Question No 3 - MCO-06 - MARKETING MANAGEMENT - Master of Commerce (Mcom) 2nd Year

Solutions to Assignments

                MCO-06 - MARKETING MANAGEMENT

                    Master of Commerce (Mcom) 2nd Year

Question No. 3. 

Write short notes on the following: 

(a) Buying Behaviour Situations 

Definition of Buying Behavior:

Buying Behavior is the decision processes and acts of people involved in buying and using products.

Need to understand:

- why consumers make the purchases that they make?

- what factors influence consumer purchases?

- the changing factors in our society.

Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for:

- Buyers reactions to a firms marketing strategy has a great impact on the firms success.

- The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy.

- Marketers can better predict how consumers will respond to marketing strategies.

Stages of the Consumer Buying Process

Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next.

The 6 stages are:

1. Problem Recognition(awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat.
   Can be stimulated by the marketer through product information--did not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.
2. Information search--
   • Internal search, memory.
   • External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc.
   A successful information search leaves a buyer with possible alternatives, the evoked set.

   Hungry, want to go out and eat, evoked set is

   • chinese food
   • indian food
   • burger king
   • klondike kates etc
3. Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, indian gets highest rank etc.
   If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives.
4. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc.
5. Purchase--May differ from decision, time lapse between 4 & 5, product availability.
6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc.
   After eating an indian meal, may think that really you wanted a chinese meal instead.

(b) Mass Marketing 

Mass marketing is a market strategy whose aim is to appeal to the largest portion of the market while ignoring niche demographic differences, in order to reach the highest number of potential customers possible. This marketing strategy focuses on high sales volumes at lower price points, traditionally using radio, television and print media to gain maximum exposure for the product. This large market coverage strategy is the opposite of niche marketing and seeks to appeal to all customers regardless of niche or segmentation by offering products that are useful to a wide variety of consumers with different needs. 

Mass marketing is most effective when used to advertise products that are considered necessities, products that a large number of people are already guaranteed to be shopping for anyway. By building brand awareness through memorable advertisements, mass marketing aims to alter the behavior of consumers so they will be directed towards the product being marketed. By producing goods that are needed by a large market and offering them at competitive prices, a mass marketing strategy increases the potential for high volume sales while reducing the costs of manufacturing through mass production. 

Products that are mass marketed often practice planned obsolescence in order to reduce the cost of production and ensure that consumers will have to come back and buy the product again. By manufacturing products with low quality materials, companies can ensure consumers will need to replace their items, creating opportunity for future sales. A large number of these products are considered staples—items that customers regularly purchase after they wear out or are used up. Staples can be promoted as being cheaper, even they are a less durable product, because they are sold at a low enough cost to make recurring purchases affordable. 

Mass Marketing Techniques

A number of techniques are used by mass marketers to appeal to the largest audience possible. The shotgun approach, which attempts to reach the audience with advertising on traditional mass media such as television, radio, and the internet, has been widely used and is likely the most familiar technique Advertisements utilizing the shotgun approach present a non-exclusive message that appeals to a broad range of customers. 

Guerrilla marketing is another commonly used tactic in mass market strategies. This strategy aims to produce advertisements that capture the attention of a large market with exciting and memorable messages while engaging consumers in a positive way. By utilizing online distribution methods, this strategy tends to minimize the cost of advertising while offering companies the ability to interact with a large base of viewers. In theory, guerrilla marketing allows a company to leave a stronger impression with consumers by cutting through the noise of a saturated market. 

Disadvantages of Mass Marketing 

Although mass marketing is widely used, a number of disadvantages that can make this strategy less effective than market segmentation should be considered. An increasing number of consumers are dissatisfied with the “one size fits all” approach and seek out more specialized products than those offered under the mass marketing umbrella. The rise of online reviews has muted the swaying power of advertisements, taking the effectiveness of directing messages about their products away from companies and placing it in the hands of consumers. The effectiveness of mass marketing to attract customers has decreased as companies’ marketing strategies attempt to replicate traditional advertising efforts in the new world of online marketing. 

Culture and location’s impact on how advertising messages are received by customers is another disadvantage of mass marketing. A mass marketing campaign may be successful in one region while failing to make an impression on consumers in another. The geographic location and culture of a consumer base have an impact on how those consumers respond to a message, and consumers in different regions will often require different services and products related to their locations. By targeting advertising in regions that may not have a need or interest in a type of product or service, companies can end up wasting money on marketing efforts that don’t attract new sales or customers. 

Because of the high cost of mass market efforts, this strategy often yields a lower return on investment than other strategies, in spite of its potential to generate high volumes of sales. Production costs for advertising spots, as well as the cost of placing those ads on the radio, internet, and television mean that this strategy often requires a large marketing budget. While mass marketing can be successful for general products and is typically considered low risk, the potential of a company’s message not resonating with consumers could lead to money wasted on failed advertising. 

Customer Experience

As the internet has risen to prominence over recent decades, it has become apparent that a better user experience for customers is more and more important, and mass marketing strategies have failed to maintain the effectiveness they had in the past. Consumers find online reviews on sites like Amazon and Yelp to be more trustworthy than commercials and advertising, meaning companies can no longer take the same liberties regarding quality in their products. Word of mouth has become a powerful tool for marketers, and the first step in generating that kind of buzz is to produce goods that can back it up. 

Audience segmentation is the process of determining which consumer traits characterize a certain group, or segment of a given market. In mass marketing, marketers ignore audience segmentation in favor of reaching all consumers in a large market and appealing to them with a product that most people need or use. However, by not targeting a specific niche, mass marketing can lead to dilution of branding efforts by causing consumers to become bored in an oversaturated environment. 

By understanding a narrow niche of consumers, businesses can better serve that segment of the market and create stronger relationships with their customers. By establishing itself as a provider of quality products or services and catering to a specific segment with a marketing strategy that resonates with customers on a deeper level, a company can generate positive word of mouth and spread its message effectively and efficiently.

(c) Internet marketing 

What Is Internet Marketing?

Internet marketing refers to the strategies used to market products and services online and through other digital means. These can include a variety of online platforms, tools, and content delivery systems, such as:

Website content and design

Email marketing

Social media

Blogging

Video/podcasting

Online ads

Sponsorships and paid promotions

While internet marketing's apparent purpose is to sell goods and services, or advertising over the internet, it's not the only reason a business will do it.

A company may be marketing online to communicate a message about itself (building its brand) or to conduct research. Online marketing can also be an effective way to identify a target market, discover a marketing segment's wants and needs, build long-term relationships with customers, or establish authority and expertise within an industry.

Alternate names: E-marketing, web marketing, digital marketing

How Internet Marketing Works

Internet marketing uses customers' online activity to connect them with a business by reaching them in a variety of places on the internet. The types of internet marketing a business uses will depend on the business model, types of products, target customers, budget, and more.

