Business Environment

(BE)
MGT511

Keshri Nandan
Chaudhary
+91 9501445120
Major Problems faced
by India
 Low NNP
 Chronic unemployment
 Low per capita income
 Considerable % of population under
poverty line
 Marginal exports
 High level of imports
Major Problems faced
by India
 Increasing trade deficits
 Decline of foreign exchange reserves
 Poor external economic image
 Low level of technological base
 Insignificant innovations
 Mounting foreign debts
Measures taken up to
solve these problems
 New Industrial Policy
 Removal of Import Restrictions
 Relief to foreign investors
 FERA and MRTP Relaxation
 Privatization of Public Sector
 Simplification of Industrial Licensing
 Encouraging Foreign Tie-ups
Measures taken up to
solve these problems
 Banking and financial Reforms
 New trade policy
Rationale for
Privatisation
 Economic inefficiencies-
high cost of productions
inability to innovate
costly delays in delivery of goods and services
Rationale for
Privatisation
 To strengthen competition and efficiency
 To fund infrastructure growth
 To reduce unnecessary interferences
 More disciplined labour forces
PRIVATISATION
 Privatisation means a change in ownership
resulting in a change in management
 Disinvestment means dilution of the stake of
the government . Change in management is
not a necessary condition in disinvestment
 PRIVATISATION
 No. of Industries reserved for Public sector in India 17(1956)
 No. of Industries reserved for Public sector in India 8(1991)
 No. of Industries reserved for Public sector in India 6(1993)
 No. of Industries reserved for Public sector in India 3(Now)
PRIVATISATION
 Sale of enterprise
 Leasing
 Joint Ventures
 Public Share offers
Problems with
Privatisation
 Ownership to a privileged few
 lack of social responsibility
 Loss of experienced managerial
expertise
Disinvestment- Methods
 Strategic sale
 Initial public offers through capital
market (domestic market)
 Issues of ADRs / EDRs
Disinvestment- (Strategic
Sale)
 Proposal for disinvestment placed for consideration of
Cabinet Committee on Disinvestment (CCD). Then
Expression of Interest Call for. Shortlisting of bidders,
Due Diligence of PSU by bidders. Bid received are again
placed before CCD for final decision.
 Ex: Sale of 51% stake in BALCO to Sterlite Industries
Disinvestment- (Strategic
Sale)
 Proposal for disinvestment placed for consideration of
Cabinet Committee on Disinvestment (CCD). Then
Expression of Interest Call for. Shortlisting of bidders,
Due Diligence of PSU by bidders. Bid received are again
placed before CCD for final decision.
 Ex: Sale of 51% stake in BALCO to Sterlite Industries
Disinvestment- (Strategic
Sale)
 25% equity out of Govt’s 53% stake in VSNL
to M/S Panatone (Tata Group) Feb 2002
 26% equity in IPCL (out of 60% Govt.
stake) to Reliance Group (May 2002)
Disinvestment- (IPO’s,
ADRs etc)
 Global Depository Receipt Issue (ex: VSNL during 1996-97
and 97-98)

 Domestic Offering of shares (ex: GAIL in 1998-99)

through Capital Market. (IPO)

 Other IPOs are ONGC (10%), Maruti (27.5%) in 2003-

04.
Measures taken up for
Liberalisation
 Relief to foreign investors
 Devaluation of Indian Rupees
 New Industrial Policy
 PSU’s disinvestment
 Changed Licensing procedures
Measures taken up for
Liberalisation
 New Trade Policy
 Streamlining licensing system
 Changed Licensing procedures
 Incentives was also provided for 100%
export units and processing zones (SEZs)
 Quota Restrictions removal