The economic environment in India at present has some favourable as well as unfavourable factors from the point of view of private enterprise.
The favourable factors are as follows:
In the first place, private enterprise derived many special benefits from the plans and policies of the government. The vast outlays in the public sector since the beginning of the Plan period provided the necessary infrastructure for the development of private business and generated widespread demand for its products.
Secondly, the Plan documents indicated the specific areas in which further investment could be made. These provided valuable guidelines for the private enterprise to proceed.
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Thirdly, the Indian market is completely sheltered since the policy of developing indigenous resources led to almost total banning of such imports as might compete with the products of local industry.
This is a further reason why the private enterprise has been able to make good profits even when some of their products were substandard.
Fourthly, the various feasibility studies and demand projection estimates made by the public sector institutions enabled the potential entrepreneurs to know the prospects of investment in those fields.
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Fifthly, various institutions have been set up to see that industries are not starved of legitimate financial needs. The development banks like IFC, ICICI, IDBI, SFC etc. provide industries with financial accommodation.
They help industries in the form of long-term loans, underwriting of shares and debentures and participating in equity. A study of the balance sheets of a large number of companies indicates that finance provided by such institutions enabled them to grow and prosper.
Lastly, the private enterprise received some direct incentives from the Government. Despite the heavy doses of taxation, many of the Finance Acts contained various tax concessions such as tax holidays for new undertakings, developmental rebate, abolition of bonus tax etc. Income Tax Act also provides fiscal incentives to the individual and corporate sectors.