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.

Question No. 3 - 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. 3

Distinguish between the following: 

(a) Primary capital market and Secondary capital market 

S.NO.	PRIMARY MARKET	SECONDARY MARKET
1.	A primary market is defined as the market in which securities are created for first-time investors.	On the other hand, the secondary market is defined as a place where the issued shares are traded among investors.
2.	The company issues the shares, and the government interferes in the process.	There is no interference of the government or the company.
3.	The primary market is called as a new issue market.	The secondary market is an aftermarket.
4.	The buying and selling of shares takes place among the investors and the companies.	The trading take place only among the investors.
5.	The primary market provides finance to the companies who want expansion and growth.	The secondary market does not provide financing to the companies.
6.	Underwriters are involved in the intermediary process.	Brokers are involved in the intermediary process.
7.	The prices in the primary market do not fluctuate, i.e., they are fixed.	On the other hand, the prices fluctuate a lot in the secondary market because of the demand and supply.
8.	The products in a primary market are limited, i.e., they include IPO and FPO.	Shares, debentures, warrants, derivatives, etc., are the kind of products offered in the secondary market.
9.	The purchase process happens directly in the primary market.	The company issuing the shares do not involve in the purchasing process.
10.	The frequency of buying and selling is limited, i.e., the investors can invest once in the market.	On the other hand, the frequency of buying and selling is quite high, i.e., the investors can trade as many times as they wish to.
11.	The beneficiary in the primary market is the company.	The beneficiary in the secondary market is the investor.
12.	The primary market is not organized.	The secondary market has an organized setup.
13.	The companies issuing shares and debentures have to follow all regulations.	The investors in the secondary market follow the rules provided by the stock exchanges and the government.
14.	The major disadvantage of the primary market is that it is very time-consuming and costly.	The major disadvantage of the secondary market is that the investors can incur huge losses due to price fluctuation.

So, these are some of the significant contrasting points between the primary market and the secondary market. It is essential to note that both primary and secondary markets help in earning profits and providing funds to the companies and investors.

(b) Speculative Transaction and Investment transaction 

Critical Differences Between Investment and Speculation

1. An investment involves an asset with the hope of securing returns over the principal amount in the future. On the other hand, speculation involves conducting a risky financial transaction to make large-scale gains from a single transaction.

2. Investments are generally held for an extended period, usually more than a year. Instances like real estate and life insurance are held for 25-30 years. Speculation is held for a brief period, usually less than a year, and can even be on a forthcoming event.

3. The amount of risk assumed is relatively moderate as compared to speculation. Speculation will focus on getting high returns in a relatively shorter amount of time, and thus, the quantum of risk is very high. Since investment is mainly made by the middle class working for the community, they would be putting the spare money off their hard work, which they expect to earn a stable return. They are ready to part with their savings if it offers a definite return.

4. An investor will be using their funds for investing, whereas speculators will use borrowed funds and lure the borrowers with attractive returns.

5. The above point also reflects the attitude of the investors and speculators. Investors will generally follow a cautious and conservative approach while considering the investment and the risk appetite

 they can absorb. Speculators believe in an aggressive approach highlighting attack but careless attitude. As the returns are far too attractive, and the window of opportunity is very small, this behavior will easily get reflected.

6. Investors expect to profit from the change in the value of an asset, whereas speculators focus on extracting profits from price changes due to demand and supply forces.

7. While making decisions, investors will conduct extensive research and focus on the fundamental factors of the company, such as the financial position, ratio analytics, etc. In contrast, speculative decisions are based on technical charts, market dynamics, and personal opinions/tips received.

8. The avenues for considering investment will focus on the Blue chip companies of the stock market, savings bank accounts, provident funds, etc. Still, speculators will focus on the commodity market, options trading, betting, etc.

9. Investment does not give rise to practices such as insider trading or possible leakage of information, which can be observed in speculative activities since their returns are lucrative.

10. The level of patience and sacrifice is relatively large in the case of investment but not in the case of speculation. However, the probability of losses does multiply in speculative activities.

