Industrial Growth during Plan Periods | India

Let us make an in-depth study of the positive and negative features of industrial growth during plan periods.

Positive Features of Industrial Growth during the Plan Period:

The trend in industrial growth over about 60 years appears to be impressive.

During this period, both the pattern and the structure of Indian industries have undergone a significant change.

1. Significant Growth Rate:

The trend in industrial production in India shows a compound growth rate of 6 p.c. The growth rate for the period 1951-55 was 5.7 p.c., 7.2 p.c. in 1955-56 and 9 p.c. in 1960-65. Thus, from the 50s to the mid- 60s, there was a significant acceleration in the industrial growth. It declined to a very low level around 3.7 p.c. in 1966-70. This period was marked by recession in Indian industries.

However, industrial production started picking up after the mid-70s. Still then, the recovery was not high enough. The growth rate of industrial production was around 5-2 p.c. during 1975-83. The decade of 1980s, however, showed a remarkable growth of the industrial sector following liberalisation measures introduced in the mid-1980s, But the decade of 1990s did not augur well.

The early years of reform yielded unsatisfactory dividends as far as growth of the industrial sector was concerned. After responding to economic reforms with vigour and registering a robust growth rate of 12.8 p.c. in 1995-96, there had been a slowdown in industrial expansion since 1996-97 when growth rate decelerated to 5.6 p.c. against a growth rate of 13 p.c. in 1995-96.

Declining trend continued in 1998-99 with overall industrial production registering 4.1 p.c. growth during 1998-99.

Minor recovery took place in 1999-2000 when overall growth rate increased to 6.7 p.c. The position deteriorated again in the next year when trends in industrial growth and by sectors also suggested an all-round slowdown in industrial activity in 2000-01 (2.7 p.c.) and 2001- 02 (2.8 p.c.).

Industrial growth rate, however, picked up in the Tenth Plan when the growth rate rose to 8 p.c. against the target industrial growth rate of 10 p.c.

2. Increase in the share of Industrial Sector in National Income:

The contribution of the industrial sector towards national income is rising continuously. Its share was 16.1 p.c. in GDP in 1950-51. It rose to 25.2 p.c. in 1990-91. This indicates industrialisation. Since then it is on the declining trend. It has come down to 24.9 p.c. in 2007-08.

3. Expansion of Public Sector:

Over the planning period, public sector has registered a phenomenal growth. The idea for giving emphasis to the public sector was to provide a firm base for setting up core industries like power, coal, steel, fertilisers, atomic energy and machine building in the public and to leave the rest for the private sector.

The Seventh Plan has, however, shown preference to the private sector. The Eighth, Ninth and the Tenth Plans, of course, have placed great emphasis on this private sector.

4. Strengthening of Industrial Base:

Besides these quantitative aspects of industrial growth, we also find large progress in strengthening the base of future industrial growth. From the very beginning of the planning period, basic and capital goods industries received utmost attention. Consequently, its performance in total industrial output and gross value added become remarkable as compared to consumer goods industries.

These industries are the base of industrialisation. Because of the strengthened industrial base including adequate building up of infrastructural facilities, other industries registered a better growth, particularly intermediate goods industries. This, of course, is not a mean achievement.

5. Modernisation:

India has now a large variety of industries producing goods of varied nature which shows the degree of modernisation. Some modern industries have really come up and they are competing effectively with the outside world. Modernisation is also evident in the field of technological and managerial skills.

This has reduced our dependence greatly on foreign experts and technologists. On the contrary, India is exporting trained personnel in relatively less developed countries.

6. Self-Reliance:

Another positive aspect of industrial growth is the attainment of the goal of self-reliance. We have achieved self-reliance in machinery, plant and other equipment. Today, the bulk of the equipment required for industrial and infrastructural development is produced within the country.

Negative Aspects of Industrial Growth:

Industrial growth in India has been exposed to certain undesired lines. These suggest the failure of industrial planning.

The most significant failure of industrial planning of India are:

(i) The structural retrogression in the industrial structure;

(ii) Expansion of large industrial houses and concentration of economic power;

(iii) Miserable performance of the public sector;

(iv) Under-utilisation of capacity; and

(v) Industrial sickness.