Website Content and Design

A business website allows customers to:

Find your business online

Learn your business's location or contact information

Discover your products or services

Sign up for your email list

Request more information

Make purchases

Websites often use search engine optimization (SEO) to ensure that their content will rank high on search engines and be easy for customers to find.

Email Marketing

You can use email for sending direct mail electronically, rather than through the post office. Collect customer emails either through purchases or website sign-ups, then use emails to share important information, encourage purchases, and build relationships.

Email allows you to reach customers individually and personally. A 2019 retail study looking at more than one billion shopping sessions found that email marketing had a conversion rate of 2.5%, compared to only 1.1% for social media. (The highest conversation rate was direct referral, at 3.0%)

Social Media

Most consumers use some kind of social media, though the type you will focus on will depend on the behavior of your target market.

More than 90% of 18 to 29-year-olds use social media of some kind, and while use decreases with age, it can still be used to reach consumers in all age brackets. More than 60% of those over age 65 use some kind of social media, and those numbers are likely to keep growing.

Older consumers are more likely to use a platform like Facebook, for example; millennials often use Instagram; and younger consumers are more interested in video platforms, such as TikTok or YouTube.

Find out where your ideal customers spend their time and focus your efforts there.

Blogging

Blogging allows you to increase your website's SEO by adding articles and posts around certain targeted keywords. This increases the likelihood that customers will find and visit your website as a result of online search.

You can also write for other people's blogs, magazines, or websites. This can increase your audience and put your business in front of more potential customers.

Video and Podcasting

Some creators who make videos or podcasts use that as their sole business. Other times, businesses use these platforms to establish expertise, connect with others in the industry, and create a funnel for new customers to find and develop an interest in their products or services.

Podcasts especially are growing in popularity. More than 100 million Americans listen to podcasts every month.

Online Ads

Online ads can take a variety of forms.

Pay-per-click advertisements placed in search engines target particular search terms that potential customers might use. Targeted ads on social media designed to reach specific segments of the platform's users who might be interested in your business's products, services, and promotions.

You can also place sidebar ads on other people's websites or in their email marketing. Online ads are most effective when they are "congruent," or relevant to where they appear or what the target audience is searching for.

Personalization can also increase the response rate to online ads, especially at the early stages of consumers' decision-making process. However, personalization is most effective when ads appear in congruent locations.

Sponsorships and Paid Promotions

You can take advantage of an audience that someone else has built with sponsorship or paid promotions. These marketing campaigns allow you to pay someone whose audience matches your target market to discuss, use, promote, or share your products and services with their followers.

This can both increase brand awareness and drive sales, especially if you pair the campaign with a targeted promo code or special offer.

Do I Need Internet Marketing for My Business?

Internet marketing is increasingly becoming mandatory for businesses of all types. Customers spend lots of time online every day, including checking email, browsing social media, using search engines, and visiting websites.

Consumers use a variety of online methods for finding, researching, and eventually making purchasing decisions. Over 40% of consumers report that they first turn to Google search when looking for a product or service, and 26% of consumers say they shop online every week.

However, traffic from social media pages and ads account for around 8% of consumers discovering retail websites.1 You can take advantage of all these channels by creating broad internet marketing platforms to help potential clients and customers find your business.

This is true even if your business is small and local. From 2015 to 2017, Google saw mobile "near me" searches with some variation of "to buy" or "can I buy" grow by 500%—a figure likely to continue rising.

No matter what type of business you have or where you are located, investing in internet marketing can help you build your business, connect with customers, and make sales.

(d) Functional Middlemen

A middleman plays the role of an intermediary in a distribution or transaction chain who facilitates interaction between the involved parties. Middlemen specialize in performing crucial activities involved in the purchase and sale of goods in their flow from producers to the ultimate buyers. They typically do not produce anything but possess extensive knowledge of the market, thereby charging a commission or a fee for their services. 

For example, a real estate agent with an established network of colleagues for contacting potential home buyers, in addition to a broad range of market information and advertising outlets. Wholesalers include the middlemen between manufacturers, producers, and retailers. The retailers themselves are the middlemen between wholesalers and the end customers.

Functions of Middlemen

Middlemen perform the following functions in a marketplace:

• They provide valuable information and feedback to producers about consumer behavior, changing tastes and fashions, upcoming rival businesses, etc.
• They enable manufacturers to concentrate on the primary function of production by handling the ancillary functions of warehousing, distribution, advertising, insurance, etc. They promote the goods to the consumers on behalf of the producers.
• Middlemen like banks and other financial institutions render financial services to manufacturers.
• They make the goods and services available to consumers at the right place, at the right time, and in the right quantity.
• Buyers and sellers are often unwilling to assume the market risk for fear of a possible loss. It is the middlemen in the process chain who assume the risks of theft, perishability, and other potential hazards.

Question No. 2 - MCO-06 - MARKETING MANAGEMENT - Master of Commerce (Mcom) 2nd Year

Solutions to Assignments

                MCO-06 - MARKETING MANAGEMENT

                    Master of Commerce (Mcom) 2nd Year

Question No. 2. 

“Developing an effective advertising campaign requires a stream of interconnected decisions on such matters as objective setting, budget setting, media decisions as well as decisions on strong creative strategy”. Elaborate. 

Question No. 1 - MCO-06 - MARKETING MANAGEMENT - Master of Commerce (Mcom) 2nd Year

Solutions to Assignments

                MCO-06 - MARKETING MANAGEMENT

                    Master of Commerce (Mcom) 2nd Year

Question No. 1. 

What is marketing research? What steps are involved in conducting a marketing research study?

Market research is defined as the process of evaluating the feasibility of a new product or service, through research conducted directly with potential consumers. This method allows organizations or businesses to discover their target market, collect and document opinions and make informed decisions.

Market research can be conducted directly by organizations or companies or can be outsourced to agencies which have expertise in this process.

The process of market research can be done through deploying surveys, interacting with a group of people also known as sample, conducting interviews and other similar processes.  

Primary purpose of conducting market research is to understand or examine the market associated with a particular product or service, to decide how the audience will react to a product or service. The information obtained from conducting market research can be used to tailor marketing/ advertising activities or to determine what are the feature priorities/service requirement (if any) of consumers.

Why is market research important?

Conducting research is one of the best ways of achieving customer satisfaction, reducing customer churn and elevating business. Here are the reasons why market research is important and should be considered in any business:

• Valuable information: It provides information and opportunities about the value of existing and new products, thus, helping businesses plan and strategize accordingly.
• Customer-centric: It helps to determine what the customers need and want. Marketing is customer-centric and understanding the customers and their needs will help businesses design products or services that best suit them.
• Forecasts: By understanding the needs of customers, businesses can also forecast their production and sales. Market research also helps in determining optimum inventory stock.
• Competitive advantage: To stay ahead of competitors market research is a vital tool to carry out comparative studies. Businesses can devise business strategies that can help them stay ahead of their competitors.

