Paper-3, Booklet-3, Economic Development

It classified industries into four broad areas: 1. Strategic Industries (Public Sector): It included three industries in which Central Government had monopoly. These included Arms and ammunition, Atomic energy and Rail transport. 2. Basic/Key Industries (Public-cum-Private Sector): 6 industries viz. coal, iron & steel, aircraft manufacturing, ship-building, manufacture of telephone, telegraph & wireless apparatus, and mineral oil were designated as ―Key Industries‖ or ―Basic Industries‖. These industries were to be set-up by the Central Government. However, the existing private sector enterprises were allowed to continue. 3. Important Industries (Controlled Private Sector): It included 18 industries including heavy chemicals, sugar, cotton textile & woollen industry, cement, paper, salt, machine tools, fertiliser, rubber, air and sea transport, motor, tractor, electricity etc. These industries continue to remain under private sector however, the central government, in consultation with the state government, had general control over them. 4. Other Industries (Private and Cooperative Sector): All other industries which were not included in the above mentioned three categories were left open for the private sector.  INDUSTRIAL POLICY RESOLUTION 1991 The long-awaited liberalised industrial policy was announced by the Government of India in 1991 in the midst of severe economic instability in the country. The objective of the policy was to raise efficiency and accelerate economic growth. Under this policy:  De-reservation of Public sector: Sectors that were earlier exclusively reserved for public sector were reduced. However, pre-eminent place of public sector in 5 core areas like arms and ammunition, atomic energy, mineral oils, rail transport and mining was continued. Presently, only two sectors- Atomic Energy and Railway operations- are reserved exclusively for the public sector.  De-licensing: Abolition of Industrial Licensing for all projects except for a short list of indus- tries. There are only 4 industries at present related to security, strategic and environmental concerns, where an industrial license is currently required- Electronic aerospace and defence 101

equipment, Specified hazardous chemicals, Industrial explosives and Cigars and cigarettes of tobacco and manufactured tobacco substitutes.  Disinvestment of Public Sector: Government stakes in Public Sector Enterprises were reduced to enhance their efficiency and competitiveness.  Liberalisation of Foreign Investment: This was the first Industrial policy in which foreign companies were allowed to have majority stake in India. In 47 high priority industries, upto 51% FDI was allowed. For export trading houses, FDI up to 74% was allowed. Today, there are numerous sectors in the economy where government allows 100% FDI.  Foreign Technology Agreement: Automatic approvals for technology related agreements.  MRTP Act was amended to remove the threshold limits of assets in respect of MRTP companies and dominant undertakings. MRTP Act was replaced by the Competition Act 2002.  NATIONAL MANUFACTURING POLICY 2011 The major objectives of the National Manufacturing Policy are to increase the sectoral share of manufacturing in GDP to at least 25% by 2022; to increase the rate of job creation so as to create 100 million additional jobs by 2022; and to enhance value global competitiveness, domestic addition, technological depth and environmental sustainability of growth. It also aims at double digit annual growth of manufacturing. The policy envisages specific interventions broadly in the areas of:  Industrial infrastructure development not only generally but also through the creation of large integrated industrial townships called National Investment and Manufacturing Zones (NIMZs) with  state-of-the-art infrastructure  land use on the basis of zoning  clean and energy efficient technologies  necessary social and institutional infrastructure in order to provide a productive environment to persons transitioning from the primary to the secondary and tertiary sectors. The land for these zones will preferably be waste infertile land 102

not suitable for cultivation; not in the vicinity of any ecologically fragile area and with reasonable access to basic resources.  Improvement of the business environment through rationalization and simplification of business regulations. It is envisaged to ensure compliance of labour and environmental laws while introducing procedural simplifications and rationalization so that the regulatory burden on industry is reduced.  Development of appropriate technologies especially green technologies for sustainable development  Skill development of the younger population.  The interventions proposed are generally sector neutral, location neutral and technology neutral except the attempt to incentivize green technology for sustainable development.  MAKE IN INDIA AND INVEST INDIA The ‗Make in India‘ campaign has its origin in the Prime Minister‘s Independence Day speech in which he gave a clarion call for ―Make in India‖ and ―Zero Defect; Zero Effect‖ policies. The campaign aims to facilitate investment, foster innovation, enhance skill development, protect intellectual property, and build best-in-class manufacturing infrastructure in India. Domestically, the ‗Make in India‘ initiative aims to identify domestic companies having leadership in innovation and new technology for turning them into global players. The focus will be on promoting green and advanced manufacturing and helping these companies to become an important part of the global value chain. The Government has identified 25 key sectors in which Indian industries have the potential to compete with the best in the world. 103

Invest India, the country‘s official agency for investment promotion and facilitation, will act as the initial reference point for guiding foreign investors on all aspects of regulatory and policy issues and would also help them in obtaining regulatory clearances. The Government is closely looking to overhaul regulatory processes in order to make them simple and reduce the burden of compliance on investors. LIMITATIONS OF INDUSTRIAL POLICIES IN INDIA  Stagnation of Manufacturing Sector: Industrial policies in India have failed to push manufacturing sector whose contribution to GDP is stagnated at about 16% since 1991.  Distortions in industrial pattern owing to selective inflow of investments: In the current phase of investment following liberalisation, while substantial investments have been flowing into a few industries, there is concern over the slow pace of investments in many basic and strategic industries such as engineering, power, machine tools, etc.  Displacement of labour: Restructuring and modernisation of industries as a sequel to the new industrial policy led to displacement of labour.  Absence of incentives for raising efficiency: Focussing attention on internal liberalisation without adequate emphasis on trade policy reforms resulted in ‗consumption-led growth‘ rather than ‗investment‘ or ‗export-led growth‘.  Vaguely defined industrial location policy: The New Industrial Policy, while emphasised the detrimental effects of damage to the environment, failed to define a proper industrial location policy, which could ensure a pollution free development of industrial climate. CONCLUSION Industrial policies in India have taken a shift from predominantly Socialistic pattern in 1956 to Capitalistic since 1991. India now has a much liberalised industrial policy regime focusing on increased foreign investment and lesser regulations. India ranked 77th on World Bank‘s Doing Business Report 2018. Reforms related to insolvency resolution (Bankruptcy and Insolvency Act, 2017) and the Goods and Services Taxes (GST) are impressive and will result in long-term gains for the industrial sector. 104

