In an Uncontrolled Capitalist Economy, Industrial Sickness is not a Problem that attracts the Attention of the Government. Explain.
The government has come to a conclusion in an uncontrolled economy that it is not all desirable to devote resources to keep alive through a process of artificial respiration such non viable units which are destined to die sooner or later. Government policy stated clearly “The approach towards the rehabilitation of sick units has to be very selective and systematic. There is no point in throwing away further resources in support of units which are irretrievably sick. Only such units are potentially viable that need to be taken up for the formulation of rehabilitation packages to restore them to health.
(According to Economic Survey 1985-86). According to the Government policy, the Sick Industrial Companies Act has been passed with the objective of carrying out early detection of sickness in an industrial unit and them to evolve a package of measures to remove uncertainty about the working-of the sick unit.
It would be more desirable to adopt the RBI definition of a sick unit which incurs cash losses for one year and according to bank is likely to continue cash losses for the current year as well as the following year which has imbalance in its financial structure. Such a definition can help to provide early detection of sickness.
The elements of policy formed by union minister on industrial sickness were the government should make suitable arrangements for monitoring and detecting industrial sickness, a group of professional directors should be set-up. The main thrust of the policy was to reduce the incidence of sickness in industry and dishonest management. The balance sheets should be reviewed every year, which enable the state to understand whether a particular enterprise is healthy, sickness prone, sick at an early stage or sick at the advanced level. On the basis of the viability status, revised definitions of sick units have been framed.
Economic Survey (1988-89), states that it will be evident from the very large number of enterprises involved, and the large volume of capital locked up in such units that the problem does not allow any room for complacency. Long-term solutions will also have to be found for the basic underlying causes which are leading to the spread of industrial sickness on such a wide scale. With economic liberalization and the new industrial policy announced in 1991. There is a need to examine the role of Government in tackling the problem of industrial sickness.