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INDUSTRIAL DEVELOPMENT DURING PLANNING PERIOD. Introduction.
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Introduction Before the arrival of Britishers, India was industrially more advanced as compared to the economies of the West European countries. The Britishers systematically destroyed the industrial base of India. As a result, India inherited a weak industrial base. Industrial Development Since Independence: Since Independence, India is trying to build up a sound industrial base. In post-independence period, India started to develop different types of industries with the help of economic planning. The contribution of the industrial sector to the gross domestic product (GDP) of the country which was 15% in 1950-51 gradually increased to 22.3% in 1970-71 and then to 24.1% in 2005-06. But in spite of all its efforts, India is still considered as an industrially backward country.
Industrial Development During The Five-year Plans After the introduction of planning in India, the industrial sector of the country started to develop at a considerably higher rate. On the eve of first plan, the industrial development in India was confined largely to the consumer goods sector. Thus, the industrial structure exhibited the features of an Under-developed economy. Industries manufacturing ‘intermediate goods’ like coal, cement, steel, power, alcohol, chemicals etc. were also established but there production was small as productive capacity was considerably below the requirements. On the whole, while consumer goods industries were well established, producer goods industries lagged considerably behind.
Twelfth Five-Year Plan (2012-17) • The Twelfth Plan proposes an outlay of Rs. 3,77,302 crore for the industrial sector which is 4.9% of the total outlay of Rs. 76,69,807 crore. • The target for industrial growth has been kept at 10% per annum. • The twelfth plan stresses the importance of infrastructure development especially in the power sector and removal of bottlenecks for high growth and inclusiveness. • It also sets targets for various economic and social sectors relating to poverty alleviation, infant mortality, job creation etc.
Industrial Growth In India -Four Distinct Phases Industrial development during the period of planning can be divided into the following distinct phases: • Phase I which covered the period of the first three phase (i.e. the period from 1951 to 1965) • Phase II which covered the period from 1965 to 1980 was marked by industrial deceleration and structural retrogression • Phase III which covered the period of 1980’s (1980-81 to 1990-91) was marked by industrial recovery • Phase IV covering the post-reform period (i.e. the period 1991-92 onwards)
PHASE I (1951-65)Building up of Strong Industrial Base The First Phase of industrial growth broadly consists of the first three plan periods which had built a strong industrial base in India. Phase I laid the basis for industrial development in the future. The second plan, based on Mahalanobis model, emphasized the development of capital goods industries and basic industries. Accordingly, huge investments were made in industries like iron and steel, heavy engineering and machine building industries . The same pattern of investment was continued in the third plan as well. As a result, there occurred a noticeable acceleration in the annual compound growth rate of industrial production over the first three plan periods upto 1965 from 5.7 % in the first plan to 7.2 % in the second plan and further to 9.0 % in the third plan.
TABLE Annual Compound Growth Rates In Index Numbers of Industrial Production, 1951 to 1965 (Phase I)
PHASE II (1965-80)Industrial Deceleration & Structural Retrogression The Second Phase of industrial growth broadly covers the period of three Annual Plans , the Fourth Plan and the Fifth Plan. The period from 1965 to 1976 was marked by a sharp deceleration in industrial growth. The annual compound rate of growth fell steeply from 9.0 % per annum during the third plan to a mere 4.1 % per annum during the period 1965 to 1976. The last year of Phase II i.e. 1979-80 recorded a negative rate of growth of industrial production of -1.6 % over the preceding year. The Second Phase clearly experienced a fall in annual growth rate of capital goods industries and basic industries which was a clear case of structural retrogression.
TABLE Annual Compound Growth Rates In Index Numbers of Industrial Production, 1965 to 1980 (Phase II)
Causes of Deceleration and Retrogression The main causes of deceleration and structural retrogression during the Second Phase include: • Exogenous factors such as the wars of 1962, 1965 and 1971; • Oil crisis of 1973; • Unsatisfactory performance of the agricultural sector; • Unequal distribution of income and wealth; • Wrong industrial policies, complex bureaucratic system of licensing, irrational and inefficient system of controls; • Supply constraints like infrastructural bottlenecks; • Successive droughts of 1965-67 and 1971-73 etc.
PHASE III (1981-1991)The Period of Industrial Recovery The Third Phase of industrial growth in India covers the entire period of 1980’s consisting of both the Sixth and Seventh Plan. This period of 1980’s can broadly be termed as a period of industrial recovery. During this phase, the consumer durables industries had recorded a considerable growth in its output. Chemicals and petrochemicals played a dominant role in determining the growth of industrial sector in general. Thus, during this third phase, there is a clear shift in the pattern of industrialization in the country.
TABLE Rate of Growth of Industrial Production (Use-based) during Phase III (1981-1991)
Causes of Industrial Recovery The main causes of industrial recovery during the Third Phase i.e. during 1980’s are as follows: • New Industrial Policy and Liberal Fiscal Regime; • Contribution of the agricultural sector; • Growth of Service Sector and • The Infrastructure Sector
PHASE IVThe Period from 1991-92 onwards The year 1991 ushered in a new era of economic liberalization. Major liberalization measures designed to affect the performance of the industrial sector were – wide-scale reduction in the scope of industrial licensing, simplification of procedural rules and regulations, reductions of areas exclusively for the public sector, disinvestment of equity of selected public sector undertakings, enhancing the limits of foreign equity participation in domestic industrial undertakings, liberalization of trade and exchange rate policies, rationalization and reduction of customs and excise duties and personal and corporate income tax etc. The performance during the later half of 1990’s deteriorated considerably as compared with the first half of 1990’s Thus the performance of the industrial sector during the post-reform period has been highly unsatisfactory.
Average Annual Growth Rate of Industrial Production in Pre-reform and Post-reform Decade
Causes of Unsatisfactory Performance in the Post–reform Period The main causes for unsatisfactory performance of the industrial sector in the post-reform period are as follows: • Exposure to external competition; • Slowdown in investment; • The infrastructural constraints; • Difficulties in obtaining funds for expansion; • Contraction in consumer demand; • Sluggish growth in exports ; • Anomalies in tariff structure etc.
Trends In Industrial Production In India In India, industrial sector has achieved a significant achievement in diversifying its productive capacities. In respect of almost all consumer goods both durables and non-durables, the stage of self-sufficiency has already been attained. The country has also achieved an impressive industrial productive capacity in respect of mining and metallurgical industries. Moreover, significant progress has also been achieved in building basic infra-structural facilities, research and development (R&D) capability, project management services etc. Thus, after more than sixty years of planning the industrial production of the country has totally been diversified. The volume of industrial production in physical terms has also been multiplied.
Problems and Obstacles to Industrial Development in India The following are some of the major problems and obstacles that are being faced in the process of industrialization of the country: • Poor capital formation; • Lack of Infrastructural facilities; • Poor performance of the agricultural sector; • Gaps between targets and achievements; • Dearth of skilled and efficient personnel; • Industrial Sickness; • Regional Imbalances; • Poor performance of the public sector; • Concentration of Wealth etc.
