1. Banking VS Industrial Undertaking From the point of view of national
growth and employment
Banking
Banks play an important role in development of Indian economy. After
liberalization, the banking industry under went major changes. The economic
reforms totally have changed the banking sector. RBI permitted new banks to be
started in the private sector as per there commendation of Narasimham
committee. The Indian banking industry was dominated by public sector banks.
But now the situations have changed. New generation banks with used
of technology and professional management has gained a reasonable position in
the banking industry.
Banks over the years, have become a significant aspect of an economy. With the
on going financial depression, the position of banks have become all the more
important in the course of working of the money market and hence the economy
of a nation. The banking sector forming a portion of the financial sector
primarily works as a financial intermediary generating money supply. From the
different macro economic models , banks have been found to be a part of the
supply side of the economy . However, over time banks have transformed from
merely money generating organizations to a multi tasking entity.
A bank is a financial institution where an individual can deposit money. Banks
provide a system for easily transferring money from one person or business to
another. Using banks and the many services they offer saves an incredible
amount of time, and ensures that the funds of micro as well as macroeconomic
agents "pass hands" in a legal and structured manner. There are also other types
of financial institutions that operate just like banks.
Functioning of a Bank is among the more complicated of corporate operations.
Since Banking involves dealing directly with money, governments in most
countries regulate this sector rather stringently. In India, the regulation
traditionally has been very strict and in the opinion of certain quarters,
responsible for the present condition of banks, where NPAs are of a very
high order. The process of financial reforms, which started in 1991 has cleared
the cobwebs somewhat but a lot remains to be done. The multiplicity of policy
and regulations that a Bank has to work with, makes its operations even more
complicated, sometimes bordering on illogical.
Banking Regulation Act of India, 1949 defines Banking as "accepting, for the
purpose of lending or investment of deposits of money from the public,
repayable on demand or otherwise and withdraw able by cheques, draft, order or

2. otherwise". Deriving from this definition and viewed solely from the point of
view of the customers,
Banks essentially perform the following functions :
1.Accepting Deposits from public/others (Deposits)
2.Lending money to public (Loans)
3.Transferring money from one place to another (Remittances)
4.Credit Creation
5.Acting as trustees
6.Keeping valuables in safe custody
7.Investment Decisions and analysis
8.Government business
9.Other types of lending and transactions
In addition to providing a safe custodian of money, banks also loan money to
businesses and consumers. A large portion of a bank's business is lending. How
do banks get the money they loan? The money comes from depositors
who intend to save a portion of their wealth. Banks acting as intermediaries,
use these deposits as loans to prospective borrowers. The objective of
commercial banks like any other organization is profit maximisation. This profit
generally originates from the interest differential between borrowers and
lenders. In the present day, however, the banking operation has extended much
beyond simple lending exercise. So there are other different channels of profit
ensuing from other investment programmes as well. However, it should be
mentioned in this context that the entire deposit held by a bank cannot be given
as loans as the Central Bank retains a portion of this money in the form of cash-
reserve for unforeseen circumstances. Banks create money
in the economy by making loans. The amount of money that banks can lend is
directly affected by the reserve requirement set by the Federal Reserve. The
reserve requirement is currently 3 percent to 10 percent of a bank's total
deposits. This amount can beheld either in cash on hand or in the bank's reserve
account with the Fed. To see how this affects the economy, think about it like
this. When a bank gets a deposit of $100, assuming a reserve requirement of 10
percent, the bank can then lend out $90. That $90 goes back into the economy,
purchasing goods or services, and usually ends up deposited in another bank.
That bank can then lend out $81 of that $90 deposit, and that $81 goes into the
economy to purchase goods or services and ultimately is deposited into another
bank that proceeds to lend out a percentage of it. In this way, money grows and
flows throughout the community in a much greater amount than physically
exists. That $100 makes a much larger ripple in the economy than you may
realize!

