What are the main reasons for industrial sickness in India? How can it be overcome? (250 words)

     The causes for India’s industrial sickness can be both internal and external.

Internal factors mainly relate to the poor quality of top management.

External Causes

  1. Industry specific factors: These relate to stagnation or recession in the industry (e.g.: the textile industry), competition faced by the unit (e.g.: small units, rayon grade, pulp unit). Entry of MNC’s has contributed to the sickness of several firms, particularly in the SSI sector.
  2. Government related factor: These include tax burden on the unit, especially import duties and sales tax; legal restrictions on the units; expansion/diversification; frequent changes in government policies affecting the unit.
  3. 3. Financial institutions related factors: These include harshness in dealing with the unit; delay in providing finance to the unit; inadequate working and / or long term capital provided by them and their inexpert assessment of the client’s finance proposal

Remedial measures

  1. a) Role of government: The government must play an active role to protect sick units especially those in Small scale industries which are fighting hard to compete in the era of globalization.
  2. b) Role of financial institutions: The following are the ways by which sickness can be prevented by financial institutions
  • Continuous monitoring of unit
  • Careful project appraisal
  • Professional institutional response to unit’s problems
  • Required systems at client units
  • Incentives to units to remain healthy

 c) Role of industry associations : A good practical review by each industry association of installed and usable capacity in the industry , capacity utilization , growth trends , problems etc should be useful for the potential new entrants for deciding whether to enter the industry or not.

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