Various indexes/indices to measure growth of Industries in India
1.The Index of Industrial Production (IIP)
- The Index of Industrial Production (IIP) measures the growth rates of various industry groups within the economy during a specific period.
- The IIP is compiled and released on a monthly basis by the National Statistical Office (NSO), a department of the Ministry of Statistics and Programme Implementation.
- The IIP uses the year 2011-2012 as its base year, and assigns it a value of 100.
- The IIP is the sole metric for measuring the physical volume of production.
It covers Broadly 3 sectors-
- Mining, Manufacturing, and Electricity.
- Out of these have maximum contribution in IIP i.e. around 77 %
Another classification -
- IIP also gives us an idea about use-based sectors – User-based sectors include Basic Goods, Capital Goods and Intermediate Goods.
About Eight Core Sectors:
- These comprise 40.30% of the weight of items included in the Index of Industrial Production (IIP).
The eight core sector industries in decreasing order of their weightage:
Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.
2.Annual Survey of Industries (ASI)
- The survey is being conducted under the Collection of Statistics Act, 2008 as amended in 2017 and Rules framed there under in 2011.
- The survey provides estimates of detailed capital expenditures, inventories, employment and emoluments by type of employees, cost of materials consumed, value added etc. for the sector.
- ASI is calculated on an annual basis.
- ASI (Annual Survey of Industries) data is derived from the genuine book of accounts and other documents that are kept by registered factories.
- The compilation and publication of the ASI data is done by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
- The ASI data pertains to factories that employ at least 10 workers using power, and those that employ at least 20 workers without using power.
Difference between IIP and ASI -
- The ASI captures information on new items and factories, whereas the IIP does not.
- The IIP is based on a smaller sample of factories compared to the ASI.
- The IIP is based on a fixed set of items and factories chosen in the base period, while the ASI is a record-based survey of establishments registered under the Factories Act, 1948.
- Growth rates in IIP are based on volume of production whereas growth rates in ASI are derived on the basis of Value Added (Output – Input).
- The IIP is based on a much smaller sample of factories as compared to that of ASI
Disinvestment and its Types
Disinvestment
- Disinvestment refers to the process of an organization or government selling or liquidating an asset or subsidiary.
Types of Disinvestments-
1.Majority Disinvestment
- A majority disinvestment refers to the sale of a majority stake in a company by the government, while retaining a minority stake in the company.
2.Minority Disinvestment(token disinvestment)
- A minority disinvestment is a process in which the government sells a portion of its stake in a company, typically up to 49%, while still retaining a majority stake of more than 51%.
- This allows the government to maintain management control of the company even after the sale of shares.
3.Complete Privatisation
- Complete privatisation involves selling off 100% control of a company to a buyer.
- This form of privatisation is a type of majority disinvestment.
- The company is no longer owned or controlled by the government or public shareholders.
- The buyer assumes full responsibility for the company's management and decision-making.
- Complete privatisation can have both advantages and disadvantages, depending on the circumstances.
Methods of Disinvestment of CPSEs (Central Public Sector Enterprises)
1.Initial Public Offering (IPO) -
- The initial public offering (IPO) is a process where an unlisted CPSE or the government can offer shares from its shareholding or a combination of both to the public for subscription, marking the first time the shares are made available for public purchase.
2.Further Public Offering (FPO) -
- A Further Public Offering (FPO) refers to the issuance of shares by a listed Central Public Sector Enterprise (CPSE) or the government, which may be a combination of both, to the general public for subscription.
3.Offer for sale (OFS) of shares by Promoters through Stock Exchange mechanism -
- This method allows auction of shares on the platform provided by the Stock Exchange.
- It is extensively used by the Government since 2012.
4.Strategic sale -
- Strategic sale involves the sale of a significant portion of the Government's shareholding in a Central Public Sector Enterprise (CPSE).
- The percentage of the CPSE sold can be up to 50%, or a higher percentage as determined by the competent authority.
- The sale includes the transfer of management control from the Government to the buyer.
- The purpose of strategic sale is to improve the financial position of the CPSE, as well as to promote efficiency and competitiveness in the sector.
- The Government may choose to undertake strategic sale in cases where the CPSE is not performing well, or where it is no longer considered necessary for the Government to hold a significant stake in the company.
5.Institutional Placement Program (IPP) -
- Only Institutions can participate in the offering.
6.CPSE Exchange Traded Fund (ETF) -
- The disinvestment of the Government of India's stake in various Central Public Sector Enterprises (CPSEs) can be done simultaneously through the Exchange-Traded Fund (ETF) route.
- The ETF route allows the government to monetize its shareholding in CPSEs that are part of the ETF basket.
- This approach provides a mechanism to sell the government's stake in multiple CPSEs across diverse sectors through a single offering.
Department of Investment and Public Asset Management
- The Department of Disinvestment was a branch of the Ministry of Finance.
- The department was rebranded as the Department of Investment and Public Asset Management (DIPAM) on April 14, 2016.
- DIPAM focuses on four primary areas of work, which include strategic disinvestment, minority stake sales, asset monetization, and capital restructuring.
National Investment Fund (NIF)
- It was formed in 2005.