11. Investment activities are recorded separately in a firm’s balance sheet of a firm , but speculation is not recorded separately. Depending on the returns that they offer, such activity may either be classified under-investment or the category of ‘Other Assets / Miscellaneous Income.’

12. The amount of money for investing activities is relatively less and depends on the ability of the individual/ organization, but speculation requires large funds for executing the activities.

SPECULATION	INVESTMENT
Meaning
Executing a dangerous monetary exchange or venture or investment with the assumption for high benefit making that can go wayward.	Purchasing of a share or an asset or anything for getting steady returns or benefits.
Investors’ Point of View
Indiscreet and forceful conduct.	Wary and helpful.
Presumption of the Returns
An undeniable degree of profits and benefits with high disappointment is the likelihood.	Unassuming and nonstop with a low likelihood of disappointment.
Level of Risk
The risk and likelihood of disappointment are high in speculation.	The gamble level is moderate in contributing.
Similitude
The reason for speculating is additionally to acquire high benefits.	The principal point of putting is to acquire benefits later on.
Time Horizon or Duration
Speculations are like shortcuts and take less time to give outcomes. But these outcomes can go one way or another.	Venture takes significant stretches to give results.
Examples
Betting, momentum contributing, development stocks, foreign monetary standards, digital forms of money.	The financial exchange, saving accounts, Government securities, factor contributing, shared assets, and so on.

The history of the business market has numerous instances of burst bubbles that had critical monetary ramifications for individuals who decided to estimate on any expectations or speculate of consistently expanding stock costs and speedy wealth. Investing is generally not quite the same as speculation. At times speculative choices are expected to support the benefits of a business.

Yet, with the increment of speculative exchanges, the risk factor likewise increments. Knowing the distinction between speculation and investment is vital for your business and benefit-making. Doing one’s own statistical surveying and assessment work, depending on decisive reasoning, and addressing the tried and true way of thinking is the most ideal choice that can work for an individual.

(c) Budla system and Equity derivative

Distinction between Budla System and Equity Derivatives

The settlement system in specified securities providing for carry forward of transactions from one

settlement day to another has been known as budla system and the charges paid for carry forward

termed as budla charges (contango or backwardation) the amount of which depended upon the

class of security, its quantity, the amount involved and the interest rate prevailing in the market at

the time of the transaction. All along, it had been felt that this system led to excessive speculation

and, at times, to certain malpractices like price rigging, evasion of margins, and non-reporting of

transactions. Hence, it was abolished in December, 1993. This led to a halt in trading of specified

securities with carry over facilities and sharp decline in turnover on the stock markets resulting in a

liquidity crunch. So, efforts were made to reintroduce the system in its revised and modified form

subject to certain conditions and precautions. But, somehow, they did not click because of the

inherent weaknesses of the system and a clamour for adopting other risk hedging devices. The

experts preferred equity derivatives, in the form of futures and options as prevalent in advanced

countries. As a result, in June 2000, index futures were launched at BSE and NSE followed by its

other variants like index options, stock futures and stock options. It may be noted that NSE

accounts for more than 90 per cent of India's equity derivatives volume which is largely due to its

effective monitoring, surveillance, netting timely settlement and minimisation of settlement risks

with the help of National Securities Clearing Corporation Ltd. (SSCCL) which offers high quality

risk mitigation in settlement.

It may be noted that options are not all like budla. An option refers to a contract which gives the

investor (its holder) a right, not the obligation, to buy or sell the specified quantity of a share at a

specified price on or before a specified time called expiry date. However, future may seem like

budla to some as just like a forward contract, it is a contractual obligation to buy or sell a standard

quantity of a share at an agreed price at a future date. But, unlike budla where cash market and all

future prices are mixed up in one price, the future markets trade differ from the cash market sc that

each future prices and cash prices are different. Future markets, also do not have any counter

party risk through the institution of the clearing house which guarantees the trade coupled with

margining. This eliminates the risk premium which is embedded inside budla financing charges. Moreover, in case of budla expiration date is unclear moving from one settlement date to another,

while in case of futures the expiration date is predetermined and the holder is under obligation to

settle the transaction.