However, electricity shortages and high prices, credit constraints, high unit labour costs due to labour regulations, political interference and other regulatory burdens continue to remain challenges for firm growth of the industrial sector in India. There is a need for a new Industrial Policy to boost the manufacturing sector in the country. Government in December 2018 also felt the need to introduce a new Industrial Policy that would be a road map for all business enterprises in the country. 105

MSME SECTOR Amid a major decline in credit growth in the economy this year, micro, small and medium sector players are among the worst hit as banks continue to practice caution in lending to the industrial sector. But, for India to pursue high growth path, the MSME sector assumes a pivotal role in driving the growth engine. The MSME sector in India continues to demonstrate remarkable resilience in the face of trialling global and domestic economic circumstances. The sector has sustained an annual growth rate of over 10% for the past few years. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive economic shocks, even of the gravest nature. MSMEs‘ definition is proposed to be changed from investment-based to turnover-based. The proposed definition is:  A micro enterprise will be defined as a unit where the annual turnover does not exceed five crore rupees;  A small enterprise will be defined as a unit where the annual turnover is more than five crore rupees but does not exceed Rs 75 crore;  A medium enterprise will be defined as a unit where the annual turnover is more than 75 crore rupees but does not exceed Rs 250 crore.  Additionally, the Central Government may, by notification, vary turnover limits, which shall not exceed thrice the limits specified in Section 7 of the MSMED Act. IMPORTANCE  Backbone of Indian economy: The importance of MSMEs is attributable to their calibre for (a) employment generation (b) low capital and technology requirement (c) promotion of industrial development in rural areas (d) use of traditional or inherited skill (e) use of local resources (f) mobilization of resources and exportability of products. 106

 Contribution to growth parameters: The sector contributes around 38% to the country‘s gross domestic product (GDP), 40% to overall exports and 45% to overall manufacturing output.  Contribution to job creation: The MSME sector generates around 100 million jobs through over 46 million units situated throughout the geographical expanse of the country. MSME sector is the second largest employment providing sector in India after agriculture.  Diversity: The MSME sector in India is quite diverse in terms of its size, level of technology employed, range of products and services provided and target markets. GOVERNMENT DEVELOPMENT STRATEGY The Prime Minister, recently launched support and outreach programme for the Micro, Small and Medium Enterprises (MSME) sector. The programme includes 12 key initiatives which will help the growth, expansion and facilitation of MSMEs across the country: AREA OF INTERVENTION PROGRAM DEVELOPMENT 1. Launch of the 59 minute loan portal to enable easy access to ACCESS TO CREDIT credit for MSMEs. The loans upto Rs. 1 crore can be granted in- principle approval through this portal, in just 59 minutes. The link to this portal will be available through the GST portal. 2. A 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans. Increase in interest rebate from 3% to 5% for exporters who receive loans in the pre-shipment and post-shipment period. 3. All companies with a turnover more than Rs. 500 crore, must now compulsorily be brought on the Trade Receivables e- Discounting System (TReDS). It is the institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate and other buyers, including Government Departments and Public Sector Undertakings (PSUs), through multiple financiers. It has been set up under the regulatory framework set up by RBI under Payment and Settlement Systems Act 2007. 107

ACCESS TO MARKET 4. Public sector companies have now been asked to compulsorily procure 25%, instead of 20% of their total purchases, from MSMEs. TECHNOLOGY UPGRADATION 5. Out of the 25% procurement mandated from MSMEs, 3% must EASE OF DOING now be reserved for women entrepreneurs. BUSINESS 6. All public sector undertakings of the Union Government must now SECURITY FOR compulsorily be a part of Government e-Marketplace (GeM). They EMPLOYEES should also get all their vendors registered on GeM. 7. HUB AND SPOKE MODEL - 20 hubs, and 100 spokes in the form of tool rooms will be established across the country to facilitate product design. 8. Clusters of pharma MSMEs will be formed and 70% cost of establishing these clusters will be borne by the Union Government. 9. In order to simplify the government procedures, the return under 8 labour laws and 10 Union regulations must now be filed only once a year. 10. The establishments to be visited by an Inspector will be decided through a computerised random allotment. 11. Environmental Clearance under air pollution and water pollution laws, have been merged into one. Also, the return will be accepted through self-certification. 12. For minor violations under the Companies Act, the entrepreneur will no longer have to approach the Courts, but can correct them through simple procedures. A mission will be launched to ensure that they have Jan Dhan Accounts, provident fund and insurance. Other steps by the government to promote development of MSMEs – the backbone of India‘s industrial sector include: 108

 The National Manufacturing Competitiveness Programme is another flagship programme of the Ministry of MSME which endeavours to equip these enterprises with technology-based tools in the areas of quality upgradation, productivity, design development, energy efficiency and marketing.  Udyog Aadhaar Memorandum (UAM): It is a simple one-page registration form to promote ease of doing business for MSMEs in India.  A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE): The scheme promotes innovation & rural entrepreneurship through rural Livelihood Business Incubator (LBI), Technology Business Incubator (TBI) and Fund of Funds for start up creation in the agro-based industry.  Credit Guarantee Fund Scheme: To facilitate easy flow of credit, guarantee cover is provided for collateral free credit extended to MSMEs.  Prime Minister‘s Employment Generation Programme (PMEGP): is a credit linked subsidy scheme, for setting up of new micro-enterprises and to generate employment opportunities in rural as well as urban areas of the country.  Scheme of Fund for Regeneration of Traditional Industries (SFURTI): The scheme aims to make traditional industriesmore productive and competitive by organizing the traditional industries and artisans into clusters.  Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation: CLCSS aims at facilitating technology upgradation of Micro and Small Enterprises (MSEs) by providing 15% capital subsidy for purchase of plant & machinery. CONCLUSION Issues related to credit, like adequacy, timely availability, cost and mortgages continue to be a concern for MSME. These enterprises are dependent on self-finance. Profit margins are also low. The government drive for financial inclusion could benefit such entities. The government could consider dedicating specialised financial schemes for addressing difficulties in assessing and providing credit for small enterprises, as also providing line of credit to firms which are under financial stress. However, it remains to be seen whether new institutions such as MUDRA Bank can open the credit markets for small enterprises. 109

