Essay on the Unfavourable Factors in Private Enterprise in India

Secondly, private undertakings in India have been operating in an environment of taxation. The heavy burden of taxation has acted as a disincentive to increased production. By immobilising funds which might have flowed into private undertakings, it has acted as a brake on industrial growth.

Thirdly, big business is subject to a large number of restrictions especially the MRTP Act. After the virtual abolition of the MRTP in the new industrial policy the situation has changed.

Fourthly, according to industrial policies announced from time to time there are a large number of industries which are either reserved for the public sector or for the small sector.

Also in the remaining sector, the Government has reserved the right to establish new undertakings. Thus the private sector does not have any independent field of its own, which is worthwhile for investment.

Fifthly, the decision of the government to vest the public financial institutions with powers to convert their long-term loans of companies into equity capital and to nominate directors on the boards of the latter is also viewed as an attempt to put a brake on the growth of private enterprise. The plea that this is being done in the interest of shareholders does not seem to be very convincing to many.

Despite the above mentioned constraints, there has been an expansion of private sector activities. Under the new Industrial Policy of 1991 emphasis has been shifted from public to private sector.

It should be noted that there has been growing concentration of economic power in the hands of big business houses.

This economic power has secured control over political power. Owing to the commanding position of big businesses in the total industrial sector, they can exercise considerable influence over government policies.

The Report of the Dutt Committee showed that 20 big business houses secured a disproportionately large share in the number of licenses issued. During the last 25 years, the process of concentration of wealth and economic power have strengthened themselves with the result that the two top business houses (Tatas and Birlas) have total assets exceeding Rs. 8000 crore each while 18 other business houses have assets exceeding Rs. 625 crore each.