Indian Industry

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During the first term of the NDA regime, as per World Bank, the GDP growth in India was 6.6% in 2017. In the short term, the growth was adversely impacted by Modi government measures like demonetisation and introduction of GST. On the other hand, World Bank has projected its growth forecast at 7.5% for FY2019-20 and retained the same forecast for the next two years as well. This shows a strong industrial outlook for India.
According to the Index of Industrial Production (IIP), our country’s industrial output grew at 3.4% on YoY basis in April 2019. The estimated contribution of various sectors to the GDP is agriculture 16%, industry 30% and services 54% respectively. Promoting industrial growth through infrastructure development, easy access to credit, and through research and skill development measures remain the government’s priority, as evidenced in ‘Make in India’ initiative.

As far as industries are concerned, 12 out of 23 groups in the manufacturing sector have performed very well during May 2019. Some industries have shown positive growth like wood and products of wood and cork. The best possible result has come from the manufacture of articles of straw and plating materials. Its growth rate is 24.8 percent; then comes the food products at 15.9 percent and computer, electronic and optical products at 9.4 percent.

In 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.

Accordingly, in the 2019-20 budget, Rs 3.19 lakh crore money has been allocated to the defence sector. This was mentioned by the Finance Minister Nirmala Sitharaman, while presenting her maiden budget in Modi 2.0 government. She further stated that, “This is a national priority.” So, defence equipments which are not manufactured in the country would be exempted from the basic duty. Indian air force requires to replace its old Soviet-era aircrafts. Indian navy has also planned to have dozen submarines to cope with the presence of the Chinese navy in the Indian ocean.

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 is in much better health than before. Problems such as License Raj are no more, and new domains of business are opening on a regular basis. This is especially true of infrastructure sector, as well as other areas 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 certain 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. The stock prices of some companies witness volatility 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.

A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. Special dispensation is available to companies and firms incorporated abroad and owned by NRIs.

FIIs and FPIs can invest in the capital of an Indian company under the Portfolio Investment Scheme (subject to sectoral or statutory caps). It also stated recently that in sectors where there is provision for automatic rules for FDI, foreign companies need not get permission from the Foreign Investment Promotion Board (FIPB) if they want to merge with a company in India or just acquire it. In certain sectors, FDI is permitted up to 100% on the Automatic route. These include mining and exploration, coal and lignite, oil and natural gas fields, DTH and cable networks, airports etc.

This information has been revealed by a circular emanating from the Department of Industrial Policy and Promotion (Chapter 5: Sector Specific Conditions on FDI, Consolidated FDI Policy 2017). The same circular has also stated that in cases where automatic rules are applicable, one does not need to take 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 trade deficit in 2018-19 has gone up to US$ 76.42 billion, as against $162.05 in the previous year. The difference between exports and imports has been narrowed to US$10.89 billion as compared to US$13.51 billion in March 2018.

Exports rose to 11% in March 2019. It is possible due to higher growth in pharmaceuticals, chemicals, petroleum products and engineering sector. In March 2019, exports hit US$32.55 billion compared to US$29.32 billion in the same month last year.

The healthy growth has come at a time when World Trade Organisation (WTO) decreased global forecast of merchandise trade from 3% in 2018 to 2.6% in 2019. This was stated by Ganesh Gupta, president, FIEO. He further added that it was possible due to the hard work put in by the exporting community.

Oil imports in March 2019 were $ 11.75 billion, and it was 5.55% more than the same month last year. However, imports of gold grew 40% more at $ 22.74 billion, as against the same month last year.

The US is India's major exporting ally. It buys almost one-fifth of India's exports. Country's IT services exports to the US have touched $63.51 billion in 2018. The Prime Minister, speaking on the fifth meeting of NITI Aayog's governing council recently, stressed that the export sector is important for increasing per capita income and generating employment.