These negative aspects of India’s industrial growth are presented below one by one.

1. Structural Retrogression in the Industrial Sector:

By industrial structure we mean interrelationship among different industry groups like consumer goods, intermediate goods and capital goods industries. At the initial stages of industrialisation, consumer goods industries predominated in the Indian economy.

As the pace of industrialisation quickened, consumer goods industries lost importance and capital and intermediate goods industries got prominence. This sort of structural change reflects industrialisation of a country.

India was on the road to industrialisation at the early stages of planning till 1965 when there was a remarkable expansion of basic and capital goods industries as compared to consumer goods industries. And the period after 1965 witnessed deceleration in industrial output for all types of industries, excepting consumer goods industries.

Within the consumer goods industries, durable consumer goods industries registered a high growth. Thus, Indian industries after 1965 showed not only poor growth but also reflected phenomenon of structural retrogression.

The situation continues to be almost similar in the 1990s and 2000s. Basic industries fared badly in 2005-06 when it struck a growth rate of 6.7 p.c. as against 10.8 p.c. in 1995-96. However, the year 2006-07 showed more than 10 p.c. growth of basic goods industries. Intermediate goods industries showed a remarkable decline. However, growth of capital goods industries in 2005-06 was remarkable.

And, this upbeat continued in 2006-07 when capital goods industries recorded a growth rate of 18.2 p.c. Along with this pattern of industrial development, one finds an increase in import-intensity of domestic manufacturing industry as a consequence of liberalisation. Hence, a process of liberalisation-induced import substitution in the manufacturing sector has emerged.

2. Expansion of Large Industrial Houses and Concentration of Economic Power:

It is the large industrial houses which have flourished over the planning period. There were two monopoly houses worth the name in 1953-54. They were Tata and Birla. Over time, these two houses have not only grown in size enormously, but also 18 other industrial houses have come up very much with a menacing speed, despite legislative measures (say, the MRTP Act).

Growth of these industrial houses is definitely an impediment towards the establishment of a socialistic pattern of society. Another allied evil of the growth of large industrial houses in India is the concentration of economic and political power in their hands.

However, the objective of establishing a socialist pattern of society in India has been buried underground in the 1990s. No longer private monopolists are required to be controlled and regulated. They are given enough latitude to produce any commodity even with multinational corporations (MNCs).

Reduction of-concentration of economic power in the hands of a few private industrialists is no longer the objective of Indian Five Year Plans since destatisation policy has assumed a great proportion after 1991. The MRTP Act has been replaced by the Competition Act, 2002.

3. Miserable Performance of the Public Sector:

It is the public sector that must flourish to fulfil the avowed objective of the government being purshed since the launching of the First Plan. Its growth is phenomenal over the years. Still, then, its performance has come in for sharp criticisms.

It has failed to generate adequate resources for development. Following the introduction of New Economic Policy in 1991, the importance of the public sector in India’s industrial planning has been pushed behind. On the contrary, what one finds is the privatisation of the public sector enterprises through a policy of disinvestment. However in recent years the performance of the public enterprises is not altogether bad.

4. Under-utilisation of Capacity:

A large number of Indian industries suffer from under-utilisation of capacity. However, the degree of utilisation of capacity differs from industry to industry and from year to year.

5. Industrial Sickness:

Along with under­-utilisation of capacity, another phenomenon that marked the industrial scene in recent years is the growing sickness of Indian industries. In 1990, the number of sick industrial units was 2,21,097 The number rose to 2.50 lakhs in March 2001. Of these, slightly less than 2.50 lakh units were in the small-scale sector.

The growing sickness of industrial units is a major growth constraint. Since then, this trend has been arrested. In March 2003 the number of total sick units declined to 1.71 lakhs. It declined further to 1.31 lakh in March 2006. Of these, the number of small units stood at 1.26 lakh in 2006 and it declined further to 1.14 lakh in March 2007.

To sum up, India’s industrial expansion over the plan period presents a mixed picture. Compared to the pre-independence level, industrial growth in the planning period is phenomenal. But, in the process, some undesirable elements have come out in recent years which have vitiated the industrial climate. Policy implication is, thus, equally apparent.