Question No. 2 - 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. 2

“The scope and coverage of labour legislation are very wide and overlapping.” Elucidate the statement with a brief overview of labour legislation in India. 

Labour law also known as employment law is the body of laws, administrative rulings, and precedents which address the legal rights of, and restrictions on, working people and their organizations. As such, it mediates many aspects of the relationship between trade unions, employers and employees. In other words, Labour law defines the rights and obligations of workers, union members and employers in the workplace.

Generally, labour law covers:

Industrial relations � certification of unions, labour-management relations, collective bargaining and unfair labour practices;

Workplace health and safety;

Employment standards, including general holidays, annual leave, working hours, unfair dismissals, minimum wage, layoff procedures and severance pay

HISTORY OF LABOUR LAW:

Labour law arose due to the demands of workers for better conditions, the right to organize, and the simultaneous demands of employers to restrict the powers of workers in many organizations and to keep labour costs low. Employers' costs can increase due to workers organizing to win higher wages, or by laws imposing costly requirements, such as health and safety or equal opportunities conditions.

Workers' organizations, such as trade unions, can also transcend purely industrial disputes, and gain political power - which some employers may oppose. The state of labour law at any one time is therefore both the product of, and a component of, struggles between different interests in society.

PURPOSE OF LABOUR LAWS:

Labour legislation that is adapted to the economic and social challenges of the modern world of work fulfils three crucial roles:

It establishes a legal system that facilitates productive individual and collective employment relationships, and therefore a productive economy;

By providing a framework within which employers, workers and their representatives can interact with regard to work-related issues, it serves as an important vehicle for achieving harmonious industrial relations based on workplace democracy;

It provides a clear and constant reminder and guarantee of fundamental principles and rights at work which have received broad social acceptance and establishes the processes through which these principles and rights can be implemented and enforced.

The Industrial Disputes Act, 1947:

The Industrial Disputes Act, 1947 extends to the whole of India and regulates Indian labour law so far as that concerns trade unions as well as Individual workman employed in any Industry within the territory of Indian mainland. The objective of the Industrial Disputes Act is to secure industrial peace and harmony by providing mechanism and procedure for the investigation and settlement of industrial disputes by conciliation, arbitration and adjudication which is provided under the statute. The main and ultimate objective of this act is "Maintenance of Peaceful work culture in the Industry in India" which is clearly provided under the Statement of Objects & Reasons of the statute.

Beneficiaries:

Welfare in industry can be achieved only if there is healthy understanding between employers, workers and the Government. There can be no growth of the industrial structure unless workers and employers realize their mutual responsibilities. Labour welfare has special significance in India where the Constitution itself enjoins the promotion of humane conditions of work and securing to all workers full employment of leisure and social as well as cultural opportunities.

The Industrial Employment (Standing Orders) Act, 1946:

This Act is to require employers in industrial establishments to formally define conditions of employment under them and submit draft standing orders to certifying Authority for its Certification. It applies to every industrial establishment wherein 100 (reduced to 50 by the Central Government in respect of the establishments for which it is the Appropriate Government) or more workmen are employed. And the Central Government is the appropriate Government in respect of establishments under the control of Central Government or a Railway Administration or in a major port, mine or oil field. Under the Industrial Employment (Standing Orders) Act, 1946, all RLCs(C) have been declared Certifying Officers to certify the standing orders in respect of the establishments falling in the Central Sphere.

Beneficiaries:

There was no uniformity in the conditions of service of workers until this act was brought, which led to friction between workers and Management. An Industrial worker has the right to know the Terms & condition which he is expected to follow. Hence the legislation.

The Trade Unions Act, 1926

Trade union is a voluntary organization of workers relating to a specific trade, industry or a company and formed to help and protect their interests and welfare by collective action. Trade union are the most suitable organisations for balancing and improving the relations between the employees and the employer. They are formed not only to cater to the workers' demand, but also for imparting discipline and inculcating in them the sense of responsibility.

The law relating to the registration and protection of the Trade Unions is contained in the Trade Unions Act, 1926 which came into force with effect from 1st June 1927.