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 readymade garments prepared from different types of manmade or natural fibres. Textile industry provides job opportunity to over 45 million (2017-2018) individuals, thus playing a major role in the nation's economy. It has 2 per cent share in GDP and shares 15% of the gross export income in 2017-2018.

  • Food Processing Industry

    Food Processing Industry's contribution in the Indian economic growth is vital. The government of India has been encouraging this industry. India's food and grocery market is the sixth largest in the world, and contributes 70% of the sales. So, this industry is called a 'Sunrise Sector'. The important thing is that 1.85 million people work in this industry. It is estimated to expand by 37 million by 2025. Its contribution is around 14% of manufacturing GDP and 13% of India's total food exports. Some of the key players in India's food processing industry are PepsiCo, Glaxo-SmithKline (GSK), Mapro Foods, Dabur, Parle, Nestlé, Frito-Lay, and Haldiram.

  • Chemical Industry:

    India is the third largest producer of chemicals in Asia. Indian Chemical industry generates around 80,000 commercial goods ranging from plastic to toiletries and pesticides to beauty products. It is regarded as the oldest domestic sector in India. In 2016-17, Alkali chemicals had the largest share in the Chemical industry in India which is approximately 69% share in the total production. Production of polymers account for around 59% of total production of basic major petrochemicals.

    The future of petrochemical market in India seems to be bright. It is expected to go up at 10 per cent over the next five years, to touch US$ 100 billion by 2022. Market for crop protection chemicals in India is expected to reach US$ 7.5 billion by 2019. The government schemes and high FDI inflows have proved beneficial for the growth of chemical industry. The government has announced to upgrade the technology and simplify FDI procedure for the rapid growth of this sector. The government has also granted tax and allowed duty reductions. Import duty is relaxed on various inputs including coal, oil, naphtha etc.

  • Cement Industry:

    Indian cement industry is second largest in the world. India has 10 large cement plants governed by the different State governments. Besides this, India has 115 big cement plants and around 300 small cement plants. The big cement plants have installed capacity of 148.28 million tonnes per annum whereas the mini cement plants have the total capacity of 11.10 million tonnes per annum. Cement demand is going to touch 550-600 million tonnes per annum by 2025. At present, Indian cement industry is producing 280 million tonnes for meeting its domestic demand and 5 million tonnes for the exports. Ambuja cement, J K Cement, Aditya Cement, L & T Cement and Ultratech Cement are some of the major cement companies in India.

  • Steel Industry:

    Indian Steel Industry is a 400 years old sector. As per the 2018 Report, India ranked second in steel production. It produces 106.5 MT in 2018. The boost in the Indian steel due to availability of raw material in abundance and cost-effective labour. Indian steel consumption is expected to touch 103 million tonnes in 2019, as against 96 million tonnes in 2018.

    The key players in Steel Industry are Steel Authority of India (SAIL), Bokaro Steel Plant, Rourkela Steel Plant, Durgapur Steel Plant and Bhilai Steel Plant.

  • Software Industry:

    Software Industry in India has registered a massive expansion in the last 10 years. India's IT sector growth has reached US$ 181 billion in 2018-19. Exports from the IT sector have gone up to US$ 137 billion in FY19 while domestic revenues (including hardware) advanced to US$ 44 billion. The IT industry is expected to maintain growth rate of over 9 per cent.

  • Mining Industry:

    The GDP contribution of the mining industry is 2.2% to 3% 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

    started its operations in the year 1867 and is considered as one of the oldest Indian industries. 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. India ranked third in energy and oil consumption in the world after China and the US. It is the fourth largest importer of Liquefied Natural Gas (LNG).
  • Fisheries in India

    India is third largest producer of fish in the world. Fish industry is also known as 'Blue Revolution'. This industry is important for India because it provides job opportunities and is one of the best sources of nutritional food for local population. Fisheries in India are still developing, so it is a good source of earning foreign exchange too. The fishery sector fetches 1.21% of the total GDP and 5.37% of the GDP from agriculture sector.

Last Updated on: July 18th, 2019