
major sporting power.

         To maintain and utilize on behalf of the Govt., stadia which were
constructed/renovated for the IXth Asian Games held in 1982.

         To act as an interface between the Ministry of Youth Affairs & Sports and
other agencies concerned with the promotion/ development of sports in
 the country on the other hand, i.e., State Govt., U.T. Administration, IOA,
National Sports Federations, Sports Control Boards, Industrial Houses, etc.

         To establish, run, manage and administer the institutions to produce high
caliber coaches, sports scientists and physical education teachers.

         To plan, construct, acquire, develop, take over, mange, maintain and
utilize sports infrastructure and facilities in the country.

         To initiate, undertake, sponsor, stimulate and encourage research projects

related to various sports sciences for upgradation of sports, sportspersons
and coaches.

         Other incidental issues concerning promotion, development and excellence

in sports.

Maintenance and Utilisation of Stadia:

SAI is maintaining and utilizing the following stadia on behalf of Govt. of India which
were created/renovated for the IXth Asian Games held in 1982.  These stadia are also
venues for the Commonwealth Games-2010 :

(i)                Jawaharlal Nehru Stadium

(ii)               Indira Gandhi Stadium

(iii)             Major Dhyan Chand National Stadium

(iv)            Dr. Syama Prasad Mukherjee Swimming Pool Complex

(v)              Dr. Karni Singh Shooting Ranges.

Sports Promotional Schemes of SAI:

Apart from the above, the following sports promotional schemes are also being
implemented by SAI through its Regional Centres for spotting and nurturing talented
children by providing them requisite facilities in terms of sports infrastructure, sports
equipment, competition exposure and scientific coaching etc.

(i)                Centres of Excellence Scheme

(ii)               SAI Training Centres (STC) Scheme

(iii)             Special Area Games (SAG) Scheme

(iv)            National Sports Talent Contest (NSTC) Scheme

(v)              Army Boys Sports Companies (ABSC) Scheme

Academic Programmes of SAI:

SAI has got two Academic Wings, namely, Netaji Subhas National Institute of Sports
(NSNIS), Patiala for coaches and the Lakshmibai National College of Physical Education
(LNCPE) at Thiruvananthapuram. 

The NSNIS, Patiala conducts the following programmes :-

(i)                Diploma Course in Sports Coaching

(ii)               Masters Course in Sports Coaching

(iii)             Certificate Course in Sports Coaching

(iv)            Post-graduate Diploma Course in Sports Medicine

(v)              Refresher Courses

LNCPE, Thiruvananthapuram conducts the following courses :-

          (i)       Bachelor of Physical Education (BPE)

          (ii)      Master of Physical Education (MPE)

          (iii)      Regular and Part-time Ph.D programmes

 

Commonwealth Games-2010:

SAI is one of the stakeholders in the Commonwealth Games-2010 and is entrusted with
the challenging task of preparing the national teams in different disciplines on behalf of
the Govt. in collaboration with the concerned National Sports Federation.  The stadia
being maintained and utilized by SAI on behalf of the Govt. are also being
upgraded/requisite facilities being created for the Commonwealth Games-2010 through
the CPWD.

 Sports Education and Training

Sports promotion is primarily the responsibility of the various National Sports Federations -
External website that opens in a new window which are autonomous. The role of the
Government is to create the infrastructure and promote capacity building for broad-basing
sports, as well as for achieving excellence in various competitive events, at the national and
international levels. All schemes are geared towards achieving these objectives. The growing
role of sports has made participation and winning of medals in competitive sports a matter of
great significance. In recognition of this fact, many states have set up national training
academies - External website that opens in a new window and specialized centres - External
website that opens in a new window of sports excellence which offer an opportunity for
exceptionally talented young children to train under experts for long duration with modern
training aids.

Several central/state universities also impart physical and sports education at graduate and
post graduate levels. Besides, almost every state government has a department dedicated to
promoting sports and youth affairs.

National-level Institutions:

 Netaji Subhas Institute of Sports, Patiala - External website that opens in a new window
 Lakshmibai National College of Physical Education (LNCPE), Thiruvananthapuram - External
website that opens in a new window
 Lakshmibai National Institute of Physical Education, Gwalior - External website that opens in
a new window

Other Institutions offering Sports Education and Training:

 Indira Gandhi Institute of Physical Education and Sports Sciences, New Delhi - External
website that opens in a new window
  Atal Bihari Vajpayee Institute of Mountaineering and Allied Sports (ABVIMAS), Manali -
External website that opens in a new window
 National Institute of Watersports - External website that opens in a new window
 Netaji Subhas National Institute of Sports, Kolkata - External website that opens in a new
window
 Sangay Lhaden Sports Academy, Arunachal Pradesh - External website that opens in a new
window
 Dr DY Patil Sports Academy, Maharashtra - External website that opens in a new window
 Chandigarh Football & Hockey Academy - External website that opens in a new window
 Andhra Pradesh Sports School - External website that opens in a new window
 Tamil Nadu Physical Education and Sports University

Manufacturing industry

The manufacturing industries in india refers to those industries which involve in the manufacturing
and processing of items and indulge in either creation of new commodities or in value addition. The
manufacturing industry accounts for a significant share of the industrial sector in developed
countries. The final products can either serve as a finished good for sale to customers or as
intermediate goods used in the production process.