Steps for conducting Market Research

Knowing what to do in various situations that arise during the investigation will save the researcher’s time and reduce problems. Today’s successful enterprises use powerful market research survey software that helps them conduct comprehensive research under a unified platform and hence provide actionable insights much faster with fewer problems.

Following are the steps to conduct an effective market research.

Step #1: Define the Problem

Having a well-defined subject of research will help researchers when they ask questions. These questions should be directed to solve problems and they have to be adapted to the project. Make sure the questions are written clearly and that the respondents understand them. Researchers can conduct a test with a small group to know if the questions are going to know whether the asked questions are understandable and will they be enough to gain insightful results.

Research objectives should be written in a precise way and should include a brief description of the information that is needed and the way in which it will obtain it. They should have an answer to this question “why are we doing the research?”

Step #2: Define the Sample

To carry out market research, researchers need a representative sample that can be collected using one of the many sampling techniques. A representative sample is a small number of people that reflect, as accurately as possible, a larger group.

• An organization cannot waste their resources in collecting information from the wrong population. It is important that the population represents characteristics that matter to the researchers and that they need to investigate, are in the chosen sample.
• Take into account that marketers will always be prone to fall into a bias in the sample because there will always be people who do not answer the survey because they are busy, or answer it incompletely, so researchers may not obtain the required data.
• Regarding the size of the sample, the larger it is, the more likely it is to be representative of the population. A larger representative sample gives the researcher greater certainty that the people included are the ones they need, and they can possibly reduce bias. Therefore, if they want to avoid inaccuracy in our surveys, they should have representative and balanced samples.
• Practically all the surveys that are considered in a serious way, are based on a scientific sampling, based on statistical and probability theories.

There are two ways to obtain a representative sample:

• Probability sampling: In probability sampling, the choice of the sample will be made at random, which guarantees that each member of the population will have the same probability of selection and inclusion in the sample group. Researchers should ensure that they have updated information on the population from which they will draw the sample and survey the majority to establish representativeness.
• Non-probability sampling: In a non-probability sampling, different types of people are seeking to obtain a more balanced representative sample. Knowing the demographic characteristics of our group will undoubtedly help to limit the profile of the desired sample and define the variables that interest the researchers, such as gender, age, place of residence, etc. By knowing these criteria, before obtaining the information, researchers can have the control to create a representative sample that is efficient for us.

When a sample is not representative, there can be a margin of error. If researchers want to have a representative sample of 100 employees, they should choose a similar number of men and women.

The sample size is very important, but it does not guarantee accuracy. More than size, representativeness is related to the sampling frame, that is, to the list from which people are selected, for example, part of a survey.

If researchers want to continue expanding their knowledge on how to determine the size of the sample consult our guide on sampling here.

Step #3: Carry out data collection

First, a data collection instrument should be developed. The fact that they do not answer a survey, or answer it incompletely will cause errors in research. The correct collection of data will prevent this.

Step #4: Analyze the results

Each of the points of the market research process is linked to one another. If all the above is executed well, but there is no accurate analysis of the results, then the decisions made consequently will not be appropriate. In-depth analysis conducted without leaving loose ends will be effective in gaining solutions. Data analysis will be captured in a report, which should also be written clearly so that effective decisions can be made on that basis.

Analyze and interpret the results is to look for a wider meaning to the obtained data. All the previous phases have been developed to arrive at this moment.

How can researchers measure the obtained results? The only quantitative data that will be obtained is age, sex, profession, and number of interviewees because the rest are emotions and experiences that have been transmitted to us by the interlocutors. For this, there is a tool called empathy map that forces us to put ourselves in the place of our clientele with the aim of being able to identify, really, the characteristics that will allow us to make a better adjustment between our products or services and their needs or interests.

When the research has been carefully planned, the hypotheses have been adequately defined and the indicated collection method has been used, the interpretation is usually carried out easily and successfully. What follows after conducting market research?

Step #5: Make the Research Report

When presenting the results, researchers should focus on: what do they want to achieve using this research report and while answering this question they should not assume that the structure of the survey is the best way to do the analysis. One of the big mistakes that many researchers make is that they present the reports in the same order of their questions and do not see the potential of storytelling.

To make good reports, the best analysts give the following advice: follow the inverted pyramid style to present the results, answering at the beginning the essential questions of the business that caused the investigation. Start with the conclusions and give them fundamentals, instead of accumulating evidence. After this researchers can provide details to the readers who have the time and interest.

Step #6: Make Decisions

An organization or a researcher should never ask “why do market research”, they should just do it!

A market research helps researchers to know a wide range of information, for example,  consumer purchase intentions, or gives feedback about the growth of the target market. They can also discover valuable information that will help in estimating the prices of their product or service and find a point of balance that will benefit them and the consumers.

Take decisions! Act and implement.

MCO-06 - MARKETING MANAGEMENT - Master of Commerce (Mcom) 2nd Year

Solutions to Assignments

                MCO-06 - MARKETING MANAGEMENT

                    Master of Commerce (Mcom) 2nd Year

Question No. 1. 

What is marketing research? What steps are involved in conducting a marketing research study? (20) 

                                                        CLICK HERE

Question No. 2. 

“Developing an effective advertising campaign requires a stream of interconnected decisions on such matters as objective setting, budget setting, media decisions as well as decisions on strong creative strategy”. Elaborate. (20)                  CLICK HERE

Question No. 3. 

Write short notes on the following: 

(a) Buying Behaviour Situations 

(b) Mass Marketing 

(c) Internet marketing 

(d) Functional Middlemen (4X5)                  CLICK HERE

Question No. 4. 

Differentiate between the following: 

(a) Product and Production concept of marketing 

(b) Micro environment and Macro environment 

(c) Market segmentation and Market targeting. 

(d) Captive Product Pricing and Product-Bundle Pricing (4X5)                 CLICK HERE

Question No. 5. 

Comment briefly on the following statement: 

(a) Different phases of development in Indian market are indicators that there is a revolution undergoing in Indian market. 

(b) Marketing research is quite pervasive in nature and can be used by the marketing managers in various marketing decision areas. 

(c) Consumers are being influenced by a number of psychological factors in the purchase of various products and services. 

(d) Marketing of services is no different from marketing of products, the strategies of the 4 P's, however, require some modifications when applied to services.                  CLICK HERE

Question No. 5 - MCO-04 - Business Environment - Master of Commerce (Mcom) 2nd Year

Solutions to Assignments 

MCO-04 - BUSINESS ENVIRONMENT

Master of Commerce (M.Com) - 2nd Year

Question No. 5 

Comment on the following statements: 

(a) India’s export is not more than the China for the year 2019-20. 

India's exports to China has increased by 16.15 per cent to USD 20.87 billion in 2020 from USD 17.9 billion in the previous year on account of healthy growth in the shipments of ores, iron and steel, aluminum and copper, according to the data of the commerce ministry.