INFRASTRUCTURE The state of infrastructure during the pre-British India was very poor. The transportation and communication lines were below average. In fact, most of the villages lacked connectivity by pucca roads. Consequently, natural dusty tracks were the roads predominant in India. However, such roads spelt misery during monsoons as they became muddy and difficult to traverse. If we start noting the pros and cons of British rule over India, the negatives column would definitely outgrow the positives. However, the infrastructure development, especially the railways, will certainly be one positive if not all. Ironically, as was with all colonial moves, the idea of railways again gained momentum to strengthen the British monopoly which was already on a high. Evidently, between 1860 and 1940, total railways route miles increased from 838 to 41,852. They developed not only railways, but also telecommunication, ports, etc. Infrastructure is a key driver of the overall development of Indian economy. Infrastructure sector focuses on major infrastructure sectors such as power, roads and bridges, dams and urban infrastructure.Infrastructure is generally understood as the basic building blocks required for an economy to function efficiently.The National Statistical Commission headed by Dr. C. Rangarajan, attempted to identify infrastructure based on some characteristics. The Rangarajan Commission indicated six characteristics of infrastructure sectors, like non-rivalness, high sunk costs, externalities on society, non-tradability of society, etc. The Economic Survey considers power, urban services, telecommunications, posts, roads, ports, civil aviation, and railways under infrastructure sector. IMPORTANCE OF INFRASTRUCTURE FOR GROWTH AND DEVELOPMENT  Better infrastructure increases productivity of physical and human resources.  Physical infrastructure improves access to social infrastructure like education, health, skills, etc reducing wastage of human hours.  It also increases farmer‘s access to markets, reduces cost and increases profitability of agriculture.  Public investment in infrastructure facilitates private investment. 110

 Balanced infrastructure development promotes regional equality. Infrastructure starts a virtuous cycle of development in the region: 111

ROADS Roads in India have been the primary mode of transportation, ever since the invention of wheels, starting with bullock carts in rural India to cars in urban India.The Indian road network, comprising of National Highways, Expressways, State Highways, Major District Roads, Other District Roads and Village Roads, is globally the 2nd largest spanning 5.5 million kilometres. India‘s road infrastructure has seen consistent improvement in the last few years. Connectivity has improved and road transportation has become a focus of rapid development. Roads are providing better access to services, ease of transportation and freedom of movement to people. IMPORTANCE PROBLEMS  Roads help in providing last mile connectivity.  Major part of the existing NH consists of single- lane roads, which are ignored for long time.  They are complimentary to other modes of transport and act as connecting modes from and  Serious problem of lack of maintenance of roads to railway stations, airports, etc. in India exists, because of political ignorance,  Quick modes for transporting perishable especially after the end of contractual period of agriculture produce. private partner.  Roads in border areas are critical for national  Problems of land acquisition in construction, and security and quick troop mobilisation. associated rehabilitation.  Roads provide all-weather connectivity, unlike  Rising number of road accidents have made them airways, railways, etc services of which are risky and increased doubts on design. disrupted in adverse weather conditions.  Congestion and traffic, especially in metro cities  Labour intensive construction provides adds to pollution and makes roadways less employment opportunities and better livelihood. attractive. Example: link with MGNREGA.  Large initial costs and long gestation period deters private investment. 112

GOVERNMENT INITIATIVES Recognizing the significance of a reliable and swift road network in the country and the role it plays in influencing its economic development, the Ministry of Road Transport and Highways (MORTH) has taken up the responsibility of building quality roads and highways across the country: 1. NATIONAL HIGHWAYS DEVELOPMENT PROJECTS(NHDP) The seven phased NHDP is being implemented by the National Highways Authority of India (NHAI) with a total estimated expenditure of USD 92 billion.As the largest highway development project in the country since 2000, more than 49,260 kms of the roads are being upgraded to match international standards. Key Projects under NHDP include the following under its various phases:  Development of National Highways to 4/6 lane standards on the Golden Quadrilateral and major ports to national highways.  4-laning of 4,000 km of National Highways Upgradation of about 20,000 km of National Highways to 2-lane paved shoulder.  Six laning of 6,500 km of existing 4 lane National Highways  Development of 1,000 km of fully access controlledexpressways under Public Private Partnership (PPP) model following Design – Build – Finance – Operate (DBFO) approach. Nine such expressways have been identified along High-Density Corridors. These corridors will seek to ensure quicker connectivity.  Construction of standalone Ring Roads, Bypasses, Grade Separators, Flyovers, elevated roads, tunnels, road over bridges, underpasses, service roads, etc. on BOT (Toll) 2. BHARATMALA The programme envisages new initiatives like development of Border and International connectivity roads, Coastal & port connectivity roads and improvements in National Corridors Efficiency Economic corridors. The ―mega-plan‖ which is the second highest highway project after NHDP will provide further boost to the ongoing road/highway development projects and will 113

witness a construction of 20,000 km of highways in its first phase. It also includes projects like connecting all Char Dham. All projects implemented under Bharatmala are to be technically, financially and economically appraised by an empowered Project Appraisal &Technical Scrutiny Committee to be setup in National Highways Authority of India (NHAI) and Ministry of Road Transport and Highways (MoRTH). The government will mobilize resources for Bharatmala through four different routes - market borrowings, central road fund, monetizing government-owned road assets and budgetary allocation. 3. PRADHAN MANTRI GRAMEEN SADAK YOJANA PMGSY was launched in December, 2000 with an objective to provide single all-weather road connectivity to eligible unconnected habitation of designated population size (500+ in plain areas and 250+ in North-East, hill, tribal and desert areas as per Census, 2001) for overall socio- economic development of the areas. The ongoing 3rd phase of PMGSY, involves consolidation of Through Routes and Major Rural Links connecting habitations to Gramin Agricultural Markets (GrAMs), Higher Secondary Schools and Hospitals. The funds would be shared in the ratio of 60:40 between the Centre and State for all States except for 8 North Eastern and 3 Himalayan States (Jammu & Kashmir, Himachal Pradesh &Uttarakhand) for which it is 90:10. 4. NATIONAL HIGHWAYS AND INFRASTRUCTURE DEVELOPMENT CORPORATION LTD. (NHIDCL) NHIDCL was founded in July 2014 by MORTH to speed up the road construction in strategic areas along the international border and North Eastern Region. It carries the responsibility of developing and improving road connectivity for 10,000 km long roads in the North Eastern region. NHIDCL is spearheading the construction of 142 National Highways for development of 8,100 km of roads with the budget of USD 15.3 billion. On the lines of fortune 500 companies, NHIDCL has adopted the use of e-tendering, e-office and e-governance tools. 114