.Manufacturing industries are broadly categorized into engineering industries, construction

industries, electronics industries, chemical industries, energy industries, textile industries, food and
beverage industries, metalworking industries, plastic industries, transport and telecommunication
industries.Manufacturing industries are important for an economy as they employ a huge share of
the labor force and produce materials required by sectors of strategic importance such as national
infrastructure and defense.

The manufacturing industry in India, has all the qualities which enhance economic
development,increase the productivity of the manufacturing industry and face competition from the
global markets. The Manufacturing industry in India is believed to have the potential of improving
the economic condition of India.

Contribution to GDP:

The Gross Domestic Product or GDP is the indicator of the performance of an economy. According to
the estimates of 2008, India's GDP is $1.209 trillion and this is slated to make improvement in the
coming times. It is estimated that India's GDP will grow by 6.5% in the year 2009. In 2008 the
country's GDP was 9%; the slowdown that has been witnessed this year in the estimates is largely
due to the slowdown witnessed by the agriculture and the industrial sectors. A look at the India GDP
composition sector wise throws up some interesting figures. The agriculture sector contributed
17.2%; industry contributed 29.1% while the service sector had a contribution of 52.7% according to
2008 estimates.

Challenges faced by manufacturing sector

Challenges faced by the Indian manufacturing warrant appropriate responses from both the govt. as
well as the industry for improving the competitiveness of the sector. There are a few areas where
both the govt. and the industry need to put in efforts through a well-designed Public-Private
partnership mode:
(i) The manufacturing sector needs to access the vast market possibilities available at the
bottom of the income pyramid in the country.
(ii) The first essentiality for ensuring manufacturing competitiveness is macroeconomic
stability.
(iii) Lowering the cost of manufacturing and improving the quality are essential for
competitiveness.
(iv) The inverted duty structure caused by FTAs as well as in all cases even otherwise needs
to be rectified.
(v) Domestic indirect taxes are often singled out as a major reason why Indian
manufacturing is uncompetitive.
(vi) Each labour legislation has a separate inspector and visits of inspectors are not
synchronized across all labour enactments.

Role of govt

Liberalization, FDI and Current Implications

FDI and trade openness are not new phenomenon in the global market but India is only recently
experiencing the growth effects of liberalization. In the forty some years after independence the
Indian economy was closed off to the rest of the world, and while some trade did occur across
borders, it was not truly part of the global economy. In 1991, under the pressures of an economic
crisis, the Indian government turned to the World Bank and IMF for loans. Even though the Indian
government never took these loans, the process of liberalization and privatization required by the
World Bank had already begun, and in a radical move, the Indian government continued these
policies of openness. The government removed numerous licensing regulations in all industries,
began the privatization of many services that were previously state-run, and most importantly
opened the economy to foreign investments. Opening the markets of India allowed for greater
development and business opportunities for domestic firms, while increasing the international
presence in Indian economics. This liberalization was a huge step for India, and it ushered in a new
period of economic policy that ultimately shaped India's stance in the global economy today.

FDI policy in India follows certain regulations on the amount of investment allowed in certain
sectors. While FDI is strictly prohibited in retail trading, atomic energy, lottery systems and other
forms of gambling, most other sectors are allowed up to one hundred per cent investment. A report
on FDI policy put out by the Ministry of Commerce and Industry in 2006 lists the various industries
and permitted levels of investment in each. It is interesting to note that all manufacturing and
heavy industries are allowed one hundred per cent investment, and most are given automatic
entry route. In contrast, the amount of FDI allowed for telecommunications is capped at seventy-
four per cent on basic telecom and Internet service provision (Foreign Direct Investment Policy).
While the current policy allows for more investment in manufacturing than other sectors, industry
is not the most popular sector for FDI inflows. In the past eight years the highest percentage of FDI
in India has been directed to the service sector at 20.87 per cent. This is followed by computer
software and hardware at 11.95 per cent, and then telecommunications at 7.99 per cent.

It is interesting to note that greater liberalization of FDI towards manufacturing has not helped it
garner international investments in India, and rather the booming IT and computer services has
been a major pull for investors abroad. Over the past eight years, the amount of FDI directed
towards services has risen at a much higher rate then that of construction, as seen in the graph
below. Moreover, the limits on investment in IT indicate that government would like domestic firms
to retain a role in the development of this sector, where whereas manufacturing does not require
domestic involvement. This points to a difference in prioritization of sectors from the government.

