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Industry Growth Rate in India GDP

The Indian economy is the twelfth biggest in the world for it has the GDP of US$ 1.09 trillion in
2007. The country has the second fastest major growing economy in the whole world for it has
the GDP rate of 9.4% in 2006- 2007.
The contribution of the Industrial Sector in India GDP
The industrial sector is one of the main sectors that contribute to the Indian GDP. The country
ranks fourteenth in the factory output in the world. The industrial sector is made up of
manufacturing, mining and quarrying, and electricity, water supply, and gas sectors. The
industrial sector accounts for around 27.6% of the India GDP and it employs over 17% of the
total workforce in the country. The Growth Rate of the Industrial Sector in India GDP came to
around 5.2% in 2002- 2003. In this year, within the India GDP, the mining and quarrying sector
contributed 4.4%, the electricity, water supply, and gas sector contributed 2.8%, and the
manufacturing sector contributed around 5.7%.
The Growth Rate of the Industry Sector in India GDP came to around 6.6% in 2003- 2004 and in
this year, the electricity, water supply, and gas sector contributed 4.8%, the mining and
quarrying sector contributed 5.3%, and the manufacturing sector contributed 7.1% in India GDP.
Industry Growth Rate in India GDP came to 7.4% in 2004- 2005, with the manufacturing sector
contributing 8.1%, the mining and quarrying sector contributing 5.8%, and the water supply,
electricity, and gas sector contributing 4.3% in India GDP.
Industry Growth Rate in India GDP came to 7.6% in 2005- 2006. In this year, the mining and
quarrying sector contributed 0.9%, the manufacturing sector contributed 9.0%, and the water
supply, gas, and electricity sector contributed 4.3%. The Growth Rate of the Industrial Sector
finally came to 9.8% in 2006- 2007. This shows that Industry Growth Rate in India GDP has
been on the rise over the last few years.
The reasons for the rise of Industry Growth Rate in India GDP
The reasons for the increase of Industry Growth Rate in India GDP are that huge amounts of
investments are being made in this sector and this has helped the industries to grow. Further the
reasons for the rise of the Growth Rate of the Industrial Sector in India are that the consumption
of the industrial goods has increased a great deal in the country, which in its turn has boosted the
industrial sector. Also the reasons for the increase of Industry Growth Rate in India GDP are that
the industrial goods are being exported in huge quantities from the country.
The Indian government must boost the Industrial Sector
Industry Growth Rate in India GDP thus has been registering steady growth over the past few
years. This has given a major boost to the Indian economy. The government of India thus must
continue to make efforts to boost the industrial sector in the country. For this will in turn help to
grow the country's economy.
The industrial growth pattern in India can be divided into four phases as explained below:
1. First Phase (1951-65): Strong Industrial Base:

7 per cent to 9. (b) Considerable slackening of real investment. basic industries. Thus basic industries were engaged in the production of ferrous metal groups.6 per cent during this period.1 per cent. During this phase. During this period investment was made into unproductive uses. (a) The wars of 1962. The annual compound growth rate in industrial production declined from 9.0 per cent during the Third Plan to only 4. . a strong industrial base was laid during the first phase covering the first three plan periods. Again the annual rate of growth of basic industries moved between 4. the annual growth rate during the second phase was far below as compared to that of Third Plan. Causes of Deceleration and Retrogression: The causes of deceleration and structural retrogression during the second phase are. construction materials. Thus.7 per cent which was far below as compared to that of first three five year plans. Successive droughts of 1965-67 and 1971-73.0 percent. huge investments were made in major industries like iron and steel. 2.1 per cent covering the period of 1965 to 1976.1 per cent over the same period. mechanical engineering industries etc. The industrial sector faced a structural retrogression during the second phase. and oil crisis of 1973 was also responsible for supply constraints. a negative annual growth rate of (—) 1. The capital goods industries registered its annual average growth rate of only 2.7 per cent to 12. 1965 and 1971. heavy engineering and machine building industries. The annual compound growth rate of industrial production during the first three plan periods moved between 5.The first phase of industrial growth consists of the first three plan periods which had build a strong industrial base in India. For.6 per cent during the second phase Fifth Plan recorded the annual growth rate of 5.6 per cent was recorded in respect of industrial outputs as the index of industrial production in this year (Base 1970 = 100) has declined to 148. In 1976-77. The capital goods industries had registered its annual average compound growth rate between 9.2 as compared to 150. Fourth Plan and Fifth Plan. Second Phase (1965-80): Deceleration and Retrogression: The second phase of industrial growth covers the period of three Ad-hoc Annual Plans.7 in 1978-79. In 1979-80.8 per cent to 19. the annual rate of growth of industrial output was 6.