Beneficiaries:

A trade union is an organized group of workers who strive to help the workers in the issues relating to the fairness of pay, good working environment, hours of work and other benefits that they should be entitled to instead of their labour. They act as a link between the management and workers. In spite of being newly originated institutions, they have turned into a powerful force because of their direct influence on the social and economic lives of the workers.

To control and manage the working of these trade unions different legislations regulating the same required. In India Trade Unions Act of 1926 is a principal Act for controlling and managing the working of trade unions. The present article aims at explaining and bringing forth various aspects of the Act.

The Employees Compensation Act, 1923

The Employee's Compensation Act, 1923 (the EC Act) aims to provide financial protection to workmen and their dependents in case of any accidental injury arising out of or in course of employment and causing either death or disablement of the worker by means of compensation.

This Act applies to factories, mines, docks, construction establishments, plantations, oilfields and other establishments listed in Schedules II and III of the said Act, but excludes establishments covered by the ESI Act.

The Act provides for payment of compensation by the employer to the employees covered under this Act for injury caused by accident. Generally, companies take insurance policies to cover their liability under the EC Act.

Beneficiaries:

It is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence. Workmen Compensation Insurance covers employees under Workmen Compensation Act, Fatal Accident Act and common law.

The Employees State Insurance Act, 1948

The Employees State Insurance Act, 1948 is beneficial and social legislation. Its main aim is to provide economic security to people who work in certain factories and establishments. The Act contains several important definitions and provisions that regulate these workers. It basically provides for payment of benefits to workers in cases of sickness, maternity, injury, etc.

The Employees� State Insurance Act incorporates a number of sections, these sections provide for medical benefits and insurance for any employees working under factories registered under the ESI Corporation. This is an exciting prospect from both an employee�s and a legal perspective as the beginning of a formal social security program in India.

Beneficiaries:

The Employees� State Insurance Act, 1948 (ESI), enables the financial backing and support to the working class in times of medical distress such as:

Sickness.

Maternity Leave.

Disorder (mental or physical).

Disability.

Death.

It is a self-financed initiative, which serves as a type of social security scheme, to prevent the working class from any financial problems arising out of the above medical issues.

The Employees Provident Funds And Miscellaneous Provisions Act, 1952:

Provident fund is a welfare scheme for the benefits of the employees. Under this scheme both the employee & employer contribute their part but whole of the amount is deposited by the employer. Employer deducted the employee share from the salary of the employee. The interest earned on this investment is also credited in pf account of the employees. At the time of retirement, the accumulated amount is given to the employees, if certain conditions are satisfied.

Beneficiaries:

Every employee, including the one employed through a contractor (but excluding an apprentice engaged under the Apprentices Act or under the standing orders of the establishment and casual labourers), who is in receipt of wages up to Rs.6,500 p.m., shall be eligible for becoming a member of the funds. The condition of three months� continuous service or 60 days of actual work, for membership of the scheme.

The Minimum Wages Act, 1948:

India introduced the Minimum Wages Act in 1948, giving both the Central government and State government jurisdiction in fixing wages. The act is legally non-binding, but statutory. Payment of wages below the minimum wage rate amounts to forced labour. Wage boards are set up to review the industry's capacity to pay and fix minimum wages such that they at least cover a family of four's requirements of calories, shelter, clothing, education, medical assistance, and entertainment.

Under the law, wage rates in scheduled employments differ across states, sectors, skills, regions and occupations owing to difference in costs of living, regional industries' capacity to pay, consumption patterns, etc. Hence, there is no single uniform minimum wage rate across the country and the structure has become overly complex.

Beneficiaries:

The Indian Constitution has defined a 'living wage' that is the level of income for a worker which will ensure a basic standard of living including good health, dignity, comfort, education and provide for any contingency. However, to keep in mind an industry's capacity to pay the constitution has defined a 'fair wage'. Fair wage is that level of wage that not just maintains a level of employment, but seeks to increase it keeping in perspective the industry's capacity to pay.

The Payment Of Wages Act, 1936:

The Payment of Wages Act regulates the payment of wages to certain classes of persons employed in industry and its importance cannot be under-estimated. The Act guarantees payment of wages on time and without any deductions except those authorised under the Act.

