Evolution
Industries in India is largely a post-independence initiative. India had Cotton textile ⚪ 👕, Sugar 🍬 and Jute. But industries were not as well developed and most of the industries would supply processed raw material semi-finished product for the development of domestic industries of Britain🇬🇧.
So Industries during the colonial times was based on exports and used the advantage port internal and raw material and cheap labour for its localisation.
Port-based ⚓ development has been one of the reasons in the disparities related to industrial location and industrial agglomeration.
India's industrial sector depended on the export market and fluctuations in the export economies invariably hurt India.
The world war's ⚔️卐 policies protecting the domestic industries in Britain, Monopoly on tea 🍵 and cotton ⚪ to China, development of the Manchurian industrial 🏭 region by Japan, all adversely impacted the Indian industry.
Example due to war interest, Britain banned export of of jute bags to Germany and axis countries because jute bags were used as sand bags. This impacted the jute industry adversely.
During and after the world wars particularly in 1920s Swadeshi movement and the growth of domestic market partially help to sustain the industry even though the export market had collapsed dramatically. The textile centre in particular spinning weaving sector/handlooms helped the development of cotton textile sector under the khadi movement.
Post independence
The major Philip to industries was under 1956 Industrial Resolution, where is India's economy was thought to be developed along the Western industrialisation lines under the Nehruvian model and Mahalanobis model.
the two components where
- import substitution policy
- imports were discouraged
- domestic production was supported to meet to domestic demands of products in India
- Capital intensive heavy engineering
- producer goods industries and intermediate goods industries for promoting an industrial base in India
some of the industries which came up under this model law.
- Steel plants
- Power plants
- Metal smelters
- Heavy engineering
- Heavy electrical equipment industry
- Machine tools industry
from the 1960 and 70s industrialization was also promoted for backward area development using licensing policies MRTP act and with the intention of dispersing and encouraging smaller players reservation policy for small scale sector was also used. The PSU where encouraged for investment intensive sectors and strategic sectors partly e also for employment generation. The restrictive policies and the in the intention of promoting domestic industries bi discouraging competition from imports resulted in adversely impacting industrialisation.
most industries where last making units and Adrian on India's finances.
post reforms
structural adjustment programme world Bank.
under balance of payment crisis and the structural adjustment programme forced by by world Bank and IMF and policy Washington consensus which was promoted by them promoted SAP. India had to opt for LPG reforms favouring increased liberalized market market best economic. Dramatically reduced state as active player in the industrial production process.
components of LPG
delicensing no permits licence is a for production or location.
deregulation in liberal market best policy bye scrapping MRTP act FERA was replaced by FEMA. the government role is to facilitate the process and not to restrict and micromanage the economy and industrial process.
dereservation
it was done under Abid Hussain committee reservation recommendation where the reservation for of small scale sector has been entirely removed. 10 ways to encourage competition quality of gradation to attract investments from larger firms.
liberalisation
external trade got liberalized. Rationalisation and reduction of tariffs. No restriction on imports. Liberalisation of capital market sector. FDI FIR stock exchange grows faster. Inna liberalization India switched from import substitution policy towards export promotion policy. Dinner liberalisation the the economic and industrial sector hard the advantage of attracting tech managerial expertise explore new markets and the source of investment and finances improved.
PSU reforms.
it was essentially to make PSU financially independent and to reduce the burden on state exchequer.
privatisation which is outright sale of of industry to a buyer. Government as a majority stakeholder and minority stakeholder.
disinvestment - it is not outright sale rather of loading a percentage of share to private sector if in the process the government becomes a minority stakeholder it may be called as privatization again. But in PSU government retains majority stake while bringing in a private player is not privatization.
if the PSU can neither be sold revived or disinvested, it was also shut down.
comment on the policies and initiatives
post reforms industrialisation has expanded. There has been an increase in private sector participation. There has been diversification of industrial products. India's export market has expanded. There has been an industrial dispersion towards smaller towns.
limitation
the new economic reforms was largely paperwork and procedural reforms and hence the industries which developed and the sectors which gained were those which were infrastructure intensive. Example industries which were based on assembling. Manufacturing and heavy industry have not been benefited because infrastructure continuous to be inadequate with respect to roads ports railways power generation. Limited infrastructure expansion has also not helped dispersion to all parts of the country.
consequence manufacturing continuous to be subdued and localised. poster reforms India's development has been primarily in service sector which has peaked and slowed down.
the second generation reforms is therefore related to infrastructure growth for industrial and expansion of manufacturing sector.
manufacturing should be all round FMCG export based manufacturing domestic consumption heavy engineering agro-based.