3. Other Services Offered by Bank
Credit Cards
Personal Loans
Home and Car Loans
Mutual Funds
Business Loans
Safe Deposit Boxes
Debit Cards
Trust Services
Signature Guarantees
…and many other investment services.
Central Bank:
The Reserve Bank of India is the central Bank that is fully owned by the
Government. It is governed by a central board (headed by a Governor)
appointed by the Central Government. It issues guidelines for the functioning of
all banks operating within the country.
Public Sector Banks
a. State Bank of India and its associate banks called the State Bank Group
b.20 nationalized banks
c. Regional rural banks mainly sponsored by public sector banks
Private Sector Banks

4. a. Old generation private banks
b. New generation private banks
c. Foreign banks operating in India
d. Scheduled co-operative banks
e. Non-scheduled banks
Co-operative Sector
The co-operative sector is very much useful for rural people. The co-operative
banking sector is divided into the following categories.
a. State co-operative Banks
b. Central co-operative banks
c. Primary Agriculture Credit Societies
Development Banks/Financial Institutions
IFCI,IDBI , ICICI Bank , IIBISCICI Ltd. NABARD Export-Import Bank of
India National Housing Bank Small Industries Development Bank of India
North Eastern Development Finance Corporation

5. Average Growth In Credit And Output For BIMAARU States
Average Growth In Credit And Output For Other States

6. Average Growth In Credit And Output For All States
Credit Allocation and Output Growth in Indian States: Summary Statistics
To understand the credit-output relationship in rudimentary fashion, Table-1 and Graph-1
present the summary statistics of average credit growth and output growth during the period
1981-2002. Table-1 suggests that
(i) average credit growth and output growth (in total) is higher in developed states (5.62
and 3.79) as compared to BIMAARU states (4.98 and 1.58);
(ii) excepting Bihar, all Indian states, both developed and BIMAARU states, show a
growth in credit and output individually during this period;
(iii) in similar way, all states, excepting Bihar, show a significant correlation between
credit and output growth; and
(iv) though Bihar has a positive growth in credit ( ie., 3.2), it has a negative growth in
output, (ie., -0.79), resulting in negative correlation between credit and output growth (i.e., -
0.16907)1.
Table-2 presents states' ranking in terms of correlation between credit and output growth,
both in BIMAARU and other developed states. Table-2 suggests that
(i) among developed states, Tamil Nadu ranks top in the list (ie., 0.9695) while
Haryana figures as the lowest with 0.7595;
(ii) among BIMAARU states, Madhya Pradesh ranks top, with 0.9219, and Bihar is
listed the lowest with -0.1691;

7. (iii) the credit and output growth relationship (ie., 0.9219) in Madhya Pradesh is
higher than certain. developed states such as Gujarat (0.8860), West Bengal
(0.8413), Andhra Pradesh(0.8137) and Haryana (0.7595).
From Table-1 and Table-2, it is possible to infer that
(i) on an average, BIMAARU states have lower credit output growth
relationship as compared to other developed Indian states;
(ii) Madhya Pradesh, state hailing from BIMAARU has a special status of
evidencing a higher credit output growth relationship as compared to four
developed states such as Gujarat, West Bengal, Andhra Pradesh and
Haryana.
Changing Trends
Post nationalisation, the Banks were asked to open more branches in rural areas.
Large number of people were recruited to man these newly opened branches.
Expanded network gave a new identity to these banks and millions of new
customers came to the fold of Banking. The business of Banking moved from
class banking to mass banking.
Manpower requirements
Public sector banks in India employ more than 7 lakh people at present. Of
these a large number of people will be retiring in next 5-6 years. To fill this gap
and to take up the growing business the Banks are on a recruiting spree as can
be seen in media and from vacancy announcements. Only this year about 40,000
vacancies have been created in public sector banks due to retirements,
resignations and expansion of business.
Earlier recruitments in public sector banks were made through Banking Service
Recruitment Boards. Each board was taking care of manpower requirements of
3-5 banks in a certain geographical area. Now the boards have been abolished
and each public sector bank may announce it’s own recruitment process for the
number of people required from time to time. Thus more such advertisements
are seen these days. Another change is seen in lateral hiring by these banks.
Earlier officers were recruited only in Junior Management Grade. Now public
sector banks are offering direct employment in middle and senior management
cadres as well. Thus for both fresher and experienced people career
opportunities are available in public sector banks. To meet their manpower
requirements these banks are presently recruiting in large numbers both in
clerical and officer cadre.
Vs

