Indian Industry

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During the second term of the UPA regime, as per experts, the industrial growth of India was hampered to a significant extent. On one hand, the GDP sharply declined from 9.4 in 2010 to 4.5 in 2013, which shows a drop of nearly 50 percent. On the other hand,
the Index of Industrial Production (IIP) was flat in January 2014 after steady decline. However, as of the present scenario, experts suggest that right now defence is one area that can significantly revive the stalled industrial scene of India, especially the manufacturing sector. If the ‘Make in India’ programme of Modi is to materialise, then this is the most obvious bet.

Experts suggest that Manohar Parrikar has to use the national defence budget in such a way that it enables the manufacturing of more arms and armaments in India. If weapons such as guns, fighter planes, tanks, warships, howitzer and submarines can be made in India, it will give a significant boost to the Indian economy. The problems with manufacturing are plenty – competition, issue of profits and the vexing question of land. The last one can be a really expensive proposition. There is only one thing that authorities need to be sure of with defence equipment – can they be used for national security?

Can India Be Industrially Self-Sufficient?

Industrialists like Ratan Tata opine that in the last few years, India has been able to significantly increase its capacities to achieve self-sufficiency from an industrial point of view. He says with the introduction of the liberal economic policies from 1991 onwards, the Indian economy has been in much better health than before. Problems such as License Raj are no more and new domains of business are opening up on a regular basis. This is especially true of infrastructural sector as well as the ones that were previously the sole preserve of the government.

Indian industrial sector has been forced to restructure itself and thus has become significantly modern than before. There is more focus on reducing costs of production and achieving the levels of technological competence that can help one stay globally relevant and deal with cut-throat competition. He feels that companies that were previously used to monopolising particular areas of business because of protective legislations will find it hard to survive in the new environment. However, he feels that companies that are willing to change with the need of time will be able to sustain and do well in the days ahead.

Industrial Rules and Policies in India

 If the industrial sector in India has to flourish, then there has to be sufficient foreign capital in the country. However, as many foreign firms would attest, it is not that easy to invest in India. Recently, the stock prices of some companies had taken a hit because of their issues with the ongoing tax regime. However, the Modi government is attempting to make things better for international companies interested in investing in India. Foreign Direct Investment (FDI) rules have been amended significantly so as to allow interested Non-Resident Indians (NRIs) to invest in India.

It also stated recently that in sectors where there is provision for automatic rules for FDI, foreign companies need not to get permission from the Foreign Investment Promotion Board (FIPB) if they want to merge with a company in India or just acquire it. This information has been revealed by a circular emanating from the Department of Industrial Policy and Promotion. The same circular has also stated that in cases where automatic rules are applicable, one does not need to take the government’s permission for issuing employee stock options. It is expected that such initiatives will increase the levels of credibility of the FDI policy and make India a far more attractive business destination for international investors.

Imports and Exports- Success Rate

India has not been doing well in its Balance of Trade as can be gauged from the fact that April 2015 was the 5th straight month that its exports took a hit and imports went up by some margin. In that month, its gold imports increased by a whopping 78 percent, while its exports plunged at a rate of 14 percent. The total worth of goods exported by India in April 2015 was US$ 22 billion. Much of this can be blamed on the fact that the prices of gems and jewellery and petroleum had fallen in the international markets.

The decrease of international prices of crude oil is one reason India’s imports came down. The aggregate worth of crude oil imported in India was US$ 33 billion and it marked a decrease of 7.5 percent. However, the fall in petroleum exports has been even higher and this is why the trade deficit ran up to almost US$ 11 billion. A year back, this deficit was calculated at US$ 10 billion. There was a reduction of 42.6 percent in oil imports in April and the present figure reads US$ 7.4 billion. Non-oil imports during that period were measured at US$ 25.6 billion, an increase of 12.6 percent.

The entire amount of gold imported during April 2015 was estimated at US$ 3.1 billion and this further increased the trade deficit. Of late, in May, oil prices have been increasing somewhat. However, their present price is still below the 100-dollar-per-barrel mark and this is why the exports have gone down a lot as well. During March, India’s exports reduced by 21 percent, which was the highest rate of contraction in the last six years. November 2014 was the last occasion when exports showed some growth with an increase of 7.3 percent.

The Federation of Indian Export Organisations has said that the prime reason for the fall in exports continues to be the fall in the prices of commodities like crude oil, metals and other necessary commodities. The growth rate of prices of products such as gems and jewellery, plastic goods and electronics is also a matter of great worry for the economic policymakers of India.

Major Industries in India

  • Textile Industry

    This industry covers a wide range of activities ranging from generation of raw materials such as jute, wool, silk and cotton to greater value added goods such as ready made garments prepared from different types of man made or natural fibres. Textile industry provides job opportunity to over 35 million individuals thus playing a major role in the nation's economy. It has 4 per cent share in GDP and shares 35% of the gross export income besides adding 14% of value addition in merchandizing sector.

  • Food Processing Industry

    In terms of global food business, India accounts less than 1.5% inspite of being one of the key food producing nations worldwide. But this on the other hand also indicates the enormous possibilities for the growth of this industry. Supported by the GDP estimates, the approximate expansion of this sector is between 9-12% and during the tenth plan period the growth rate was around 6-8%. Food Processing Industry provides job opportunities to 1.6 mn people and it is estimated to expand by 37 mn by 2025.

  • Chemical Industry:

    Indian Chemical industry generates around 70,000 commercial goods ranging from plastic to toiletries and pesticides to beauty products. It is regarded as the oldest domestic sector in India and in terms of volume it gives a sense of pride to India by featuring as the 12 largest producer of chemicals. With an approximate cost of $28 billion, it amounts to 12.5% of the entire industrial output of India and 16.2% of its entire exports. Under Chemical industries some of the other rapidly emerging sectors are petrochemical, agrochemical, and pharmaceutical industries.

  • Cement Industry:

    India has 10 large cement plants governed by the different State governments. Besides this India have 115 cement plants and around 300 small cement plants. The big cement plans have installed competence of 148.28 million tones per annum whereas the mini cement plants have the total capacity of 11.10 million tonnes per annum. This totals the capacity of Indian cement industry at 159.38 million tonnes. Ambuja cement, J K Cement, Aditya Cement and L & T Cement are some of the major steel companies in India.

  • Steel Industry:

    Indian Steel Industry is a 400 years old sector which has a past record of registering 4% growth in 2005-06. The production during this period reached at 28.3 million tones. India steel industry is the 10th largest in the world which is evident from its Rs 9,000 crore of capital contribution and employment opportunities to more than 0.5 million people. The key players in Steel Industry are Steel Authority of India (SAIL), Bokaro Steel Plant, Rourkela Steel Plant, Durgapur Steel Plant and Bbilai Steel Plant.

  • Software Industry:

    Software Industry registered a massive expansion in the last 10 years. This industry signifies India's position as the knowledge based economy with a Compounded Annual Growth Rate (CAGR) of 42.3%. In the year 2008, the industry grew by 7% as compared to 0.59% in 1994-95.

  • Mining Industry:

    The GDP contribution of the mining industry varies from 2.2% to 2/5% only but going by the GDP of the total industrial sector it contributes around 10% to 11%. Even mining done on small scale contributes 6% to the entire cost of mineral production. Indian Mining Industry provides job opportunities to around 0.7 million individuals.

  • Petroleum Industry:

    Petroleum industry started its operations in the year 1867 and is considered as the oldest Indian industry. India is one of the most flourishing oil markets in the world and in the last few decades has witnessed the expansion of top national companies like ONGC, HPCL, BPCL and IOC.

Last Updated on: January 17th, 2019