5. LOGISTIC EFFICIENCY ENHANCEMENT PROGRAMME (LEEP) This programme rests around 4 pillars:  Freight aggregation and distribution  Multimodal freight movement  Storage and warehousing  Value-added services such as custom clearances. Through addressing these, the programme aims to enhance freight transportation in India through improving cost, time by as much as 10% and tracking and transferability of consignments through infrastructure, procedural and Information Technology (IT) interventions. Under the first phase of LEEP, USD 5 billion has been allocated for development of multimodal logistics parks and 15 locations have been identified for this purpose. These parks will ensure that shifting from one mode of transport to another does not result in excessive time loss and wastage in handling. 6. OTHER INITIATIVES include VAHAN and SARTHI Portal for online registration of vehicles and driving licence, respectively, and new investment models, FASTags for toll collection, new National Permit Scheme to facilitate inter-state connectivity, SetuBharatam for Railway over and under bridges, etc. CONCLUSION When India is looking at international connectivity like the Trilateral Highway with Myanmar, Laos and Thailand and investment in the Asian Highway Network, it is important that all areas within the country, including rural, difficult terrain and border areas are well connected with all-weather roads. Land acquisition and funding problems must be solved using innovative methods, Hybrid Annuity Model, PPPP i.e. People Public Private Partnership. 115

AIRPORTS The Civil Aviation Sector in India is a fast growing industry and has recorded considerable growth in the last 30 years. India has the third largest aviation market in terms of domestic passenger traffic. Further, International Air Transport Association (IATA), has projected that India would overtake the UK to become the third largest air passenger market (both domestic and international) by 2025. Entry 29, List I, VII Schedule read with Art. 246 of the Indian Constitution vests with the Parliament of India, the exclusive jurisdiction to legislate in relation to ‗Airports; aircraft and air navigation; provision of aerodromes; regulation and organisation of air traffic and of aerodromes.‘ ISSUES AND CHALLENGES Despite huge potential in the country due to middle class population, investor friendly environment and diverse physiography with multiple inaccessible regions, the industry is in its nascent stages of development because of the following changes: 1. Infrastructure issues: A major issue is that aviation infrastructure growth hasn‘t kept pace with the growth in air traffic. Relatively small size of the aircraft fleet available for domestic 116

routes or international destinations poses hurdles. Even, congestion and delays lead to poor passenger experience. 2. Financial Health: Though India is among the fastest growing aviation markets in the world, its airlines have been gripped in loses. Recent cases of Jet Airways, Air India are evidence. 3. Rupee Depreciation: The recent rupee‘s depreciation has had negative impact on the airline industry. About 25-30% of airline costs (excluding fuel) are dollar denominated. Example: aircraft lease rents and maintenance costs to ground handling and parking charges abroad. 4. Aviation Turbine Fuel (ATF): International prices of ATF, is one of most important factor that affects the cost of air operations. Further, the high state tax levied on the ATF in India makes it one of the most expensive in the world. As compared to the world average of 20- 25%, ATF accounts for over 40% of the total cost for the airline companies. 5. Competition: The arrivals of LCCs (Low cost carriers) lead to wearing down the market share of the premium airlines. To moderate the decline in market share, the premium airlines were forced to reduce their fares and this in the long run lead to a pricing war amongst the airlines with potentially affecting the financial viability of the carriers. 6. Security: A 2016 report by a department related to the Parliamentary Standing Committee on Transport, Tourism and Culture raised deep concerns by suggesting that 27 functional airports in the country are protected by forces other than the Central Industrial Security Force (CISF). Explanations given to the committee for non-deployment of CISF at remaining airports were lack of fund. 7. Regulation: The aviation sector is generally believed to be over-regulated. There is excessive concentration of power in the DGCA through which the Central government exercises its authority. According to critics, this negatively affects the competitiveness and viability of the aviation industry. 117

GOVERNMENT INITIATIVES 1. UDAN (Ude Desh ka Aam Nagrik) Scheme:  The scheme seeks to boost air connectivity by linking up un-served and under-served airports in Tier 2 and Tier 3 cities with the big cities and also with each other.  Critics have raised concerns as the viability gap funding (concessions provided to the airlines to encourage them to fly on regional routes) under UDAN scheme will last only for three years and various operational issues, such as the lack of slots for connecting flights at major airports will affect financial health of airlines.  A number of smaller airports have come up under the hub and spoke model. Example: Shirdi in Maharashtra, Pasighat in Arunachal Pradesh and Pakyong in Sikkim.  In the upcoming 3rd phase of UDAN, the government would invite proposals for air routes that include tourist destinations and seaplanes to connect through places such as Sardar Sarovar Dam, Sabarmati Riverfront in Ahmedabad, Tehri Dam in Uttarakhand and Nagarjuna Sagar in Telangana 2. International UDAN:  It seeks to connect India‘s smaller cities directly to some key foreign destinations in the neighbourhood.  Only the State government that will provide the financial support for flights under international UDAN. Financial support and flying exclusivity on the route will be for three years. 3. Project DISHA (Driving Improvements in Service and Hospitality at Airports): It aims to enhance operational efficiency and the overall travel experience of the travellers. The Airports Authority of India has planned to invest Rs. 17,500 crore in upgrading the existing airport infrastructure as part as part of Project DISHA. 4. Draft charter of passenger rights:  Passengers will be compensated if an airline is at fault for any delay. Passengers are eligible for a full refund if a domestic airline cancels a flight 1 day before departure or delays it for more than 4 hours. 118

 Delay resulting in flight departing next day- Airline to provide free hotel stay  Compensation for missing connecting flights: Rs. 5000-Rs.20000  Free Cancellation of air tickets within 24hrs of booking and within 4 days before scheduled departure. Further cancellation charges cannot be more than the sum of basic fare and fuel surcharge 5. Air SEWA mobile app: It enables passengers check flight status and connecting flights in real time, and get information on the facilities available at all airports in the country. It also helps users address their grievances through the application. CONCLUSION To realise the dream of the present government of ensuring that ―people wearing a hawai chappal can also travel in a hawai jahaz‖, the industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India‘s civil aviation industry. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2020. 119

PORTS The 6,000 km long Indian coastline has 12 major ports and 181 minor/ intermediate ports out of which 139 are operable. Indian Ports are the gateways to India's international trade by sea and are handling over 90% of foreign trade. The major ports are located at Calcutta/ Haldia, Chennai, Cochin, Ennore, Jawaharlal Nehru Port at Nhava Sheva, Kandla, Mormugao, Mumbai, New Mangalore, Paradip, Tuticorin and Vishakhapatnam. The 12 major Indian ports, which are managed by the Port Trust of India under Central Government jurisdiction, handle 90 percent of the all-India port throughput, and thus bear the brunt of sea borne trade. The 139 minor ports are under the jurisdiction of the respective State Governments. 120