The Act provides for the responsibility for payment of wages, fixation of wage period, time and mode of payment of wages, permissible deduction as also casts upon the employer a duty to seek the approval of the Government for the acts and permission for which fines may be imposed by him and also sealing of the fines, and also for a machinery to hear and decide complaints regarding the deduction from wages or in delay in payment of wages, penalty for malicious and vexatious claims.

Beneficiaries:

As per section 1(6) of the Payment of Wages Act, the wages averaging less than INR 6,500 per month are covered and protected by the Act. The Wages Act regulates the payment of wages to persons employed in factories, railways, industrial and other establishments specified under the Wages Act. It contains provisions with respect to the responsibility for payment of wages, fixing of wage-periods, time of payment of wages, permissible deductions, maintenance of records and registers and penal consequences for non-compliances of the provisions stipulated under the Wages Act.

The Factories Act, 1948

The Factories Act, 1948, serves to assist in formulating national policies in India with respect to occupational safety and health in factories and docks in India. It deals with various problems concerning safety, health, efficiency and well-being of the persons at work places.

The Act is applicable to any factory using power & employing 10 or more workers and if not using power, employing 20 or more workers on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on; but this does not include a mine, or a mobile unit belonging to the armed forces of the union, a railway running shed or a hotel, restaurant or eating place.

Beneficiaries:

The Factories Act, 1948 is a beneficial legislation. The aim and object of the Act is essentially to safeguard the interests of workers, stop their exploitation and take care of their safety, hygiene and welfare at their places of work. It casts various obligations, duties and responsibilities on the occupier of a factory and also on the factory manager.

The Industries (Development And Regulation) Act, 1951:

The Act brings under the control of the Central Government the development and regulation of a number of important industries listed under the first schedule attached to the Act as the activities of such industries will affect the country as and, therefore, the development of such important industries must be governed by the economic factors of all India importance.

A system of licensing is introduced under the Act to regulate planning and future development of new undertaking on sound and balance lines and may be deemed expedient in the opinion of the Central Government.

Beneficiaries:

The Act provides and protects the development of those industries, present under schedule 1, those which are important for the country�s welfare and economy. Being under supervision of the government, guarantees availability of funds and smooth functioning of these industries.

The Payment Of Bonus Act 1965:

The payment of Bonus Act, 1965 aims to regulate the amount of bonus to be paid to the persons employed in establishments based on its profit and productivity. The act is applicable to the whole of India for all establishments which had twenty or more persons employed on any day during the year.

Beneficiaries:

Any employee is eligible for availing bonus if the following conditions are satisfied:

The employee receiving salary or wages up to Rs.21,000 per month

The employee engaged in any work whether skilled, unskilled, managerial, supervisory etc.

The employee who have worked not less than 30 working days in the same year.

The employees cannot avail the bonus if any action taken by the management in case of dishonesty, theft, sabotage of any property of establishment, violent behaviour while on the duty within premises of the establishment.

The Apprentices Act 1961:

The main purpose of the Act is to provide practical training to technically qualified persons in various trades. The objective is promotion of new skilled manpower. The scheme is also extended to engineers and diploma holders.

The employer is required to provide training facilities to apprentices. Multiple employers to come together, either themselves or through an approved agency to provide apprenticeship training to apprentices under them. Thus, the facilities of training apprentices in theoretical subjects can be shared among employers.

Beneficiaries:

The Apprenticeship Act explains apprentices to be the ones who receive apprenticeship or practical training under an apprenticeship scheme for a specified duration. The main requisites for a person to receive an apprentice training are that he/she should have attained an age of 14 years and for the trades where safety issues are concerned to the apprentice should have attained 18 years.

The main objective of the Apprentices Act, 1961 is to meet the rising need for proficient craftsman. Giving experimental training to the people who�re specialized in their crafts is the primary aim of the Apprentice Act. Candidates holding Diploma and Engineering Graduates can likewise benefit from this plan.