Trade deficit with China has declined 19.39 per cent from USD 56.95 billion in 2019 to USD 45.91 billion in 2020 as the country's imports from the neighbouring country contracted 10.87 per cent to USD 66.78 billion from USD 74.92 billion in 2019, the data showed.

The bilateral trade in 2020 decreased by 5.64 per cent to 87.65 billion compared to USD 92.89 billion in the previous year.

In the agriculture sector, the main export commodities which recorded healthy growth includes cane sugar, soybean oil, and vegetables fats and oils.

However, the exports of mangoes, fish oil, tea, and fresh grapes declined.

Commenting on these numbers, Federation of Indian Export Organisations (FIEO) President S K Saraf said that this is a positive sign and it reflects increasing competitiveness of domestic exporters.

Imports of goods including electrical machinery and equipment, boilers, machinery and mechanical appliances, plastics and related articles, articles of iron and steel, furniture, fertilizers, vehicle parts and accessories, toys and sports equipment, inorganic chemicals and ceramic products have recorded a decline.

India’s trade with China last year fell to the lowest since 2017, with the trade imbalance declining to a five-year low on the back of a slump in India’s imports from China.

Two-way trade in 2020 reached $87.6 billion, down by 5.6%, according to new figures from China’s General Administration of Customs (GAC). India’s imports from China accounted for $66.7 billion, declining by 10.8% year-on-year and the lowest figure since 2016.

India’s exports to China, however, rose to the highest figure on record, for the first time crossing the $20 billion-mark and growing 16% last year to $20.86 billion.

The trade deficit, a source of friction between India and China, declined to a five year-low of $45.8 billion, the lowest since 2015.

While there was no immediate break-up of the data in 2020, India’s biggest import in 2019 was electrical machinery and equipment, worth $20.17 billion. Other major imports in 2019 were organic chemicals ($8.39 billion) and fertilisers ($1.67 billion), while India’s top exports were iron ore, organic chemicals, cotton and unfinished diamonds. The past 12 months saw a surge in demand for iron ore in China with a slew of new infrastructure projects aimed at reviving growth after the COVID-19 slump. China’s total iron ore imports were up 9.5 per cent in 2020.

Whether 2020 is an exception or marks a turn away from the recent pattern of India’s trade with China remains to be seen. While India’s imports from China declined, so did India’s imports overall with a slump in domestic demand last year. There is, as yet, no evidence to suggest India has replaced its import dependence on China by either sourcing those goods elsewhere or manufacturing them at home, and the trade pattern of the coming 12 months, as India’s economy begins to rebound, will reveal whether the past year was an exception or a turning point.

The decline in exports to India bucked the trend of a strong year for Chinese exports, which surged 10.9% in December and grew 4% in 2020, aided by the economic recovery in China while many countries remained in various states of lockdown.

This marked a sharp turnaround for the world’s second-largest economy, which saw its GDP contract 6.8% during the height of the COVID-19 outbreak in the first quarter of the year and a 4.9% fall in foreign trade from January until May. With a stringent lockdown bringing the outbreak in China under control by the summer, the economy rebounded to grow 3.2% in the second quarter and 4.9% in the third, with China’s industries humming back to life with much of the rest of the world in lockdown.

China was “the world's only major economy to have registered positive growth in foreign trade in goods,” Li Kuiwen, spokesperson of the GAC, said, with China’s foreign trade and exports in the first 10 months of the year accounting for a record 12.8% and 14.2% of the global total.

That was reflected in the annual export figures, recording a sharp rise with most of China’s major trading partners. Exports to ASEAN countries, China’s largest trading partner last year with $684 billion in annual trade, were up 6.7%, while exports to the EU, China’s second-largest trading partner, were also up 6.7%, with trade reaching $649 billion.

Despite the trade war with the U.S. and the pandemic, two-way trade was up 8.3% to $586 billion, with Chinese exports up 7.9% to reach a record $451 billion. The trade surplus with the U.S. was $317 billion in 2020, higher than the $288 billion figure at the end of President Donald Trump’s first year in office in 2017, underlining the limited impact of his tariff and trade war as he ends his presidency.

(b) Agricultural and allied products are not the India’s leading export products. 

Growth in agricultural exports, notwithstanding pandemic disruptions, has been pushed with the aid of using the government’s coverage-stage interventions in addition to the growth of merchandise into new markets, Commerce Secretary Anup Wadhawan stated on Thursday.

After ultimate stagnant for the closing 3 years, the export of agriculture and allied merchandise at some point of 2020-21 grew 17.34 in keeping with cent to $41.25 billion. In 2017-18 and 2018-19, they hovered round $38 billion, thereafter declining to $35.sixteen billion in 2019-20. In the primary  months of the modern-day financial yr, there has been a forty three in keeping with cent jump, Wadhawan informed media men and women in a digital briefing.

“Growth turned into because of the possibilities that Covid-19 offered. It turned into additionally because of numerous programmes emanating from agriculture Agricultural and allied products are not the India’s leading export products. coverage that got here into impact in December 2018. It turned into applied in districts and clusters. Many clusters and districts that had been now no longer exporting in advance have commenced doing it now,” Wadh­awan stated.

India is seeing boom withinside the export of cereals, non-basmati rice, wheat, millets, maize, and different coarse grains. The biggest markets for India’s agriculturalproducts are the US, China, Bangladesh, the UAE, Vietnam, Saudi Arabia, Indonesia, Nepal, Iran, and Malaysia.An professional declaration stated that the very best boom has been recorded in Indonesia (102.forty two in keeping with cent), Bangladesh (95.ninety three in keeping with cent), and Nepal (50.forty nine in keeping with cent).

Demand for Indian cereals turned into strong in 2020-21, with shipments despatched to numerous nations for the primary time, together with rice to nations like Timor-Leste, Puerto Rico, and Brazil. Similarly, wheat turned into sent to nations together with Agricultural and allied products are not the India’s leading export products. Yemen, Indonesia, and Bhutan, and different cereals had been exported to Sudan, Poland, Bolivia, stated Diwakar Nath Mishra, joint secretary on the trade ministry. Demand for greater fitness merchandise such millets, ginger turmeric, quinoa is rising.

According to Agricultural and Processed Food Products Export Development Authority (APEDA) Chairman M Angamuthu, there was a upward thrust in call for for natural merchandise. Organic exports that consist of merchandise together with cereals and millets, spices Agricultural and allied products are not the India’s leading export products. and condiments, tea, medicinal plant merchandise, dry fruits, and sugar grew fifty one in keeping with cent yr on yr to $1,040 million. The boom also can be attributed to call for for such merchandise because of the outbreak of the pandemic.

Pesticide residue troubles have affected exports of basmati rice -- key conventional export product -- to the EU because of stringent norms imposed for chemical compounds together with Tricyclazole and Buprofezin, substantially utilized in rice cultivation in India. Testing with the aid of using the Export Inspection Council (EIC) has been made obligatory for basmati exports to the EU, which caused a lower withinside the range of alerts.

