INDIA

INDUSTRIAL DEVELOPMENT SINCE 1951

Presentation by:

ITM BATCH NO 18 (Sunil, Ajay, Yogesh, Preeti, Kedar, Ganesh) GROUP 2

This presentation focuses on the pace and pattern of industrial development in India post independence period, explains the key reform measures undertaken for development of industry in the wake of economic liberalisation, issues pertaining to the vital sector of the Indian economy and future prospects for the Indian Industry. The presentation is divided into seven sections, with each section focusing on the turning points that have taken place during that Phase and the impact on Industrial Growth. The last section appraises the countrys medium term growth prospects and points to some risk and vulnerabilities that could stall the current dynamism if correction action is not taken.

Presentation Structure
Industrial Development during Planning Period Building a strong Industrial Base Industrial Deceleration The Period of Industrial Recovery New Era of Economic Liberalization Current Growth Momentum in Industrial Production

What lies ahead for Indian Industry?

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THE INDIA STORY

INDUSTRIAL DEVELOPMENT DURING PLANNING PERIOD

Industrial Development During Planning Period

Industrial Growth in India during Independence Factors for Weak Industrial Base and Stagnant Economy Setup of Planning Commission in 1950 Advent & Impact of Industrial Policy Resolution of 1948 Launch of First Five Year Plan in 1951 Increase of Industrial Output by 17.4% during 1946-1951
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THE INDIA STORY

BUILDING A STRONG INDUSTRIAL BASE

Building a Strong Industrial Base (1951-65)

This phase represents the period of three 5-year plans.

Emphasis on development of capital goods and basic industries Sharp rise in Public sector investment Acceleration in CAGR of Industrial Production from 5.7% to 9.0% per annum
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GDP Growth up from 3.6% to 5.6%

Building a Strong Industrial Base (1951-65)

THE INDIA STORY

INDUSTRIAL DECELERATION

Industrial Deceleration (1965-80)

Factors that led to sharp deceleration of Industrial Growth :
Wars of 1965 and 1971 Currency Devaluation in 1966 due to foreign crisis Drought condition in 1965, 1966, 1971 & 1972 Oil Crisis of 1973 Internal Emergency was clamped

Sharp decline in industrial growth from 9% to 4.1%

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THE INDIA STORY

PERIOD OF INDUSTRIAL RECOVERY

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Period of Industrial Recovery (1981-91)

New Industrial Policy (year) and Liberal Fiscal Regime Reducing domestic barriers to entry Easier access to technology and material imports Contribution of Agricultural Sector Growth of Service Sector The Infrastructure Sector

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THE INDIA STORY

THE NEW ERA OF ECONOMIC LIERALISATION

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Severe Macroeconomic Crisis

Against a background of low export/GDP ratio, rising trade and current account defecits and a detoriating external debt profile, the 1990 gulf war and consequent oil price spike tipped Indias Balance of Payment(BOP) into crisis in 1990/91. The new congress government had to take emergency measures to restore external and domestic confidence in the economy and its management. The rupee was devalue, fiscal defecit was cut and special balance of payment financing mobilized from IMF and World Bank. This compeled the govt to introduce an array of economic reforms

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New Era of Economic Liberalisation (1991-92 onwards)

Major Liberalization measures including :
Wide-scale reduction in the scope of industrial licensing

Simplification of procedural rules and regulation

Reduction of areas exclusively reserved for public sector Disinvestment of equity of selected public sector undertaking

Enhancing of limits of foreign equity participation in domestic industrial

undertaking Rationalization of reduction of customs, excise duty, personal and corporate

income tax
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New Era of Economic Liberalisation (1992-2002 onwards)

Increase in Industrial Production from 2.3% in 1992-93 to respectable 13% in 1995-96

Decline in momentum of growth during 1997-2002 to 5% due to

following factors
Slowdown in domestic and global demand

Decline in Investment by Private Sector

Slow Growth of World Economy Slowdown in Manufacturing Exports

Significant worsening of the fiscal deficit

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THE INDIA STORY

CURRENT GROWTH MOMENTUM IN INDUSTRIAL PRODUCTION

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Current Growth Momentum in Industrial Production (2002-07)

Main Drivers of Recent Economic Growth: The momentum of a quarter of a century of strong economic growth; A much more open economy (to external trade and investment) A growing middle class fuelling domestic consumption;

The demographic dividends of a young population;

Strong companies in a modernized capital market; A supportive international economic environment.

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Current Growth Momentum in Industrial Production (2002-07)

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Current Growth Momentum in Industrial Production (2002-07)

Industrial Index Output Echoes Indias Growth Story

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THE INDIA STORY

WHAT LIES AHEAD FOR THE INDIAN INDUSTRY?

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What lies ahead for Indian Industry? (2011-12)

Govt. Planning Commission estimates GDP growth projections of 8 t0 9% and foresees 10% growth as almost inevitable Ensure sustenance of 8% growth enjoyed by India since 2003. However, these may include some risks such as : Renewed fiscal stress from populist policies; Infrastructure bottlenecks;

Labour market rigidities;

Weak performance of agriculture; Pace of economic reforms; Weaknesses in human resource development programmes; The international economic environment
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Percentage
0 1 2 3 4 5 6 7 8

1955-56 1958-59 1961-62 1964-65 1967-68 1970-71 1973-74 1976-77 1979-80 1982-83 1985-86 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 2006-07
Year
Rolling Average (5 year)

What lies ahead for Indian Industry? (2002-07)

Figure 3: India's GDP Growth

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What lies ahead for Indian Industry? (2002-07)

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Final Thoughts Realising India's growth potential would call for overcoming some of the widely accepted problems currently faced by the industrial sector. Industrial output growth has decelerated since around the mid-1990s.

Constraint on growth seems to be mainly from the demand side as agriculture growth
slowed down in the 1990s, and infrastructure investment has steadily declined since the late 1980s. Further, small enterprises and unregistered manufacturing have been adversely affected by lack of credit and its high cost. India has to step up investments in infrastructure and agriculture, strengthen its labourintensive manufacturing sector to realise its export potential.. An increase in investment would improve demand for the domestic capital goods industry that has been suffering from excess capacity. Access to long-term finance for promoting industrial investment needs to be revived with performance guarantees as in east Asia
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THANK YOU

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Building a Strong Industrial Base (1951-65)

Launching of First Five Year Plans (1951-56)
Emphasis on building basis services like power and irrigation

Genesis of public sector

Pro-Public Sector Industrial Policy (1956-61)

Progress in public sector / Industrial Priorities

Progress in village and small scale industries

Controls and Restrictions on Private Sector (1961-65)

Role in planned development

Public sector programmes

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