Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

Finishing the unfinished task of reform in land and labour markets


From UPSC perspective, the following things are important :

Prelims level: APMC Act, Companies Act, ECA 1955

Mains level: Paper 3- Reforms in various sectors of economy

The article discusses the issues faced by the various sectors of the economy and how the reform measures introduced by the government could help these sectors.

Exploitation of farmers and consumers

  • The Indian farmer has bee treated as captive sources of producing cheap food grain while living at subsistence levels.
  • There was no freedom to choose the point of sale for his produce, he could not decide the price of his product and had no say in selecting the buyer.
  • The end consumer was equally short-changed with frequent cycles of persistent high inflation.
  • The only beneficiaries of this perverse system were middlemen who thrived under political protection.

How reforms will help farmers

  • The stifling nature of the Essential Commodities Act and the APMC Act have both been removed.
  • Contract farming is now nationally enabled, allowing private investment to come in.
  • Private investment will bring in technology, modern equipment, better seeds, know-how for in-between-season crops, improved yields, better logistics and freer access to national and international markets.
  • The Indian farm sector will now finally begin to see the benefits of economies of scale.

Need for the reforms in various sectors

  • There were 44 different labour laws with more than 1,200 sections and clauses that demanded compliance if one even thought of becoming an entrepreneur.
  • Different inspectors and departments administered these laws and this stunted many entrepreneurs.
  • The Companies Act of 2013 completely paralysed risk-taking and quick decision-making among the private wealth creators.
  • There were a large number of organisations that called themselves “banks” but were completely outside the ambit of RBI regulation.
  •  The politicians who controlled these banks were the primary obstacles in introducing any reforms in these sectors.
  • Indian mainstream banks, contrary to international norms, had a peculiar practice of “grossing” their bilateral liabilities rather than “netting”.
  • As per estimates, this locked anywhere between Rs 50,000 to Rs 70,000 crore funds.

Reforms made by the government

  • In place of the 44 central labour laws,  the Parliament has now put in place four labour codes that are much simpler — the Code on Wages, the Industrial Relations Code, the Social Security Code and the Occupational Safety, Health and Working Conditions Code.
  • The bilateral banking netting law has been passed and a large corpus of unproductive capital has been freed to be deployed in the market.
  • Cooperative banks will now be regulated by the RBI and its customers will have the same protections as those of other regular banks.
  • The problematic sections of the Companies Act 2013 have been done away with and the fear of criminal prosecution gone.


The reforms in various sectors of the economy are bound to help the faster recovery of the economy as well as help the farmers realising their full potential.

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