HIGH POTENTIAL IN INDIA CHALLENGES Although the ports in India have shown considerable improvement over years, benchmarking them against the ports in Hong Kong, Los Angeles, and Rotterdam reveals that there needs to be marked improvement in many parameters to get Indian ports at par with international standards. The performance of Indian ports does not compare favorably with that of efficient international ports. On three important parameters- capacity, productivity and efficiency, Indian ports lack in comparison to some of the major international ports. Various challenges facing the Indian ports are:  labour and equipment productivity levels are still very low due to the outdated equipment  poor training  low equipment handling levels by labour  uneconomic labour practices  idle time at berth  time loss at shift change 121

GOVERNMENT INITIATIVES 1. PROJECT UNNATI Under Project Unnati, the global benchmarks were adopted to improve the efficiency and productivity Key Performance Indicators for 12 major ports. Around 116 initiatives were identified across 12 major ports to unlock more than 100 MTPA capacity just through efficiency improvement. 2. SAGARMALA PROGRAM In 2003, then PM Vajpayee proposed Project Sagarmala with following features: 1. Setup Sagarmala Development Authority (Similar to National Highway Authority of India) 2. Will get money via Maritime Development Cess. (5 paise per kg on cargo) 3. Will improve ports, shipping industry, inland water transport, coastal shipping. 4. PPP and FDI to gather more investment. A National Sagarmala Apex Committee is envisaged for overall policy guidance and high level coordination. It will look into matters of planning and implementation of the projects. It is a port-led development program of Ministry of Shipping. Major aim is to modernise minor and major ports of India as well as setup new ports for capacity enhancement. Presently, 6 new ports have been proposed to be developed:  Vadhavan (Maharashtra)  Cuddalore/Sirkazhi (Tamil Nadu)  Tajpur (West Bengal)  Belikeri (Karnataka)  Paradip Outer Harbour (Odisha)  Enayam (Tamil Nadu) – Transshipment Port 3. MODEL CONCESSION AGREEMENT The MCA spells out the policy and regulatory framework for implementation of a PPP project. Recently, a revised Model Concession Agreement (MCA) was approved to make port projects more investor-friendly and make investment climate in the sector more attractive. 122

4. 100% FDI permitted for port development projects (automatic route), along with reliefs in Income tax for such investors. 5. NATIONAL MARITIME AGENDA 2010-2020 INCREASING CAPACITY To create a port capacity of around 3,200 MT to handle the expected traffic of about 2,500 MT by 2020. INVESTMENTS Proposed investments in major ports by 2020 are expected to total US$ 18.6 billion, while those in non-major ports would be US$ 28.5 billion. The government is also working to float a specialised Maritime Finance Corporation with the equity of ports and financial institutions to fund the Port projects WORLD CLASS To implement full mechanisation of cargo handling and movement INFRASTRUCTURE at ports, thereby bringing Indian ports on par with the best international ports in terms of performance and capacity. LANDLORD PORTS Major ports have been working towards implementing 'Landlord port' concept duly limiting their role to maintenance of channels and basic infrastructure leaving the development, operation, management, of terminal and cargo handling facilities to the private sector. REGULATOR FOR To establish a port regulator for all ports in order to set, monitor and PORTS regulate service levels, technical and performance standards. BUILDING STRATEGIC  To develop 2 major ports (1 each on East and West Coast) to PORTS promote trade as well as 2 hub ports (1 each on the west coast and the East coast) - Mumbai (INPT), Kochi, Chennai and Visakhapatnam.  In April 2017, Indian government has approved MoU on passenger cruise services on the coast and protocol routes between India and Bangladesh to commence regular movement of tourists and passengers in vessels between the 2 countries. 123

CONCLUSION Ports have served as important linking pins for India since the ancient times. From trade to tourism to coastal development and conservation, shipping industry impacts and is impacted by multiple stakeholders. Today, maritime security and entry of world countries to the region is both a challenge and an opportunity. So, we must develop world-class infrastructure- both commercial and military- to fully exploit this opportunity. 124

INLAND WATERWAYS Transportation plays an important role in the development of a country and it is of great significance for a developing country like India. The country is bestowed with a plethora of diverse topography which enables different kinds of transportation. India has about 14500 km of navigable waterways. This includes rivers, backwaters, canals, creeks and so on. CHALLENGES GEOGRAPHIAL  Increasedsiltation: Reduced navigability due to siltation, as in the TECHNICAL Bhagirathi-Hooghly and in the Buckingham Canal. REGULATORY  Reducedwater flow:Reduced flow due to diversion of waterforirrigation, forinstance,intheGangawhich makes it difficult even forsteamers to ply.  Geographical constraints: There are problems in smooth navigation because of waterfalls and cataracts,asinNarmadaandTapti.  Inadequate depth: Lack of inadequate depth of waterwaysfor commercialmovementofcargoisa major concern. Also quality of water flow is becoming poorer progressively.  Inadequate air draft: Multiple bridges with low vertical clearance obstruct the passage of bigger vessels. Eg: It is faced in NW3.  Shortage of IWT vessels: Due to its capital incentive nature India lacks in vessel building  Lackofterminals: It inhibits door-door connectivity to end users.  Lack of navigation infrastructure: Rudimentary infrastructure coupled with non-availability of water roundtheyearisanimpedimentforoperation of waterways.  Shortage of MRO facilities:There is severe shortage of Maintenance, Repair, Overhaul facilities for inland water transport vessels.  There is lack of modal integration of and detailed mapping of waterways and industrial clusters and also lackofintegrationofhinterlandcoastal shippingwith international maritimetraffic. 125