8. Industrial Undertaking
The world’s second largest populated country, India, is the apple of the eye for
the world now. The world economies are seeing it as their potential market.
This has been going on since quite some time now, ever since 1991 reforms of
liberalization, globalization and privatization. Indian markets in urban areas
have grown appreciably and are on the verge of saturation, so corporates have
started tapping rural markets, since more than 60 per cent of India’s population
lives in rural areas.
During this global meltdown and fall of exports, if the Fast
Moving Consumer Goods (FMCG) sector has been able to show rising quarterly
growths, it is because of the Rural Markets and their rising spending power,
which have not been affected by this meltdown. If we look at the strategies
followed by Rural Marketers in the FMCG sector, it is to sell many small
sachets of Rs. 2 shampoo pouches, Rs. 5 Maggi packs and the Rs. 5 chota Pepsi,
because here, the strength lies in volume sale, considering the large consumer
base in these rural markets which won’t spend altogether at once on buying
large family packs of 500ml shampoo or super saver packs of Maggi or a Pepsi
pet bottle of 2 litres.
Meaning of expression ‘industrial undertakings’ for purpose of section 35D
of IT Act, 1961
Those undertakings would qualify as ‘industrial undertakings’ which are
involved in ‘manufacturing activity’; the activity of construction can, by no
stretch of imagination, be treated as manufacturing activity as it does not
amount to manufacture or production of an article or a thing.
Industries offer several benefits to the country. They are:

9. 1. When there is development of industries in the country, there will be the
investment of large capital, use of modern machineries, high degree of
specialisation and large-scale operations. As a result, there will be greater
productivity and higher national income. Higher national income, in turn, will
contribute to increase in per capital income. Thus, development of industries
will contribute to the growth of national and in per capital income in the
country.
2. Industrialisation creates more and varied employment opportunities, and
thereby, reduce the problem of unemployment and under-employment in the
country. Further it can absorb the surplus agricultural labour, and thereby,
reduce the problem of disguised unemployment in rural areas. Again it can
contribute to the development of cottage and small industries in rural areas.
3. Industries will promote agricultural development in the country in many ways.
First, with the development of agro-based industries (i.e. industries based
agriculture), such as sugar-cane, raw cotton, raw jute, tobacco, oil seeds etc.
there will be more demand for these materials. This, in turn will encourage the
development of agriculture.
4. Industries will contribute to the development of tertiary sector, i.e. trade,
transport & communication , banking insurance, etc.
5. Development of industries will be helpful in maintaining a proper balance
between agriculture, industry and the tertiary sector, which is essential for the
all-round economic progress of any nation.
6. Development of industries will contribute to the expansion of existing
industrial areas and growth of new industrial areas.
7. Agriculture in India is not stable, as it is largely dependent on the vagaries of
monsoons. On the other hand, industries are relativity more stable.

10. 8. Industrialisation contributes to better utilisation of natural resources like
minerals, forests, fisheries, etc. which the country has in abundance
9. Industrialisation will contribute to the expansion of the markets for agricultural
crops, minerals, forest products etc. Further, industrialisation will contribute to
the expansion of the markets for capital goods or producer goods like plant &
machinery.
10.Industries contribute to increase in the income and purchasing power of the
people. Further, they make available to the people a wide variety of goods for
consumption.
11.Industries are indispensable for national defence. Arms and ammunitions,
ships, aircrafts, tankers, etc.
Economy Growth
Industry accounts for 28% of the GDP and employ 14% of the total workforce.
In absolute terms, India is 12th in the world in terms of nominal factory
output. The Indian industrial sector underwent significant changes as a result of
the economic reforms of 1991, which removed import restrictions, brought in
foreign competition, led to privatisation of certain public sector industries,
liberalised the FDI regime, improved infrastructure and led to an expansion in
the production of fast moving consumer goods. Post-liberalisation, the Indian
private sector was faced with increasing domestic as well as foreign
competition, including the threat of cheaper Chinese imports. It has since
handled the change by squeezing costs, revamping management, and relying on
cheap labour and new technology. However, this has also reduced employment
generation even by smaller manufacturers who earlier relied on relatively
labour-intensive processes.
Textile manufacturing is the second largest source of employment after
agriculture and accounts for 20% of manufacturing output, providing
employment to over 20 million people. As stated in late January, by the then
Minister of Textiles, India, Shri Shankersinh Vaghela, the transformation of the
textile industry from a degrading to rapidly developing industry, has become the
biggest achievement of the central government. After freeing the industry in
2004–2005 from a number of limitations, primarily financial, the government

