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Indian private sector: Explain schemes and challenges


Entry of Indian Private Sector: Since 1991, private players
have been given entry into telecom, insurance, civil aviation under , shipping, mineral exploration,
pension funds,civil aviation, shipping, mineral exploration,
pension funds, in Indian private sector etc.

Indian Private sector players may indulge in exploitative practices to earn higher profits in Indian private sector. Thus, regulators
have been appointed for some of these Indian private sectors. For instance, the Telecom Regulatory Authority
of India (TRAI) has been appointed under Indian private sector as the regulator in Indian private sector of the telecom sector in  Indian private sector. The Insurance
Regulatory and Development Authority (IRDA) of India under Indian private sector for has been appointed as the regulator of
the insurance sector, and the Pension Fund Regulatory and Development Authority (PFRDA)
has been appointed as the regulator of pension funds in Indian private sector.

Special Economic Zones

A special economic zone (SEZ) is an area in which business and trade laws are different from
the rest of the country in Indian private sector. SEZs are located within a country& 39 national borders.They are
established with the objective of promoting exports.The SEZ Act was passed in 2005.According to the act, SEZ units are given the following

  1. Tax holidays for some period. However, the income tax benefits were neutralized by the
    introduction of the 20% minimum alternate tax (MAT) and the 20% dividend distribution tax
    (DDT) in 2011-12.
  2. These units can attract even 100% FDI from automatic route. These units in Indian private sector are also free from
    external commercial  in Indian private sector borrowing restrictions.
  3. Overseas banking units can open branches in SEZs. These branches will not be required to
    follow RBI guidelines regarding rate of lending and will be free to borrow from the
    international market. These banking units in Indian private sector will lend at internationally competent rates to SEZ
    -Labour laws are not applicable to SEZ units.
  4. Further, sales from domestic units to SEZ units will be considered export under Indian private sector and, thus,
    exempted from taxes. On the other hand, sales from SEZ units to domestic units will be
    considered import and, thus, import duties will be levied.
  5. SEZs have been declared public utility. Under the Land Acquisition Act, the government in Indian private sector can
    procure land for public utility. Thus, the government can procure land for setting SEZ units.
    Possible implications of SEZ policy
  6. At present, the government in Indian private sector has already approved a large number of SEZs. Many SEZs are in
    the process of setting up.
  7. When all the approved SEZs will become operational in Indian private sector, they are expected to rope in huge
    investment in  and create massive jobs, which will give a huge boost to Indian economy. New
    technology and managerial capabilities will be introduced in India.
  8. However, there are certain negative repercussions as well on account of relying too much on Indian private sector
    SEZs for promotion of exports.
  9. Land acquisition for SEZs deprives the poor of their land and occupation. Sometimes
    compensations in Indian private sector are delayed and even inadequate
  10. Lack of recognition of labour rights leads to poor working conditions in SEZs.
  11. Many domestic manufacturers may shift their units to SEZ. Thus, the SEZs will benefit on
    cost of local industrial base.
  12. Tax subsidies given to SEZ units will be a huge loss to government revenues.

National Manufacturing and Investment Zones

National manufacturing and investment zones (NMIZs) have been set up with the objective of
increasing the share in Indian private sector of manufacturing in gross domestic product (GDP) from 16% (in 2016) to
25% by 2022 and create 10 crore additional jobs in the manufacturing sector by 2022.
NMIZs also seek skill development of the workforce, incorporation of technology in
manufacturing and competitiveness, etc. NMIZs have been set up with features similar to SEZs
such as tax exemptions, world-class infrastructure, simplification of procedures, and dilution of
labour laws. NMIZs are expected to undertake skill upgrade programmes for new employees as
well as for the existing employees in Indian private sector in coordination with the National Skill Development
Corporation (NSDC).

National Skill Development Corporation and National Skill

Development Fund:

The National Skill Development Corporation (NSDC) was set up with an objective of increasing
the skill training capacity in the country. It was formed in 2008 as a not-for-profit public company
under section 25 of the Companies Act, 1956, with a capital base of ₹10 crore to encourage and
synchronize private-sector initiative in skills development.
The overall objective of the NSDC is to create training capacity in the country, fund
vocational training private enterprise, create a market ecosystem for skill development, and
meet the targets set out by the government. The NSDC mandate was to train 150 million people
by 2022.