Steps to overcome the problems in manufacturing industry

Use time-based competition as one of your most powerful strategic weapons! Drive down the time it
takes to develop and deliver new products, dramatically reduce inventory and manufacturing time,
slash the cost of quality and win back market share. The question remains: How can you do it and
become a fierce competitor?
Substantial market share has been lost over the years to foreign competitors. No industry is
immune. The pressure is on to be nothing less than the best. Reducing cycle times in your company
is a new way of tackling the problem. It is a new world-class manufacturing strategy that is making
companies fiercely competitive. Companies who are doing it are cutting out 50 percent of the time
to develop and introduce new products. They have already reduced factory throughput time by 98
percent.
But being the best takes radical change and it is no easy matter. Becoming a time-based, world-class
company requires overcoming organizational inertia. Often overlooked are outdated cultures,
ineffective management skills, bureaucratic red tape and a reward system that does not fit.
Companies must streamline factories, systems and organizations, and open up lines of
communications. They must break down barriers between departments and put an end to the
"we've always done it that way" argument. Companies have to get employees highly involved in
assuming new responsibilities if they are going to compete in the tough global markets of the 1990s.
The integrated change model provides a way to do it. It utilizes social and technical application tools,
emphasizing continuous improvement, with high involvement of people.
This internally developed, exclusive cycle-time reduction program guides and facilitates a company.
It provides a master plan that takes a company through the steps necessary to reduce total cycle
time. This broad approach covers all parts of the organization: marketing, manufacturing,
engineering, accounting, etc. It includes the full service chain from customer through warehousing,
distribution, assembly, production and supply.
The integrated change model
At the heart of the program is the integrated change model. Managing large scale change requires a
comprehensive master plan as well as accountabilities for getting work accomplished. The integrated
model provides that plus more. It is the shell of a master plan for reducing cycle times in a company.
It consists of three dimensions:
The Closed Loop -- Large scale change requires managing in phases or stages to control the effort.
The first dimension consists of four stages, looped as a continuous process: diagnosis, action
planning, building capabilities and performance results.
Stage 1 (diagnostic action) is preparation and discovery. It begins with awareness raising and data
gathering to discover problems and build a case for change.
Stage 2 (action planning) guides in the development of a vision, processes, structure and a master
plan with executable steps.
Stage 3 (building capabilities) guides in implementing master plan through team building and high
involvement activity.
Stage 4 (performance results) guides a company in measuring the results of the plan to close the
loop. The loop is a continuous process that returns to stage 1.
Six Keyholes -- The second dimension consists of six keyholes: strategy, process, structure,
staffing/skills, culture and organizational systems. Working through the strategy keyhole, one can
build a fast-cycle company vision that provides direction. Develop a new plan for the firm, then align
divisions, departments, work groups, jobs and resources with the new strategic direction. Define
where the company should be in terms of market share, people issues, profit, product lines, etc., by
setting goals in terms of specific outcomes.
In the process keyhole, define new methods of converting materials and data into products and
services. The focus in this keyhole is the reduction of cycle times using state-of-the-art innovative
methods and techniques. Revise production methods, work flow and equipment. Simplify flow,
integrate processes, reduce set-ups and use automation. Remove delays and interruptions in the
factory and office and reduce overall throughput time.
Through the structure keyhole, design the logical and physical architecture to support the new
direction. Define how the company can physically or logically organize to produce fast cycle products
or services. Revise the way your organization is designed and define relationships between groups.
Revise job structures and determine where power is allocated. Specify rules, procedures and policies
to control operations and direct organizational behavior.
Using the staffing/skills keyhole, define the mix and quality of human resources required to develop
a fast-cycle company. Determine the skills needed to cope with complex problems. Define
mechanisms for selecting, training and developing employees.
Working through the culture keyhole, facilitate the measuring of climate, organizational behavior,
attitudes and management style. Define the character of the organization, and the new norms,
values and beliefs that drive behavior. Devise the new principles that guide human actions for the
fast cycle company and cascade them throughout the organization.
The organizational systems keyhole defines performance measurements and rewards. In this
segment, close the loop, sanctioning the new culture, and devise new rewards for cooperative
efforts and new behavior. Reward adherence to new principles and achievement of new objectives.
This type of program links the six keyholes into an approach for managing change.
Change Strategy --The third dimension consists of three levels of focus for change strategy:
organization, group and individual. They are used in the four stages and must all be addressed for
organizational effectiveness. They include responsibility and accountability.
Using team building techniques, facilitate the process of diagnosis at each level and develop
technical and organizational strategies. Using high involvement, transform them into executable and
measurable short-term actions. This is the way work gets accomplished.
Develop concise objectives for all managers that focus on cycle time reduction. Each manager has a
short-range action plan for which he or she is accountable. Measure the successes and link them
with the performance system.

Conclu:

Studies conducted on the manufacturing industry has concluded that India has a working population
of 75%. Out of this, only 600 million have acquired education till middle school. Due to this reason,
the manufacturing industry in India , which is labor intensive, can provide the requisite number of
employment units in the country. Studies have indicated that the productivity of the manufacturing
industry in India is approximately 1/5th of the productivity in the manufacturing industry of United
States Of America. It is about ½ as compared to the productivity levels in South Korea as well as
Taiwan. Labor productivity has escalated only to a small extent in case of India in comparison to
United States Of America, on the contrary, labor productivity has increased manifold in countries like
Taiwan and Korea.