INDUSTRIAL PERFOMANCE BY R NAGRAJ

1. INDUSTRIAL GROWTH AND
PERFORMANCE

2.  Industralisation is a socio economic change that transforms human
group to industrial one.
 Need of industrialization in India:
Progress of India
 To become a developed nation from a developing nation.
 Increase employment
Increase Income and savings
Increase economies of scale
Better productivity of raw materials

3. 1951-65
Rapid growth of
over 7%per year
1966-80
Growth
declined to
4% due to
crop failures
1980s
Improvement
in public
infrastructure
1990s
Outburst of
industrial activity
reaching to 15%

4.  In 1991,economy faced liquidity crisis on account of
• The Gulf War
• Collapse of Soviet Union
• The domestic political uncertainty
 Encouraged by the industrial and export boom in 1980s, economic reforms
initiated in 1991 sought to
• make a bonfire of remaining output and investment controls
• Cut back public investment
• Undermine protective and promotional measures for small scale industries
• Sell minority equity holding in public sector enterprises.

6. INDUSTRIAL
PERFORMANCE AFTER
1991-2

7. • After an expected dip in 1991-2 on
account of crisis and adjustment,
output boomed for 4 years peaking
in 1995-6.
• After that, there was a steep
deceleration for 7 years until 2002-
3.
• Next boom lasted for 5 years, from
2003-4 to 2007-8.
• Average annual growth rate over
the 17-year period since 1991-2 is
6.6 per cent.
• During this period
 Consumer durables grew the
fastest at 8.1 per cent per year
 Capital goods grew at 7.4 per
cent per year

8. • By two-digit industry groups, beverages recorded
the fastest growth at 12 per cent per year.
• Capital goods grew at nearly 15 per cent during
2003-8.

9. • Electrical machinery grew faster in the 1980s at 12.7 per
cent per year.
• Transport equipment fared better after the reforms of
1991.

10. • In spite of the dismantling of the much criticized ‘ permit license raj’,
industrial growth rate has not accelerated, nor has the growth rate of
labour-intensive consumer goods gone up
• There has been no de-industrialization
• The shares of industrial employment and output in the total have not
declined
• The structural transformation of workforce has continued at the same
pace at the reforms, though the workforce has gone into services, not
manufacturing.
• Within industry, the incremental workforce has gone into
construction.
• Manufacturing sector’s share in total fixed investment has gone up
from around 27 per cent in the 1980s to about 40 percent in the
current decade.

11. • Causes of concern:
Industry or manufacturing sector’s share in domestic
output has stagnated and its export share has declined;
primary sector’s shares in merchandise exports has risen
The rising share is entirely due to iron ore exports to
China, as India rode the commodity boom.
This was perhaps avoidable, if the much anticipated
expansion of labour-intensive manufacturing was realized.

12. • Manufacturing sector’s share in total
employment stagnation represents the failure of
the reforms to promote labour-intensive
manufacturing. Partly, growing capital intensity of
production in general explains the employment
stagnation.
• There could be structural reasons as well.
• While the stagnation of the industrial
employment share is a cause of concern, it
perhaps represents an outcome of the changing
market conditions,organization of production and
technology in an open labour-surplus economy.

13. While india has managed to avert de-
industrialization, its output growth rate has
not accelerated.
Manufacturing sector’s share in GDP has
stagnanted(its share in merchandise exports
has declined in favour of primary products).
The sustained growth in output and exports,
and a rising share in the economy’s fixed
investment are reassuring that the reforms
have not damaged India’s industrialization
prospects.

14. OTHER ASPECTS OF
INDUSTRIAL CHANGE
Easierimports.
Entry ofnew firms.
Development of buyers market.
Increase in foreign firms share in GDP.
Decrease in publicsector share in
GDP.
Manufacturingsector restructuring.

16. WHY DID THE
REFORMS FAILED
TO DELIVER THE
EXPECTED
RESULTS?

17. 1) LABOR MARKET
RIGIDITIES
Lack of entrepreneurial
hiring and firing of workers.
Though in the economic crisis of
2008, 3.7 lakh workers lost their
jobs against the labor market
rigidities law.

18. 2) SIZE STRUCTURE OF INDIAN
FACTORIES
Indian factories are either too large or either too
small both of which are said to be inefficient.
Indian industries are generally dominated by large
sized factories ; like the worlds largest bicycle
actory (Hero Cycles), largest motor cycle plant(Hero
Honda), largest petroleum refinery (Reliance
refinery in Jamnagar).
Large sized plants in China may or may not be said
to be efficient because China internalizes its
functions through integrated plants and unlike
Taiwan and Japan has a weak inter firm
relationship which is more efficient.

19. 3) INFRASTRUCTURE
BOTTLENECKS
Infrastructure services by definition, have
a long gestation period and are capital
intensive, with low rates of return spread
over a long period.
Before 1991 public sector provided
infrastructure but was considered to be
poor.
Reforms encouraged private and foreign
capital in these industries.

20. CONCLUSION
After 1991 reform :
1. Export diversification,
2. Boom in services exports
3. Enhanced competition,
4. Improved quality, variety and
5. Decline in public sector investment

21. Reforms promised faster and labour intensive
growth………….
What is holding back industrial growth?
Incomplete reforms,
1. Infrastructure constraint,
2. Rigid labour laws
3. Exposure of external competition
4. Public infrastructure investment
(decrease)

22. 5. Difficulties in obtaining funds for expansion
6. Anomalies in tariff structure
7. Contraction in consumer demand