“Punjab imposed a ban on income of 9 chemical compounds, which includes Tricyclazole and Buprofezin, at some point of the Kharif season 2020. APEDA, in collaboration with the change bodies, has taken measures to create focus withinside the basmati-developing areas. Efforts also are being made to make certain that the manner for solving Import Tolerance Limits (ITLs) for Tricyclazole and Buprofezin with the aid of using the EU isn't delayed,” an professional declaration stated.

As a long way because the Services Exports from India Scheme (SEIS) is concerned, Wadhwan stated while the branch made a brand new overseas change coverage, “what we want to do for offerings can be taken under consideration primarily based totally on stakeholder remarks and different inputs”.

India is an agrarian financial system and is a primary contributor to the worldwide meals basket, way to the beneficial agro-climatic situations and the wealthy base of herbal resources. As in keeping with WTO’s Trade Statistics, the proportion of India’s agricultural exports and imports withinside the international agriculture change in 2017 turned into 2.27% and 1.90%, respectively. India is a number of the international’s main manufacturers of many commodities together with dairy, cereals, spices, fruits & vegetables, rice, wheat, cotton, and others. Agricultural and allied products are not the India’s leading export products. Apart from pleasing home call for, Indian agricultural produce that consists of horticultural produce, and processed ingredients are exported to greater than one hundred nations withinside the international which includes the US, nations withinside the Middle East, and the EU. Amidst the COVID-19 pandemic, the easy functioning of the agriculture area turned into ensured with the aid of using issuing applicable guidelines. There turned into a large development withinside the meals grain manufacturing and the COVID-19 brought on motion regulations global did now no longer have an effect on India’s agri-exports as they did with different commodities. With recognize to agri-imports, India majorly imports vegetable oils, clean fruits, pulses, and spices.

India has constantly maintained a change surplus in agricultural commodities over the years. India’s agri-exports accelerated from Rs. 38,078 crores in 2004-05 to Rs. 2.7 lakh crores in 2018-19, registering an growth of almost 7 instances withinside the span of 15 years. However, in 2019-20, there has been a drop in export with the aid of using round eight%. Between April 2020 and February 2021 of 2020-21, India’s agri-exports have already crossed the 2019-20 levels, indicating boom in agri-exports for 2020-21 in keeping with the sooner trends.

Likewise, the import of agricultural merchandise has additionally accelerated over the years. In 2004-05, agri-imports had been really well worth Rs.18,924 crores which went as much as Rs. 1.sixty eight lakh crores in 2016-17, recording a boom of just about eight instances. However, due to the fact that 2016-17, the fee of imports dropped to attain Rs. 1.forty two lakh crores in 2018-19. In 2019-20, India’s agri-imports had been really well worth Rs.1.fifty one lakhe crores and in 2020-21, up to twenty-eight February 2021, the imports had been really well worth Rs.1.forty four lakh crores.

Comparison of exports of agriculture and allied commodities with the aid of using fee at some point of the primary eleven months of 2019-20 and 2020-21 indicates that the exports at some point of April 2020 and February 2021 had been Rs. 2.sixty nine lakh crore compared to Rs. 2.27 lakh crore at some point of the equal length in 2019-20, indicating an growth of 18.four%. Meanwhile, the imports had additionally accelerated with the aid of using 2.38%, from that Rs. 1.four lakh crores to nearly Rs. 1.forty four lakh crores at some point of the equal length in 2019-20 and 2020-21 respectively. It may be visible that the agriculture exports Agricultural and allied products are not the India’s leading export products. with inside the first eleven months of 2019-20 accounted for 91.2% of the general agriculture exports in 2019-20. Similarly, withinside the case of imports, those eleven months accounted for ninety three% of all of the imports in 2019-20. If the equal fashion keeps in 2020-21, India’s exports and imports may also develop in addition while facts for all of the 12-months of 2020-21 is available. Despite the COVID-19 pandemic, the exports withinside the agriculture area had been now no longer as seriously affected as the alternative sectors.

The important drivers of the growth in exports in 2020-21 are wheat (672% growth), vegetable oil (258%), different cereals (245%), molasses (141%) and non-Basmati rice (132%).  Marine merchandise, Basmati Rice, Non- Basmati Rice, Spices, and Buffalo meat had been a number of the pinnacle 5 commodities to be exported, in phrases of fee, each in 2019-20 and 2020-21. Together, those 5 merchandise accounted for nearly 57% of agriculture exports withinside the first eleven months of 2019-20 and 54% of the exports at some point of the equal length in 2020-21. Agricultural and allied products are not the India’s leading export products. In rupee phrases, Marine merchandise are the maximum exported with over Rs. 40,a hundred and forty crores really well worth exports in 2020-21. However, their exports have dropped with the aid of using 10.18% in 2020-21, as in comparison to Rs. 44691.forty four really well worth marine exports in 2019-20. The exports of Basmati rice have additionally barely dropped with the aid of using 2% withinside the first eleven months of 2020-21.

(c) Export promotion capital goods scheme does not facilitate import of capital goods in India. 

EPCG (Export Promotion Capital Goods) Scheme helps in facilitating the import of capital goods for manufacturing quality goods and to augment the competitiveness of India’s export.

EPCG scheme enables the import of capital goods that are used in the pre-production, production, and post-production without the payment of customs duty.

This is a Scheme that enables an importer (being an export-oriented business) to import capital goods at zero rates of customs duty. However, the scheme is subject to an export value equivalent to 6 times of duty saved on the importation of such capital goods within 6 years from the date of issuance of the authorization.

In simple words, there is a compulsion on the business to bring in foreign currency which is equal to 600 per cent of duty saved on such importation measured in domestic currency. This is to be done within six years from availing of the Export Promotion Capital Goods Scheme.

Export Promotion Capital Goods

Export Promotion Capital Goods are capital goods used in the production of goods that are exported to other countries. It includes machinery as well as spares. Hence, to qualify as Export Promotion Capital Goods, the commodity manufactured in India must be exported outside India.

Capital Goods allowed under EPCG Scheme

The capital goods allowed under Export Promotion Capital Goods Scheme shall include spares (including reconditioned/ refurbished), fixtures, jigs, tool, moulds and dies. Further, second-hand capital goods may also be imported without any restriction on age under the EPCG Scheme.

Under this scheme of Foreign Trade Policy (FTP), importation of capital goods required for the manufacturing of export-oriented product specified in the Export Promotion Capital Goods Authorization is permitted at concessional/nil rate of duty. This scheme under Foreign Trade Policy allows technological up-gradation of the indigenous industry.

Export Promotion Capital Goods (EPCG) Authorizations are issued by licensing authority – Director General of Foreign Trade (DGFT) based on the certificate issued by an Independent chartered engineer.

Benefit from EPCG Scheme

EPCG is intended for promoting exports and the Indian Government with the help of this scheme offers incentives and financial support to the exporters. Heavy exporters could benefit from this provision. However, it is not advisable to go ahead with this scheme for those who don’t expect to manufacture in quantity or expect to sell the produce entirely within the country, as it could become almost impossible to fulfil the obligations set under this scheme.

