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Indian Economy / Industry Sector

Industrial Development in India since Independence

At the time of Independence, the Indian industry was severely underdeveloped with feeble infrastructure. The main reason for underdevelopment of industry is due to lack of government support. The little developed industry ownership was in the hands of very few industrialists. There was no sufficient managerial and technical skills at that time.

Development of Industry in India

  • During the Five Year planning periods in India, large scale industries were initiated during the first fifteen years. The initial three Five Year Plans are very important because they aimed at setting up a strong industrial base in India.

    The growth rate in industrial production witnessed a strong acceleration during this period. Many hydroelectric power projects were initiated and steel plants at Bokaro, Bhilai, Durgapur and Rourkela were started out during this period.

    Railway network and infrastructure was strengthened. Many fertilizer and cement companies were also started. Two research institutes, The Atomic Energy Commission of India and Tata Institute of Fundamental Research were founded.

  • During the next 15 years, industrial production witnessed deceleration. The main reasons for the deceleration were, wars with Pakistan and China, strong Licence Raj system, shortage in raw materials because of low agricultural production, etc.

  • From 1980 to 1991, there was recovery in industrial growth particularly in manufacturing and the capital goods sector. There was also increase in productivity in the Indian industrial sector.

    The important reasons for this recovery were, adoption to newer technologies, partial decontrol of bureaucratic hurdles, liberalizing the trade and industrial policy, heavy spending by Government, expansion of services sector, etc.

  • During the period 1991-92, India witnessed balance of payment problems. India was not having enough foreign exchange reserves for paying the import bill of crude oil even for 15 days.

    At this juncture, the then Prime Minister P. V. Narasimha Rao and the Finance Minister in his Cabinet, Dr. Manmohan Singh brought in the New Industrial Policy 1991 and initiated massive Liberalization, Privatization and Globalization (LPG) processes.

  • The steps taken during this period were Abolishing the industrial licenses, Reducing the number of industries that are reserved for the Government, Reducing the Government share in Public Sector Undertakings through Disinvestment, Encouraging the Ease of Doing Business, Encouraging foreign investment, Reducing the rates of all types of taxes, etc.

  • Despite LPG initiation, Indian industry did not grow as expected. But Services sector grew a lot surpassing the Manufacturing sector in contributing its share to Gross Domestic Product (GDP).

    To encourage industry, Government established and continue to establish Special Economic Zones (SEZ), minor and major industrial regions in India and provides various incentives to the industry sector. The process of implementation of LPG is still continuing today.