11. gave the green light to the flow of massive investment – both domestic and
foreign. During the period from 2004 to 2008, total investment amounted to
27 billion dollars. By 2012, still convinced of the government, this figure will
reach 38 billion as expected; these investments in 2012 will create an additional
sector of more than 17 million jobs. But demand for Indian textiles in world
markets continues to fall. According to Union Minister for Commerce and
Industries Kamal Nath, only during 2008–2009 fiscal year (which ends 31
March) textile and clothing industry will be forced to cut about 800 thousand
new jobs – nearly half of the rate of two million, which will have to go all the
export-oriented sectors of Indian economy to soften the impact of the global
crisis. Ludhiana produces 90% of woollens in India and is known as the
Manchester of India. Tirupur has gained universal recognition as the leading
source of hosiery, knitted garments, casual wear and sportswear.
India is 13th in services output. The services sector provides employment to
23% of the work force and is growing quickly, with a growth rate of 7.5% in
1991–2000, up from 4.5% in 1951–80. It has the largest share in the GDP,
accounting for 55% in 2007, up from 15% in 1950. Information technology
and business process outsourcing are among the fastest growing sectors, having
a cumulative growth rate of revenue 33.6% between 1997–98 and 2002–03 and
contributing to 25% of the country's total exports in 2007–08. The growth in
the IT sector is attributed to increased specialisation, and an availability of a
large pool of low cost, highly skilled, educated and fluent English-speaking
workers, on the supply side, matched on the demand side by increased demand
z to outsource their operations. The share of the Indian IT industry in the
country's GDP increased from 4.8 % in 2005–06 to 7% in 2008. In 2009, seven
Indian firms were listed among the top 15 technology outsourcing companies in
the world.
Mining forms an important segment of the Indian economy, with the country
producing 79 different minerals (excluding fuel and atomic resources) in 2009–
10, including iron
ore,manganese, mica, bauxite, chromite, limestone, asbestos, fluorite, gypsum,
ochre, phosphorite and silica sand. Organised retail supermarkets accounts for
24% of the market as of 2008. Regulations prevent most foreign investment in
retailing. Moreover, over thirty regulations such as "signboard licences" and
"anti-hoarding measures" may have to be complied before a store can open
doors. There are taxes for moving goods from state to state, and even within
states. Tourism in India is relatively undeveloped, but growing at double digits.
Some hospitals woo medical tourism.

12. Current Scenario
According to a survey of the manufacturing industry, carried out by FICCI
among 25 core sectors, 21 capital goods, 15 intermediate goods, 26 consumers
durables, and 13 consumer non-durable sectors, the country's manufacturing
sector is expected to grow by 9.5 per cent in 2008-09, up from 8.8 per cent last
fiscal.
LG is looking at making India its global manufacturing hub for its mobile
handsets. The company will soon be exporting mobile phones to Europe
and the Commonwealth of Independent States (CIS) from India.
Luxury brands like Louis Vuitton and Frette are looking at India as a
manufacturing base for their products.
Skoda Auto, a part of the international Volkswagen Group based in the
Czech Republic, plans to make India its regional manufacturing hub. It
will start producing cars in India by 2010 with a manufacturing target of
50,000 units. Besides the domestic market, these will also be exported to
neighbouring countries like Nepal, Sri Lanka, Burma and Bangladesh.
Aircraft manufacturer Airbus is considering India as one of the key
centers for design and development of its long haul A 350 plane.
Cummins is making India its manufacturing hub for newly developed line
of generator sets.
Samsung plans to invest US $ 100 million over a period of four years in
its manufacturing plant near Chennai and make it its global hub.
Ford is making India its manufacturing hub for engine manufacturing.

13. Hyundai has made India the manufacturing and export hub for its small
Cars. The i10 is being manufactured only in India and exported to the
world. India is Hyundai's largest base outside Korea.
Suzuki too is making India its manufacturing hub for small cars. The A-
Star is being manufactured solely in India and exported to Europe.
Nokia is investing an additional US $ 75 million in its Sriperumbudur
plant taking the total investment to US$ 285 million. Nearly 50 per cent
of its production at Sriperumbudur is exported to countries across the
Middle East and Africa, Asia, Australia and New Zealand.