Economic Challenger - - NEWS -

(I) Misu­ti­liza­tion of in­sti­tu­tional funds

The sick­ness in any sec­tor on ac­count of this fac­tor re­sults ul­ti­mately in stag­na­tion of cap­i­tal in­vest­ment. Misu­til­i­sa­tion of scarce re­sources by the sick units can­not be tol­er­ated

(ii) Cre­ation of un­em­ploy­ment prob­lem in the econ­omy

Work­ers lose jobs on ac­count of clo­sure of sick units with the re­sult that the econ­omy bears ad­di­tional prob­lem of un­em­ploy­ment of labour force as the econ­omy has al­ready an abun­dance of labour force.

(iii) Re­duc­tion of for­eign ex­change earn­ings

There will be a re­duc­tion in the earn­ings of for­eign ex­change if any big unit fall­ing sick is fetch­ing less for­eign ex­change on ac­count of sale of its fin­ished prod­ucts abroad.

(iv) Ef­fect on fi­nan­cial in­sti­tu­tions and govern­ment

In­dus­trial sick­ness to the fi­nan­cial in­sti­tu­tions is the big ques­tion of sink­ing large funds and the pre­cious scarce cap­i­tal go­ing waste and valu­able as­sets re­main­ing idle.


The fac­tors which are re­spon­si­ble for the in­dus­trial sick­ness can be of two groups: Ex­ter­nal fac­tors and in­ter­nal fac­tors. Ex­ter­nal fac­tors are those which af­fect all the units in an in­dus­try and which are be­yond the con­trol of the man­age­ment of a unit. Th­ese fac­tors de­ter­mine the busi­ness risk of the firm.

Ex­ter­nal Fac­tors

Ex­ter­nal fac­tors in­clude a) scarcity of raw-ma­te­rial b) in­ad­e­quate credit fa­cil­i­ties c) in­fras­truc­tural con­straints d) lack of mod­ern plant & equip­ment e) in­fla­tion­ary ten­den­cies and f) govern­ment reg­u­la­tions. Whereas in­ter­nal

fac­tors i nclude a) non- pro­fes­sional man­age­ment b) faulty pro­ject plan­ning in the ini­tial stages c) poor man­power plan­ning d) in­ad­e­quate knowl­edge of mar­ket di­ver­si­fi­ca­tion and e) ab­sence of re­search and de­vel­op­ment.

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