EPCG License

In order to obtain a License under the EPCG scheme, it is a primary requirement to file an application with the licensing authority of the Director General of Foreign Trade. The application shall be attached with the required documents along with the company and personal details.

(d) Third party exports are not allowed in India. 

What is third-Party: A third party is someone who is not one of the main people involved in a business agreement or legal case, but who is involved in it in a minor role. Any individual who does not have a direct connection with a legal transaction but who might be affected by it. A third–party beneficiary is an individual for whose benefit a contract is created even though that person is a stranger to both the agreement and the consideration. 

Understanding of Third-Party transactions: When a buyer and seller enter into a business deal, they may decide to use the services of an intermediary or third party who manages the transaction between both parties. For example, if a company X sells inventory to its subsidiary, company Y, a third-party transaction occurs when company Y sells those final goods to company Z. A third-party transaction often involves a seller, a buyer, and an additional party not connected to the others. 

Third-Party Imports: When an individual or entity (importer) imports goods on behalf of another individual or entity and make payment to third-party on behalf of seller, it is called the third-party imports. For example X has imported books from Y, USA, worth CIF value of USD 25,000. Y requested X to remit the amount to Z on behalf of Y. Here consignee would be X and buyer is Z and in AWB/BL consignee would be X and Notify would be Z.

Third-Party Exports: Whenever an individual or entity (exporter) makes an export on the behalf of another individual entity or individual (exporter or manufacturer), it is called third-party exports. In such cases, export documents such as shipping bills shall indicate name of both exporter and third-party exporter. BRC, GR declaration, export order and invoice should be in the name of third-party exporter. Foreign Inward Remittance Certificate (FIRC) is the legal document that shows that a certain individual or entity has received a remittance from outside the country. During third-party exports, the FIRC is furnished in the name of the said exporter instead of the actual manufacturer/exporter of the shipment. An assessee who supplies goods and services may not have the infrastructure to undertake the export. Hence, the assessee may utilise the services of an intermediary for carrying out the export transaction. The intermediary is known as the third party exporter. The supplier of the exported goods and services is known as the manufacturer exporter. 

Advantages of Third-Party Exports 

In case of third-party exports manufacturer need not register with Reserve Bank of India because the third party who are obtaining foreign exchange receipts should register with the Reserve Bank of India (RBI). 

Under a third-party export, the foreign inward remittance from the customer is received by the third party explorer. The inward remittance is received in foreign currency.

However, the settlement between the third party exporter and the manufacturer exporter is made in rupees. 

Hence, the manufacturer explorer need not undertake the procedure for conversion of foreign exchange. 

By making use of the services of the third party exporter, the manufacturer exporter can concentrate on the core business. The manufacturer exporter can make use of the expertise of the third party explorer. 

The third-party explorer helps the manufacturer exporter to procure orders from customers.

Question No. 4 - MCO-04 - BUSINESS ENVIRONMENT - Master of Commerce (M.Com) - 2nd Year

Solutions to Assignments 

MCO-04 - BUSINESS ENVIRONMENT

Master of Commerce (M.Com) - 2nd Year

Question No. 4 

Write short notes on the following: 

(a) Nature of Indian Economic Planning 

Independence came to India with the parti­tion of the country on 15 August 1947. In 1948, an Industrial Policy Statement was an­nounced.

It suggested the setting up of a National Planning Commission and framing the policy of a mixed economic system.

On 26 January 1950, the Constitution came into force. As a logical sequence, the Planning Commis­sion was set up on 15 March 1950 and the plan era started from 1 April 1951 with the launch­ing of the First Five Year Plan (1951-56).

How­ever, the idea of economic planning in India can be traced back to the pre-independent days.

“The idea of economic planning gained currency in India during and after the years of the Great Agricultural Depression (1929-33). The then Government of India was by and large guided by a policy of leaving economic mat­ters to individual industrialists and traders.”

(i) 1934:

It is rather surprising that blue­prints for India’s planning first came from an engineer-administrator, M. Visvervaraya. He is regarded as the pioneer in talking about planning in India as a mere economic exer­cise. His book ‘Planned Economy for India’ pub­lished in 1934 proposed a ten-year plan. He proposed capital investment of Rs. 1,000 crore and a six-fold increase in industrial output per annum.

(ii) 1938:

In 1938, the Indian National Con­gress headed by Pandit J.L. Nehru appointed the National Planning Committee (NPC) to prepare a plan for economic development. The NPC was given the task of formulating a com­prehensive scheme of national planning as a means to solve the problems of poverty and unemployment, of national defence, and of economic regeneration in general. However, with the declaration of the World War II in September 1939 and putting leaders into prison, the NPC could not march ahead.

(iii) 1944:

The Bombay Plan, the People’s Plan and the Gandhian Plan: One of the most widely discussed plan during the 1940s was the Bombay Plan prepared by the Indian capi­talists. It was a plan for economic development under considerable amount of government intervention.

It emphasised the industrial sec­tor with an aim of trebling national income and doubling of per capita income within a 15-year period. Under this plan, planning and industrialisation were synonymous.

An alternative to the Bombay Plan was given by M. N. Roy in 1944. His plan came to be known as People’s Plan. His idea of plan­ning was borrowed from the Soviet type plan­ning. In this plan, priorities were given to ag­riculture and small scale industries. This plan favoured a socialist organisation of society.

In the light of the basic principles of Gandhian economics, S. N. Agarwal authored ‘The Gandhian Plan’ in 1944 in which he put emphasis on the expansion of small unit pro­duction and agriculture. Its fundamental fea­ture was decentralisation of economic struc­ture with self-contained villages and cottage industries.

(iv) 1950 Planning Commission:

After in­dependence, the Planning Commission was set up by the Government of India in March 1950. The Commission was instructed to (a) make an assessment of the material capital and human resources of the country, and formu­late a plan for the most effective and balanced utilisation of them; (b) determine priorities, de­fine the stages for carrying the plan and pro­pose the allocation of resources for the due completion of each stage; (c) identify the fac­tors which tend to retard economic develop­ment; and (d) determine the conditions which (in view of the then current socio-political con­ditions) should be established for the execution of the plan.

The planning process was initiated in April 1951 when the First Five Year Plan was launched. Since then ten five year plans have been completed and the Eleventh Plan is in progress.

The Timing of These Eleven Plans are Given here in a Tabular Form:

2. Characteristics of Indian Plans:

There is a long history of the evolution of eco­nomic thinking and approach to planning in India and, therefore, its features are changing with the change of the economy. Structure and objectives of each and every country never remain uniform as well as linear. One can also see a wide difference in the political viewpoint as well as political approaches. Such differ­ences lead to different approaches to plan­ning varying from country to country.