POLITICAL  Lackoflevelplayingpolicy (waterways were not on the national horizon for FINANCIAL planning and connectivity for longtime) amongdifferentmodesoftransport.  Lack of uniformity in legal and administrative issuesas inland waterways move through more than one state.  Inter-linkingof rivers is a major issue, which is yet to materialize.  Underinvestmentbythe government.  Private sector participationinMROisdismal.  Construction of dams/barrage to increase depth of navigation faces challenges of economic viability. GOVERNMENT STRATEGY  In 1986, the Government of India created Inland Waterways Authority of India (IWAI) for regulation and development of Inland Waterways for navigation and shipping.  National Waterways Act came into effect in 2016. It proposed 106 additional National Waterways and merges 5 existing Acts which were declared the 5 National Waterways.  Out of the 111 National Waterways declared under the National Waterways Act, 2016, 13 are operational for shipping and navigation and cargo/passenger vessels are moving on them. The existing waterways of India under operation have been shown in the map on the following page. THIS IS JUST A BRIEF OVERVIEW. FOR A DETAILED DISCUSSION ON THIS TOPIC, YOU CAN WATCH GUESS PAPER VIDEO BY ANKIT SIR ON YOUTUBE. URL: https://www.youtube.com/watch?v=W7z4QK2WJas 126

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RAILWAYS The Indian Railways (IR) is the fourth-largest railway network in the world – in terms of size, its total track length being 1,21,407 kilometer. It operates more than 13,000 passenger trains on a daily basis. It is currently the 8th-largest employer in the world, with more than 1.3 million employees but trains running late has been a common scenario across the country. IR has historically played an important integrating role in the socio-economic development of the country. Its role in economic development assumes importance due to its innate advantage as a mode of surface transport being more energy efficient and environment friendly than other transport modes. CHALLENGES Despite a huge network, Railways face the following multiple challenges today, as highlighted y the recent CAG report:  Food - Reports submitted by CAG on the quality of food served to passengers by the Indian railways was not satisfying.  Cleanliness - The CAG also found the blankets supplied to passengers in AC compartments were dirty. There are rising complaints over unclean toilets and sanitation accessories provided to the passengers.  Charges - Railways were levying a surcharge for journey on ―superfast‖ trains when these often ran late.  Redressal mechanism - The complaints raised by passengers on different issues are not addressed properly by the authorities.  Competitors - An internal study on railways shows there is declining passenger rate due to bus and air services. The share of intercity passengers is also in a threat due to poor service and cheap private bus services.  Industrial slow down as contributed to the drop in the railway freight business. At a time of industrial slowdown, shipment of bulk commodities will be sluggish. 128

HIGH POTENTIAL GOVERNMENT INITIATIVES ENHANCED SAFETY  Smart coaches with warning system about condition of wheels and bearings.  Plan to completely switch over to LHB coaches.  Elimination of unmanned level crossings.  GPS based trackers have been provided to Keymen and Patrolmen to get real time information of any untoward incidents/emergencies to avert derailments. MAKE IN INDIA  ICF took up manufacturing of Semi High Speed (160 Kmph) Self Propelled Train-set with indigenous efforts, termed Train-18 or Vande Bharat Express.  100% indigenization has already been achieved in manufacturing of around 20-25% of total fleet of the track machines such as Utility Vehicles (UTVs), Rail Bound Maintenance Vehicles (RBMVs), Track Laying Equipment (TLE), Rail Threader & Rail-cum-Road Vehicles (RCRVs) over IR. 129

INFRASTRUCTURE  Eastern and Western Dedicated Freight Corridors DEVELOPMENT  The Seven Sister States of North Eastern India (Assam, IMPROVED Meghalaya, Nagaland, Tripura, Mizoram, Manipur and Arunachal PASSENGER Pradesh) have been connected by Rail Network. SERVICES  India‘s tallest bridge with pier height of 141 m is being constructed on Irang River at Noney in Tamenglong district, Manipur.  Bogibeel Bridge is India‘s longest Rail-cum-Road Bridge of India. It has been built over river River Brahmaputra in Assam.  The Government of India has signed an agreement with the Government of Japan under which Japan will help India in the implementation of the Mumbai-Ahmedabad high speed rail corridor along with a financial assistance that would cover 81 per cent of the total project cost.  New trains and coaches with better amenities like Deen Dayalu coaches, Tejas Trains, Antodaya trains, Humsafar trains, etc.  Project Swarn was started to upgrade the condition of Rajdhani and Shatabdi Express Trains, with the objective of significantly improving the passenger experience.  Project Utkrisht has been launched to improve condition of 66 important Mail/ Express trains.  Digital transactions and various apps like Rail Sewa, Food on Wheels, etc for services and information.  As a part of ―Swachh Bharat Mission‖, IR is proliferating bio-toilets on all its coaching stock so that no human waste is discharged from coaches on to the track. CONCLUSION The Indian Railway network is growing at a healthy rate. In the next five years, the Indian railway market will be the third largest, accounting for 10 per cent of the global market. Indian Railways, which is one of the country's biggest employers, can generate one million jobs. For a sustainable future, green fuel, clean stations and coaches are needed. 130

ENERGY Energy represents as one of the most important bond for viable economic growth and human development. The per capita energy consumption is one of the major parameters used to assess the stage of economic and social development of any country. It is recognized by professionals that energy is one of the major drivers of a mounting economy for developing country such as India and it is an essential building block of economic progress. India has a population of over 1.21 billion (2011 census) with 70% of total population living in rural areas. Out of these 1210 million people, 396 million (44.7% of the total rural population compared to 7.3% of urban population) does not have access to electricity and 592 million (rural- 62.5%; urban- 20.1%) people still use firewood for cooking. Majority of these people reside in rural areas and are still dependent on non-commercial energy sources, such as fuel wood, crop residue, and animal waste for their energy needs. Furthermore, about 80% of the population - which includes 28% of urban inhabitants - still relies on combustion of biomass fuels for cooking activities. The use of biomass for cooking also contributes to the indoor air pollution phenomenon, which caused 488.200 deaths in 2004. SOURCES OF ENERGY Conventional energy sources Non Conventional energy sources  Solar Energy  Fossil fuel energy : Coal, Petroleum,  Wind Energy  Tidal Energy Natural Gas,  Geothermal Energy  Biomass  Hydraulic energy  Nuclear energy 131