- Into this fund the proceeds from disinvestment of Central Public Sector Enterprises were to be channelized.
- The corpus of NIF was to be of a permanent nature.
- The management of the NIF corpus was assigned to specific Public Sector Mutual Funds.
Utilization of the Fund-
- The NIF (National Investment Fund) allocates 75% of its annual income to finance select social sector schemes promoting education, health, and employment.
- The remaining 25% of NIF's annual income is allocated to meet the capital investment needs of profitable and revivable PSUs.
- In 2013, the Indian government decided to align the NIF with its disinvestment policy by crediting disinvestment proceeds to the existing NIF as a 'Public Account' from the 2013-14 fiscal year onwards.
NIF would be utilized for the following purposes:
- To subscribe to shares being issued by CPSEs on a rights basis, ensuring that the government's 51% ownership in CPSEs is not diluted.
- To make preferential allotment of shares of CPSEs to promoters in accordance with SEBI Regulations, 2009 to ensure that the government's shareholding does not fall below 51% in all cases where CPSEs wish to raise fresh equity for their Capex program.
- Recapitalization of public sector banks and public sector insurance companies so as to strengthen them by further capital infusion towards achieving the Basel III norms.
National Investment and Infrastructure Fund
- The National Investment and Infrastructure Fund (NIIF) is India's first infrastructure-specific investment fund, established by the Government of India in February 2015.
- NIIF functions as a sovereign wealth fund for India's infrastructure development.
- The Indian government holds a 49% stake in NIIF, while the remaining portion is held by domestic and foreign investors.
- It was set up in December 2015 as a Category-II Alternate Investment Fund.
It has a Three funds-
1.Master Fund-
- Invests primarily in operating assets in core infrastructure sectors such as roads, ports, airports, power, etc.
2.Fund of Funds (FoF) -
- Fund of Funds (FoF) is a type of investment fund that is managed by experienced fund managers who specialize in infrastructure and related sectors in India.
- Their areas of focus include Green Infrastructure, Mid-Income & Affordable Housing, Infrastructure Services, and other allied sectors.
3.Strategic Opportunities Fund (SoF)-
- SOF has been established with the objective to provide long-term capital to high-growth future-ready businesses in India.
Public sector enterprises(PSE)
- A pubic sector enterprise may be defined as any commercial or industrial undertaking owned and managed by the government with a view to maximize social welfare and uphold the public interest
A. Characteristics of PSE
- Government have majority ownership in them.
- They are financed by Government funds.
- Public enterprises are guided by a public welfare motive, rather than profit motive.
- The government formulates public policies that govern public enterprises, which are accountable to the legislature.
- Public sector enterprises focus on providing public utility services such as transport, electricity, and telecommunications.
B. Division of PSE
There are three different forms of organization used for the public sector enterprises in India.
These are as follows-
1.Departmental Undertaking-
- Departmental Undertakings are typically responsible for providing essential services like railways, postal services, broadcasting, and more.
- These entities are funded and regulated by the government.
2.Statutory Corporations-
- It refers to a corporate body created by the Parliament or State Legislature by a special Act which define its powers, functions and pattern of management
Life Insurance Corporation of India, State Trading Corporation etc. are Examples of such organisations.
3.Government Companies-
- Government companies are companies in which the government holds 51% or more of the paid-up capital. These companies are registered under the Companies Act.
Maharatna, Navratna, and Miniratna
These are different status given to PSU based on some parameters
A. Miniratna-
- Companies that are categorized as Central Public Sector Enterprises (CPSEs) and have recorded profits for three consecutive years while also having a positive net worth are considered eligible for receiving Miniratna status.
Category I Miniratna-
- Category I Miniratna is a classification for Public Sector Enterprises (PSEs).
- To be categorized as Category I Miniratna, a PSE must have made continuous profits for the last three years.
- Additionally, the PSE must have earned a net profit of at least Rs. 30 crores in one of those three years.
- These Miniratnas are granted some level of autonomy, such as the ability to incur capital expenditures of up to Rs. 500 crores without government approval.
- The capital expenditure limit is set to whichever amount is lower - Rs. 500 crores or the net worth of the PSE.
Category II Miniratna-
- Category II Miniratna refers to a group of PSEs that have recorded continuous profit over the past three years and have a positive net worth.
- These companies are granted autonomy to incur capital expenditure without seeking government approval up to Rs. 300 crores or 50% of their net worth, whichever is lower.
B. Navratna
- The Navratna scheme was introduced by the government in 1997 to support CPSEs with comparative advantages to become global giants.
- Companies must have a 'Miniratna Category - I' status and a Schedule 'A' listing.
- At least three Memorandum of Understanding (MoU) with an 'Excellent' or 'Very Good' rating must be achieved during the last five years.
- In addition to the above criteria, a composite score of 60 or more out of 100 marks must be obtained in six selected performance parameters.
C. Maharatna-
- The category of PSEs was created in 2011.
To be eligible for the grant of the Maharatna status the company should have-
- An average turnover of over RS 25000 crores average.
- Annual net worth of more than 15000 crores and
- Average annual net profit of over rupees 5,000 crore during the last 3 years.
At present, there are Eight Maharatna companies