In other words, every country has its own pecu­liarities of economic planning, and India is no exception to this. Further, such characteristics of Indian planning are not uniform. It is to be noted here that the features relate to the initial situation that shape the future of plan­ning. Again, the objectives of planning are not static in the sense they need to be changed according to the needs and opportunities of the country.

Indian history of planning can be divided into three periods: pre-independent, 1951- 1991 and 1991 onwards. We will, however, concentrate on planning of independent In­dia down from 1951 till date. Now we will present some of the essential features of Indian planning so as to understand the me­chanics of planning both in a controlled and planned economy, and planning in a market- friendly economy.

(i) Five Year Planning:

Though India’s plans are of a 5-year period, such planning is linked with a long term view. Sino-India War (1962), Indo-Pak War (1965), and the unprecedented drought in the mid-60s forced to adopt the approach of ‘plan holiday’ from the Fourth Five Year Plan. Instead of a regular Five Year Plan, planning was discontinued through three ad hoc Annual Plans during the period 1966-69.

Again, with the assumption of power by the Janata Government in 1977, rolling plan on a year to year basis or the Sixth Plan had been formulated for the period 1978-83. In 1980, this rolling plan concept was discontin­ued by the Congress (I) Government much ahead of the scheduled time and the Sixth Plan came into operation from 1980 and continued till 1985. Because of unprecedented political crisis in New Delhi and frequent changes of power, the Eighth Five Year Plan scheduled for the period 1990-95 could not be launched.

The Eighth Five Year Plan was delayed by two years, though the years 1990-91 and 1991-92 had not been projected as ‘plan holiday’. The Eighth Five Year Plan came into operation in 1992. Since then there has been no break from the five year planning system.

(ii) Developmental Planning:

Indian plan­ning is of the developmental variety. To build up a self-reliant economy, overall economic development of the country received top pri­ority. However, short term problems like refu­gee rehabilitation, food crises, foreign ex­change shortage also got due attention from the planners.

(iii) Comprehensive Planning:

Indian plan­ning is comprehensive in character in the sense that it not only undertakes economic pro­grammes but also puts emphasis on changes in institutional structures and cultures. It emphasies both on the development of agri­culture, industry, transport and commu­nications and physical infrastructures and so­cial infrastructures such as literacy, health, population control, environment, etc. Plan­ning programmes are also initiated for the development of lower castes and backward classes so that these people are involved in the development processes.

(iv) Indicative Planning:

Indian planning before 1991 was of the nature of directive plan­ning and averse to the role of market mecha­nism. As far as resource allocation in the gov­ernmental sector was concerned, the govern­ment did not rely on the market but gave directions so that resources could be utilised by all the states efficiently. Private initiative and freedom was allowed but not in an un­hindered way. Private industrialists were en­couraged for making investments but, at the same time, they came under strong control and regulation.

Thus, planning in India during 1951-91 was not strictly ‘planning by direction’ like the socialist plan and not strictly ‘planning by inducement’ like capitalist planning.

This old system of Indian planning of the comprehensive nature was to be replaced by an integrative approach that combines both planning and market mechanism. Thus, the Indian planning became indicative in nature with the launching of the Eighth Five Year Plan in 1992. As plans roll on, its indicative nature gets strengthened.

Under it, the role of the government becomes passive and the gov­ernment sheds some of its functions at the al­tar of the market principles. It is indicative planning as it merely outlines the directions to which the country is expected to run as well as talks about the means for achieving these aims.

To improve efficiency and productivity of the economy, reliance on market principles is attached and planning mechanism then act as a pathfinder or a leader instead of putting more emphasis on the long term goals of the country.

Thus, flexibility is one of the impor­tant hallmarks of indicative planning. Earlier, Indian planning was also of indicative char­acter. But the Eighth Plan had made it more so and had redefined the role and functions of the Planning Commission.

(v) Democratic Planning:

Indian planning is democratic planning. The chief building block of laying down the national plan is the Planning Commission. It is a decision-making body that formulates five year plans and implement them in a democratic spirit and frame. Discussions are held periodically be­tween the people’s representatives, industrialists, chambers of commerce, educationists, and many other bodies as well as the mem­bers of the Planning Commission.

The National Development Council is there to make decisions relating to planning in con­sultation with the Union and State Govern­ments. In fact, the NDC is the apex body for coordination of policies and plans of the Cen­tral and the State Governments.

After getting the stamp of approval from the NDC, the plan document is placed before the Parliament for consideration. Though one finds some sort of centralise, planning decisions Indian planning may be called a decentralised one, if not bottom-up planning.

(vi) Decentralised Planning or Planning from Below:

Being democratic planning, In­dian planning is essentially a decentralised type of plan. Until the Fourth Plan, planning at the national level was essentially macro planning. In other words, there was very lit­tle or no provision for microplartning, i.e., planning from below. While ‘macroplan’ pro­vides a broad framework, a ‘microplan’ chalks out all the details in and fixes priorities for dif­ferent regions depending on their specific needs.

A macroplan cannot deal with the problems of the remotest regions of the coun­try. A macroplan does not involve people straightforward. However, for an allround growth of every region—small or big—plan­ning has to be decentralised in which local people, local institutions and local governance are asked to participate. This is called ‘partici­patory development’. Participation of the com­munity is needed to deal with the local prob­lems, local resources, local priorities, etc. In this way, the concept of planning from bottom-to-top rather than top-to-down is more popular in India.

(vii) Present Role of the Planning Commis­sion:

The nature and content of the Eighth Plan (1992-97) was different from earlier plans since this plan had been greatly influenced by the liberalised economic policies of the gov­ernment and the changing world situation. From a rather centralised planning system, the country moved gradually towards indicative planning.

However, as market forces gathered strength as contrasted to planning, India’s Planning Commission became somehow re­dundant. Earlier, the Planning Commission behaved something like a ‘super-cabinet’ in propagating and implementing plan policies and programmes.

Against the backdrop of embracing market philosophies, the Planning Commission could no longer act as a policy­making body as it did earlier. The role of the Planning Commission indeed needs to be di­luted in the light of changes in the Indian sce­nario. In other words, Planning Commission needs to be married to the market economy.

Most importantly, the present UPA gov­ernment has been facing challenges from dif­ferent quarters because of coalition politics. And the Planning Commission has been reorienting itself to accommodate the compul­sions of the coalition Government.

In view of this, Dr. M.S. Ahluwalia articu­lated relating to the role of the Planning Com­mission that currently the two roles of the Planning Commission are more important. First is the role of principles that needs to be changed regularly according to the exigencies of the situation. Different ministries will play such roles in their policies and principles.

Since no neutral standpoint could be maintained by the respective ministries, the Planning Com­mission would then play a more bigger role in the realm of perspective or long term plan­ning. Secondly, market, in case of long term of planning, has very little say. Herein lies the importance of the Planning Commission. Thus, the planning methodology must change so as to reflect the new economic realities and the emerging requirements.