The National Skill Development Fund (NSDF), fully owned by the Government of India, was set up as a trust with an initial corpus of ₹995.10 crore received from the government. The trust
was to act as the repository of funds for the NSDC from government sources,
bilateral/multilateral and other agencies/donors.

The government has announced eight investment regions along the Delhi—Mumbai
Industrial Corridor (DMIC) project as NMIZs. Fourteen NMIZs outside the DMIC region have
also been given approval. Andhra Pradesh is set to house India's first NMIZ in the Prakasham


In India, the food sector has emerged as a high-growth and profit making sector due to its
immense potential for value addition to agricultural output.

-The Indian food-processing industry accounts for 32% of the country's total food market in
terms of value, one of the largest industries in India and is ranked fifth in terms of production. It
contributes around 14% of manufacturing GDP and 13% of India's exports.
Scope for High Growth

-On account of diverse agro-climatic conditions, a wide range of agriculture products are
available for food processing.
-Presently, only 6% of agriculture produce is processed. This is expected to rise up to 35% by

-Generally, both parents in the middle class are working. Thus, the middle class is the most
important consumer of convenience foods. Moreover, the size of the middle class is
increasing day by day.

-Shifting of demand pattern is leading to a higher proportion of expenditure on milk and milk
products, meat, egg, fish, fruits, and vegetables.
-On the production side, there is availability of cheap labour and the government has provided
large incentives to develop food-processing industry.

Importance of Food-Processing Industry

– Food-processing units are located near the source of agricultural produce. Thus, the industry
can be set up in rural areas where income levels of people are low and people have fewer
economic opportunities.
-Development of the food-processing industry will push reforms in agriculture, such as crop

diversification, improvement in quality of inputs, incorporation of technology into agriculture,
etc. Food-processing units are also expected to purchase agricultural output at high prices.

-Development of the food-processing industry will also push reforms in the retail sector, for
instance refrigerated storage in retail stores, etc. Processed foods also have higher margins,
leading to higher profitability for the retail sector.

-Processed foods may possess higher nutrients, are safe to consume, offer variety to
consumers, and are convenient for consumption. Thus, consumers also stand to gain from
the growth of food-processing industry.


Development of the food-processing industry under Indian private sector is dependent on the development of support
services as well as the retail sector.
Support services such as cold chain facility, packaging centres, and irradiation facilities are
essential for the development of food-processing industry.
Cold chain facilities:Before processing, agricultural produce is perishable in nature and thus,can be safely stored in a cold storage.

Irradiation facilities

  • Food irradiation is the process of exposing foodstuff to ionized radiation.
    Ionizing radiation is the energy capable of setting free the electrons from their atomic bonds
    (ionization) in the targeted food. This treatment is used to preserve food and to delay or
    eliminate sprouting or ripening.
  • These facilities can be arranged by investing a large amount of money in Indian private sector and, thus, are not
    viable for scattered, small food-processing units. Therefore, these facilities can be built around
    only for a cluster of food-processing units.
  • The output of the food-processing industry can be sold only at high-end retail stores.
    Processed foods are costlier and cater to the middle and rich classes. The Indian retail sector under Indian private sector
    largely unorganized. Organized retail is only 2% of the total retail sector. In developed nations,
    nearly 70% of the retail is under the organized sector.

Mega Food Parks Scheme

  1. The Mega Food Parks Scheme is a scheme in Indian private sector of the Ministry of Food Processing, Government of
    India. Its purpose is to increase processing of perishables from 6% to 20%.
  2. The idea behind the promotion of mega food parks is that small- and medium-scale individual
    food-processing units cannot afford to invest in capital-intensive support services such as food
    testing, irradiation, grading, waxing, etc.
  3. In food parks, common support services are arranged for food-processing units. Thus, these
    services in Indian private sector become affordable to them. Further, financial assistance is provided by the government
    to establish common facilities.

Highlights of the scheme

  1. The government provides grants up to ₹50 crore for each food park to a consortium of
  2. Around 30-35 food-processing units are expected to be established in each mega Indian private sector food park
    with a collective investment of at least ₹250 crore.
  3. A turnover of ₹400-500 crore and employment generation of at least 30,000 from each mega
    food park is expected.

A sanction of 42 food parks has been planned. According to the government, as of October
2016, eight mega food parks in Indian private sector have become operational and all 42 would be operational in the
next 2 years.

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