RENEWABLE ENERGY SOURCES Renewable energy is derived from natural processes that are r eplenished constantly such as solar, wind, ocean, hydropower, biomass, geothermal resources, and biofuels and hydrogen. They are called renewable because they are naturally replenished in a short period of time. Day after day, the sun shines, the wind blows, and rivers flow.  Solar Energy Sun is the primary source of energy. Sunlight is a clean, renewable source of energy. It is a sustainable resource, meaning it doesn't run out, but can be maintained because the sun shines almost every day. It is called 'Green Power'. It lights our houses by day, dries our clothes and agricultural produce, and keeps us warm and lots more. Its potential is however much larger Advantages Disadvantages  It is a perennial, natural source and free  Dependent on change in seasons /  It is available in plenty weather – hence they may not be used  It is non-polluting always  It does not emit any green house gases.  Solar energy offers decentralization in  Requires high initial investments for productive use most (sunny) locations, meaning self- reliant societies.  Solar systems don‘t work at night directly  One of the biggest advantages of solar but the battery bank, which stores energy energy is the ability to avoid the politics during day-time, can be used during and price volatility that is increasingly night. characterizing fossil fuel markets.  It doesn‘t result in the destruction of  Solar electricity storage technology has forests and eco-systems that occurs with not reached its potential yet. most fossil fuel operations.  Solar panels are bulky. This is particularly true of the higher-efficiency, traditional silicon crystalline wafer solar modules. 132

Technologies for productive use of solar energy Solar energy can be used to generate electricity. Through Solar Photovoltaic (SPV) cells, solar radiation gets converted into DC electricity directly. The generated electricity can either be used as it is or can be stored in the battery. The stored electrical energy can be used when solar energy is not available. SPV is nowadays successfully used for home and street lighting and water pumping in villages. In hilly areas, solar water heating is also being used.  Wind Energy Wind is the natural movement of air across the land or sea. The wind when used to turn the blades of a wind mill turns the shaft to which they are attached. This movement of shaft through a pump or generator produces electricity. The Potential for wind power generation for grid interaction has been estimated at about 1, 02,788 MW taking sites having wind power density greater than 200 W/sq. m at 80 m hub-height with 2% land availability in potential areas for setting up wind farms @ 9 MW/sq. km. India now has the 4th largest wind power installed capacity in the world which has reached 36089.12 MWp (as on May, 2019). Private agencies own 95 % of the wind farms in India. Advantages Disadvantages  It is environment friendly  High investment requirement  Its freely and abundantly available  Wind speed is not uniform all the time which affects power generated  Biomass and Biofuels The plants fix solar energy through the process of photosynthesis to produce biomass. This biomass passes through various cycles producing different forms of energy sources. For example, fodder for animals that in turn produce dung, agricultural waste for cooking, etc. The current availability of biomass in India is estimated at about 500 million MT per annum, with an estimated surplus biomass availability of about 120 – 150 million metric tonnes per annum covering agricultural and forestry residues. This corresponds to a potential of about 18,000 MW. An additional 9131.50 MWp power was generated through bagasse based cogeneration in the country‘s Sugar mills. iomass is an important source of energy accounting for about one third of the total fuel used in our country and in about 90% of the rural households. The widespread use of biomass is for household cooking and heating. The types of biomass used are agricultural waste, wood, charcoal or dried dung. 133

Advantages Disadvantages  Available locally and to some extent  Drudgery involved in collection of fuel abundantly  During indoor cooking and in the  It is a relatively clean fuel when absence of sufficient ventilation fuels compared to fossil fuels. In a way such as dung cause air pollution which is biomass also cleans our environment by a serious health hazard trapping carbon- di-oxide  Unsustainable and inefficient use of biomass often leads to destruction of vegetation and hence environmental degradation. Technologies for productive use of biomass Technologies that enable efficient use of biomass are becoming prevalent in rural areas. Biofuels are predominantly produced from biomass feed stocks or as a by-product from the industrial processing of agricultural or food products, or from the recovery and reprocessing of products such as cooking and vegetable oil. Biofuel contains no petroleum, but it can be blended at any level with petroleum fuel to create a biofuel blend. It can be used in conventional healing equipment or diesel engine with no major modification. Biofuel is simple to use, biodegradable, non-toxic and essentially free of Sulphur and aroma.  Water The flowing water and the tides in the sea are sources of energy. India is endowed with large hydropower potential of 1,45,320 MW. Heavy investments are made on large projects. In recent years, hydel energy (through mini and small hydel power plants) is also used to reach power to remote villages which are unelectrified. The estimated potential of Small Hydro Power is about 15,000 MW in the country. As on May 2019, the installed capacity of Small hydro projects (upto 3MW) amounts to 4603.75 MW. 134

Advantages of Small Hydro Power as an energy source  Reliable, eco-friendly, mature and proven  Non-polluting, entails no waste or technology. production of toxic gases, environment friendly.  More suited for the sensitive mountain ecology.  Small capital investment and short gestation period.  Can be exploited wherever sufficient water flows -along small streams,  Minimal transmission losses. medium to small rivers and also harness  With careful planning and adoption of abundant sun-shine, wind-energy and other bio-energy sources. simplified and standardized designs, SHP installations are becoming increasingly  Does not involve setting up of large dams competitive with thermal, diesel or gas or problems of deforestation, based power generation. submergence or rehabilitation.  Geothermal energy Geothermal Energy is heat stored in earth crust and being used for electric generation and also for direct heat application. Geothermal literally means heat generated by earth. Various resource assessment carried out by agencies established the potential 10600 MWth /1000MWe spread over 340 hot springs across seven Geothermal provinces/11 states. The availability of geothermal power is most environment-friendly power, round the year 24x7 basis, not affected by the severity of climate during 6 to 7 winter months like hydro and like dependence on sun in solar PV. 135

INVESTMENT MODELS India is a developing economy, where an investment of atleast USD 1.5 trillion is needed to meet the infrastructure demands of the world‘s second largest population. It is neither possible nor feasible for a mixed economy like India to meet the requirements with only government funding. Role of private investors and FDI cannot be understated. So, various investment models have been tried in India to promote infrastructure and investment, some of which have been explained below: 1. PUBLIC PRIVATE PARTNERSHIP A PPP Project means a project based on a contract or concession agreement, between a Government or statutory entity on the one side and a private sector company on the other side, for delivering a service on payment of user charges. The rights and obligations of all stakeholders including the government, users and the concessionaire flow primarily out of the respective PPP contracts.PPP projects typically involve transfer of public assets, delegation of governmental authority for recovery of user charges, private control of monopolistic services and sharing of risks and contingent liabilities by the Government. For creating a transparent, fair and competitive environment, the Government of India has been relying increasingly on standardising the documents and processes for award and implementation of PPP projects. 136