The Maternity Benefit Act, 1961:

The Maternity Benefit Act, aims to regulate of employment of women employees in certain establishments for certain periods before and after child birth and provides for maternity and certain other benefits. The Maternity Benefit Act is one of the best steps taken by the government to protect women employment while they experience their Maternity. Maternity Benefit is basically the benefit of getting full paid absence from work. As per the government rules, every establishment having 10 or more employees need to apply this act in the organization.

Beneficiaries:

Every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit, which is the amount payable to her at the rate of the average daily wage for the period of her actual absence. The maximum period for which any woman shall be entitled to maternity benefit shall be 12 weeks in all whether taken before or after childbirth. However she cannot take more than six weeks before her expected delivery.

The Payment Of Gratuity Act, 1972:

The Payment of Gratuity Act, enables the government to raise the limit of tax-free gratuity. The change can be made through an executive order by the prime minister.

Gratuity is a lump sum that a company pays when an employee leaves an organization, and is one of the many retirement benefits offered by a company to an employee.

Beneficiaries:

The Payment of Gratuity Act, 1972 (the Gratuity Act) is applicable to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments with ten or more employees. Gratuity is fully paid by the employer, and no part comes from an employee�s salary.

Gratuity is paid when an employee:

Is eligible for superannuation;

Retires;

Resigns; or

Passes away or is rendered disabled due to accident or illness

The Child Labour (Prohibition And Regulation) Act, 1986:

The Child Labour (Prohibition & Regulation) Act, 1986 aims at prohibiting engagement of children aged below 14 in certain hazardous Occupations and Processes as well as regulating the conditions of services of such children engaged in non-hazardous Occupations and Processes. The penal provisions for engaging child labour in hazardous Occupations and Processes is quite rigorous. It is a cognizable criminal offence to employ a Child for any work.

Beneficiaries:

Children between age of 14 and 18 are defined as "Adolescent" and the law allows Adolescent to be employed except in the listed hazardous occupation and processes which include mining, inflammable substance and explosives related work and any other hazardous process as per the Factories Act, 1948. In 2001, an estimated 1% of all child workers, or about 120,000 children in India were in a hazardous job. Notably, the Constitution of India prohibits child labour in hazardous industries (but not in non-hazardous industries) as a Fundamental Right under Article 24.

The Equal Remuneration Act, 1976:

The employer must not discriminate on grounds of sex, when it comes to remuneration provided for the same amount and nature of work. This Act was placed because there were numerous cases of women getting paid at a lower rate than their male counterparts.

In the case of People�s Union of Democratic Republic v. Union of India 1982, women were only paid 7 per day as opposed to 9.25 per day for male workers. After hearing both sides, Justice P.N. Bhagwati held that the authorities need to make sure that the men and women both are paid at par to each other for similar amount of work.

Beneficiaries:

The basic concept underlying, the very controversial subject, Feminism, is �equity�. Equity refers to a treatment of equal with equals and Unequal with unequal. The Equal Remuneration Act, does just that. It provides for Equal remuneration both men and women, but also understanding the fact that it will not override any special treatment provided to women in the country. There was a time in India when women used to face heavy discrimination in pay. But, after the advent of this Act, women have been able to sue malpractices prevailing in their workplace.

The Bonded Labour System (Abolition) Act, 1976:

The Bonded Labour System (Abolition) Act, 1976 provides for the abolition of the bonded labour system, with a view to preventing the exploitation of vulnerable sections of society.

This Act prohibits, criminalises and extinguishes any system of debt bondage, whether by agreement, custom or contract. The object of the Act is to provide for the abolition of bonded labour system with a view to preventing the economic and physical exploitation of the weaker sections of the people and for matters connected therewith or incidental thereto.

Beneficiaries:

According to the definition given in section 2(g) of the Act, bonded labour means service arising out of loan/debt/advance. The bonded labour is to be immediately released from the bondage. His liability to repay bonded debt is deemed to have been extinguished. Freed bonded labour shall not be evicted from his homesteads or other residential premises which he was occupying as part of consideration for the bonded labour. A rehabilitation grant of Rs.1 20,000/- to each of the bonded labour is to be granted and assistance for his rehabilitation provided.