It is, thus, obvious that the features of Indian planning are not static. The role of the Planning Commission has changed to a dif­ferent form. Above all, the above features of Indian plans are just the reflection of the coun­try’s socio-eco-politico philosophies and view­points.

(b) Small Scale industries 

Small Scale Industries (SSI) are those industries in which the manufacturing, production and rendering of services are done on a small or micro scale. These industries make a one-time investment in machinery, plant, and equipment, but it does not exceed Rs.10 crore and annual turnover does not exceed Rs.50 crore.

Update on Small Scale Industries (SSIs):

Earlier industries that manufactured goods and provided services on a small scale or micro-scale basis were granted Small Scale Industries (SSI) registration by the Ministry of Small Scale Industries.  However, after the government passed the MSME (Micro, Small and Medium Enterprises) Act in 2006, the small and micro-scale industries came under the MSME Act. 

On 9 May 2007, subsequent to the amendment of the Government of India (Allocation of Business) Rules, 1961, the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries were merged to form the Ministry of Micro, Small and Medium Enterprises. Thus, the SSIs are included under the Ministry of MSME. 

Currently, the SSIs are classified as small or micro-scale industries based on the turnover and investment limits provided under the MSME Act and they need to obtain MSME registration. The government provides many benefits to the small scale industries having MSME registration at present.

Introduction of SSI

Essentially the small scale industries are generally comprised of those industries which manufacture, produce and render services with the help of small machines and less manpower. These enterprises must fall under the guidelines, set by the Government of India.

The SSI’s are the lifeline of the economy, especially in developing countries like India. These industries are generally labour-intensive, and hence they play an important role in the creation of employment. SSI’s are a crucial sector of the economy both from a financial and social point of view, as they help with the per capita income and resource utilisation in the economy.

Characteristics of SSI

Ownership

SSI’s generally are under single ownership. So it can either be a sole proprietorship or sometimes a partnership.

Management

Generally, both the management and the control is with the owner/owners. Hence the owner is actively involved in the day-to-day activities of the business.

Labor Intensive

SSI’s dependence on technology is pretty limited. Hence they tend to use labour and manpower for their production activities.

Flexibility

SSI’s are more adaptable to their changing business environment. So in case of amendments or unexpected developments, they are flexible enough to adapt and carry on, unlike large industries.

Limited Reach

Small scale industries have a restricted zone of operations. Hence, they can meet their local and regional demand.

Resources Utilisation

They use local and readily available resources which helps the economy fully utilise natural resources with minimum wastage.

Role in the Indian Economy

Employment

SSI’s are a major source of employment for developing countries like India. Because of the limited technology and resource availability, they tend to use labour and manpower for their production activities.

Total Production

These enterprises account for almost 40% of the total production of goods and services in India. They are one of the main reasons for the growth and strengthening of the economy.

Make in India

SSI’s are the best examples for the Make in India initiative. They focus on the mission to manufacture in India and sell the products worldwide. This also helps create more demands from all over the world.

Export Contribution

India’s export industry majorly relies on these small industries for their growth and development. Nearly half of the goods that are exported from India are manufactured or produced by these industries.

Public Welfare

These industries have an opportunity to earn wealth and create employment. SSIs are also important for the social growth and development of our country.

Seedbed for Large Scale Industries

SSI acts as the seedbed for Large Scale Industries (LSI) as it provides conducive conditions for the development and growth of entrepreneurs. Small enterprises require low investment and simple technology and use local resources to meet local demands through personal contacts. Thus, it creates scope for the growth and development of LSI.

Objectives of SSI

The objectives of the small scale industries are:

To create more employment opportunities.

To help develop the rural and less developed regions of the economy.

To reduce regional imbalances.

To ensure optimum utilisation of unexploited resources of the country.

To improve the standard of living of people.

To ensure equal distribution of income and wealth.

To solve the unemployment problem.

To attain self-reliance.

To adopt the latest technology aimed at producing better quality products at lower costs.

Types of SSI

SSI are primarily categorised into 3 types, based on the nature of work carried out, which are as follows:

Manufacturing Industries

The manufacturing industries manufacture finished goods for consumption or used further in processing. Some examples of such SSIs are food processing units, power looms, engineering units, etc.

Ancillary Industries

Ancillary industries manufacture components for other manufacturers. These manufacturers then assemble the final product. Big companies manufacture finished goods, but they do not generally make all the parts themselves. The vendors of such big companies are ancillary industries.

Service Industries

Service-based industries are not involved in any kind of manufacturing products. They provide services such as repair, maintenance and upkeep of the products after-sales. 

Other types of SSIs are as follows:

Export Units

An SSI is considered as an export unit when the exporting is more than 50% of its production.

Cottage Units

The cottage units are considered as SSIs when they do not involve a dedicated facility and are carried out within living spaces or houses of the owners. 

Village Industries

An SSI is considered village industries when they are established in rural areas and are not part of the organised sector. Typically, these industries solely depend on human labour for production.

(c) Economic Reforms

Economic reforms refer to the fundamental changes that were launched in 1991 with the plan of liberalising the economy and quickening its rate of economic growth. The Narasimha Rao Government, in 1991, started the economic reforms in order to rebuild internal and external faith in the Indian economy.

The reforms intended at bringing in larger cooperation of the private sector in the growth method of the Indian economy. Policy changes were proposed with regard to technology up-gradation, industrial licensing, removal of restrictions on the private sector, foreign investments, and foreign trade. The essential features of the economic reforms are – Liberalisation, Privatisation, and Globalisation, commonly known as LPG.

In other words, ‘“economic reforms’” normally indicate deregulation or at times, decrease in the size of government, to eliminate deformities caused by the management or the presence of administration, rather than current or raised regulations or government plans to lessen the perversions created by market failure.

Why were Economic reforms introduced in India?

Economic reforms were introduced in India because of the following reasons:

Poor performance of the public sector

• Public sector was given an important role in development policies during 1951–1990.
• However, the performance of the majority of public enterprises was disappointing.
• They were incurring huge losses because of inefficient management.

Adverse BoP or imports exceed exports

• Imports grew at a very high rate without matching the growth of exports.
• Government could not restrict imports even after imposing heavy tariffs and fixing quotas.
• On the other hand, exports were very less due to the low quality and high prices of our goods as compared to that of foreign goods.

Fall in foreign exchange reserves

• Foreign exchange (foreign currencies) reserves, which the government generally maintains to import petrol and other important items, dropped to the levels that were not sufficient for even a fortnight.
• The government was not able to repay its borrowings from abroad.

Huge debts on government

• Government expenditure on various developmental works was more than its revenue from taxation.
• As a result, the government borrowed money from banks, public and international financial institutions like the IMF, etc.

Inflationary pressure

• There was a consistent rise in the general price level of essential goods in the economy.
• To control inflation, a new set of policies were required.

Terms and conditions of the World Bank and the IMF

India received financial help of $7 billion from the World Bank and the IMF on an agreement to announce its New Economic Policy.