2. VIABILITY GAP FUNDING The scheme aims at supporting infrastructure projects that are economically justified but fall marginally short of financial viability. Support under this scheme is available only for infrastructure projects where private sector sponsors are selected through a process of competitive bidding. The total Viability Gap Funding under this scheme will not exceed twenty percent of the Total Project Cost; provided that the Government or statutory entity that owns the project may, if it so decides, provides additional grants out of its budget, upto a limit of a further twenty percent of the Total Project Cost. Bids are made in form of government support required. Party bidding for least government support wins the project.Funding can be provided by both central and state governments. 3. INDIA INFRASTRUCTURE FINANCE COMPANY LTD. This a government company created in 2006 to provide long term finance to viable infrastructure projects through the Scheme for Financing Viable Infrastructure Projects through a Special Purpose Vehicle. The sectors eligible for financial assistance from IIFCL are transportation, energy, water, sanitation, communication, social and commercial infrastructure. IIFCL accords overriding priority to Public-Private Partnership (PPP) Projects. 4. INFRASTRUCTURE DEBT FUND Infrastructure Debt Funds (IDFs) are investment vehicles to accelerate the flow of long term debt to the sector. IDFs aim at taking out a substantial share of the outstanding commercial bank loans. IDFs are set up by sponsoring entities either as Non-Banking Financing Companies or as Trusts/Mutual Funds. It prescribes 70:30 Debt-equity ratio for the fund. 5. HYBRID ANNUITY MODEL (HAM) In India, the new HAM is a mix of BOT Annuity and EPC models. As per the design, the government will contribute to 40% of the project cost in the first five years through annual payments (annuity). The remaining payment will be made on the basis of the assets created and the performance of the developer. Here, hybrid annuity means the first 40% payment is made as fixed amount in five equal installments whereas the remaining 60% is paid as variable annuity amount after the completion of the project depending upon the value of assets created.As the government pays only 40%, during 137

the construction stage, the developer should find money for the remaining amount.Here, he has to raise the remaining 60% in the form of equity or loans. There is no toll right for the developer. Under HAM, Revenue collection would be the responsibility of the National Highways Authority of India (NHAI).Advantage of HAM is that it gives enough liquidity to the developer and the financial risk is shared by the government. While the private partner continues to bear the construction and maintenance risks as in the case of BOT (toll) model, he is required only to partly bear the financing risk. Government‘s policy is that the HAM will be used in stalled projects where other models are not applicable. 6. HARROD DOMAR MODEL The model implies that economic growth depends on policies to increase investment, by increasing saving, and using that investment more efficiently through technological advances. It suggests that there is no natural reason for an economy to have balanced growth. It was more or less a One Sector Model. We failed to attract investment on consumer goods in India as we lacked good capital goods industries. 7. SOLOW SWAN MODEL The neo-classical model was an extension to the 1946 Harrod–Domar model that included a new term: productivity growth. 8. FELDMAN–MAHALANOBIS MODEL A high enough capacity in the capital goods sector in the long-run expands the capacity in the production of consumer goods. Thus the essence of the model is a shift in the pattern of industrial investment towards building up a domestic consumption goods sector. It was a Two Sector Model which was later developed into Four Sector Model. Also known as Nehru-Mahalanobis model. 138

9. SWISS CHALLENGE Swiss Challenge allows an infrastructure developer to come up with a suomotu proposal for a new project without waiting for the government to call for bids. This can foster innovation, as contractors or developers may initiate projects that the powers-that-be didn‘t even think of. The method was upheld by the Supreme Court of India for awarding public projects and the Government of India has tried out this method in road and railway projects. CONCLUSION Other measures of infrastructure financing have emerged to meet the new demands of changing times like PPPP i.e. People Public Private Partnership, National Infrastructure Investment Fund with a corpus of Rs. 40,000 as a Fund of Funds, Infrastructure Investment Trusts (InvIT) as a collective investment scheme, infrastructure bonds, etc. 139

PRIVATE EQUITY AND ITS ANALYSIS A Private Equity Fund, also known as Private Equity, is equity capital which comprises of investors who invest directly in private companies. This equity capital is not listed on the stock exchange and usually follows general investment criteria of investing in varied industries or follows industry specific criteria. Considering that holding periods for private equity funds are long, therefore, private equity capital is raised from institutional and retail investors who can afford to invest large sums of money for longer time periods. INDIA AND PRIVATE EQUITY In India, PE line of financing is still in its nascent stages. While in the early 2000s, the focus of PE investments was towards the booming sector of Information Technology due to its dynamic growth opportunities.  However, after the burst of the dot-com bubble, PE investors shifted focus to other commercially viable industries.  Another hindrance to the rising graph of the PE investment was the economic meltdown in 2008- 2009 which substantially deflected the investment deals size.  However, consequently Flipkart‘s USD 150 million, 4th round funding in 2012 Q1 kicked off an overall positive sentiment in funds investing in the domestic e-commerce industry.  India witnessed an increase in the number and size of PE investments made in 2014 aggregating to around $11.5 billion, which was 17% higher than the total investment value as compared to the same period the previous year.  PE investors have been steadfastly interested in certain lucrative sectors including E-commerce, financial services, power and, energy among others.  Most notably, in the current economic scenario, Indian real estate industry owes its foundation to private equity.  PE financing, in a broad ambit – now makes up 75 percent of the funds in India‘s real estate sector, compared with just about a fourth in 2010. 140

ADVANTAGES DISADVANTAGES 1) Untapped Potential- There are several 1) Money laundering: It is alleged that some options looming in the horizon, from PE capital is actually political money unlisted privately owned companies which routed via tax havens such as Mauritius to have just begun expanding, unpopular convert it into white money. divisions of larger organizations or even companies which aren‘t doing well on the 2) Some so-called equity PE deals are stock market and make them private. actually debt transactions involving the issue of fully convertible debentures or 2) Stringent Company Selection Process- compulsorily convertible preference Firms which handle private equity shares. investments are highly selective and spend a considerable amount of resources to assess 3) The agreement may even carry a ―put‖ the potential companies which they could option in favour of the PE investor or a invest in. This also involves an ―buyback‖ clause that makes it incumbent understanding of the risks involved and how upon the promoter to buy the security at a to ease the same. specified price and time. Promoters who do not have the money are forced to 3) Clear Accountability- Management teams borrow or sell other assets to arrange of private equity owned companies are money for the buyback. accountable to an engaged professional shareholder who has the right to protect their shareholding and act accordingly. CONCLUSION The private equity segment has also played a crucial role in the growth and development of many small and medium-size enterprises. It has also stimulated employment opportunities in the country and aided the progress of strategic capabilities. 141

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