Industrial Development Since 1951

8/12/2019 Industrial Development Since 1951

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INDUSTRIAL DEVELOPMENT SINCE 1951

INDIA

Presentation by:

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

GROUP 2


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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.


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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 STORYINDUSTRIAL DEVELOPMENT DURING PLANNING PERIOD


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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 STORYBUILDING A STRONG INDUSTRIAL BASE


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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

GDP Growth up from 3.6% to 5.6%


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(1951-65)


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THE INDIA STORYINDUSTRIAL DECELERATION


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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 STORYPERIOD 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 STORYTHE 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 tofollowing 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 STORYCURRENT 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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Industrial Index Output Echoes Indias Growth Story


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THE INDIA STORYWHAT LIES AHEAD FOR THE INDIAN INDUSTRY?


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(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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(2002-07)

Figure 3: India's GDP Growth

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

Percentage

Rolling Average (5 year)


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(2002-07)


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F inal 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 labour-

intensive 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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(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

Industrial Development Since 1951

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