The growth rate for consumer durable goods increased to 16. Third Phase: Industrial Recovery in Eighties (1981 to 1991): The third phase of industrial growth covers the period of eighties consisting of both Sixth and Seventh Plan.9 per cent during 1980-85 and 1985-89 respectively. basic metal and alloys and metal products recorded only 5.0 percent in 1989-90. In 1990-91 also. capitalist class and the class representing rich agricultural farmers. It shows a clear shift in the growth pattern of the industrial sector during eighties (Third Phase) as compared to two earlier phases. During the period 198185. Looking at the growth of different product group in the manufacturing sector.6 per cent during 1985-90.9 percent in 1985-89.0 per cent which further increased to 8.4 per cent and 3. In 1981-90. But gradually declined to 5. expanded at an annual average rate of 11. The basic goods industries maintained the annual average growth rate of 8. 3. Thus during this third phase. there was a set back as the segment recorded only 1.47 per cent in machine building sector. there is a clear shift in the pattern of industrialisation in the country.(c) Unequal distribution of income in favour of the rich followed by stagnation in demand for consumer goods. the production of chemicals and chemical product industries. The capital goods industries recorded 6. the average annual rate of growth of industrial production was accelerated to 7. the annual rate of industrial growth was registered at 9.0 per cent. (e) Policy constraints and bureaucratic obstacles on industrial growth. (d) Unsatisfactory performance of the agricultural sector.19 per cent as compared to that of only 5. (f) Conflicts in the dominant coalition between proprietary classes.94 per cent and 3.3 per cent annual rate of growth during 1980-85 which experienced increase in its growth rate of 13.8 per cent in 1990-91. during this period. The growth rate of capital goods was 17. petrochemicals and allied industries recorded a faster rate as compared to others. This period of eighties experienced industrial recovery. iron and steel. Causes of Industrial Recovery: .15 percent 4. chemicals.8 and 8.7 per cent growth rate and then the same rate again shot up to 14. Moreover. During this period.8 per cent in 1989-90 and 1990-91 respectively.95 per cent.4 per cent in 1990-91.0 per cent in 1985-89 and then significantly 24.

During the same period. During the year 1996-97 industrial output has increased by 7.8 per cent in 1997-98. 4.4 per cent during April-Feb. (c) Revival of investment in the infrastructure sectors and its effects in raising the degree of efficiency of the industrial sector. from 1991-92 to 1997-98.. This is the clear evidence of sharp industrial retrogression in the country.10 per cent as compared to that of 8. (b) Higher contribution of agricultural sector in some of the regions in the country which helped in raising the demand for industrial inputs used for agricultural production.7 per cent in 1996-97 to only 4. The growth rate of consumer non.7 per cent in 1997-98.e. 1996-97 and 1997-98 respectively. Causes of Industrial Slow down: The factors responsible for industrial slow down in the fourth phase are summarized as below: (a) Decline in the growth of export to 4. i.6 per cent in 1997-98.2 per cent and 2.7 per cent.5 per cent in 1990-91. the general growth rate of industrial production declined from 7. 1998.durables decreased to 4. . During 1991-92.6 per cent in the first eight months between April and November 1997. the country had a bitter experience of negative growth rate of (—) 0. Fourth Phase: Industrial Retrogression followed by an Upturn and Downturn Nineties (1991-92 to 1997-98): The fourth phase of industrial growth covers the early part of nineties. The growth rate of capital goods industry declined to 7. This short period experienced a sharp industrial retrogression followed by an immediate upturn in the industrial growth of the country. The industrial growth rates by use-based industrial classification again showed downward trend from April to Feb.2 per cent in 1996-97 and to 1.2 per cent in April to Feb. But after that in 1995-96 the country experienced an industrial upturn trend as annual growth rate during this year stood at 11.The main factors which were responsible for the industrial recovery during eighties are described as under: (a) Introduction of new industrial policy and liberal fiscal period. 1997 to 7.2 and 10.7 per cent. (b) The impact of the tight money policy followed in 1995-96 when the monetary expansion was about 13.1 per cent and further 8.

02. Industrial slowdown was recorded in all broad sectors such as manufacturing. In fact. Signs of Sustained Industrial Recovery in 1999-2000: The acceleration of growth rates in various sectors of the economy underline the significance of industrial recovery in the current year and cyclical downturn. the country is experiencing a serious phase of industrial slowdown during 200001 and in 2001. the reasons for slowdown in industrial growth during this period is due to a number of structural and cyclical factors.7 per cent in April to December 1998. electricity and mining an all end use based groups such as capital goods. . However.01. is substantially lower than the 5. (e) Non-metallic mineral products. basic goods. 6. wool. machinery and equipment. the growth rate of the industrial sector during the first nine months of 2001-02 is considered as the lowest during the last ten years. intermediate goods and consumer goods. (d) In some cases the rate of demand growth was overestimated. (f) Industries like electricity.7 per cent in overall IIP.2 per cent in April-December 1999.3 per cent. consumer goods both durables and non-durables. (b) The position of electricity generation remained much better in 1999-2000. grew at 8.2 per cent in April-December 1999 as compared to that of only 3.7 per cent in April-December 1998. are having higher growth in 1999. (d) As per use based classification. following are some of the major indicators of industrial recovery in recent years: (a) Overall industrial output of the country i.e.December 2001-02 at 2. leather.(c) Significant build up industrial capacity in the first phase of liberalization. The overall industrial growth during April. paper and basic chemicals are some of the industries growing at more than 10 percent during 1999-2000.8 per cent achieved during the corresponding period of 2000. (c) Manufacturing segment of industrial sector has grown by 6. steel and cement having a weight of 26. (g) Better corporate performance in 1999-2000 compared to previous year. crude oil. However. coal. intermediate goods.2000. Industrial Slowdown since 2001: In recent years.

There is potential for the sector to account for 25-30 per cent of the country’s GDP and create up to 90 million domestic jobs by 2025. out-dated technology and restricted labour laws’.The other reasons are explained below: 1. 6. Mr Narendra Modi.iBusiness conditions in the Indian manufacturing sector continue to remain positive. The composite PMI that combines both services and manufacturing sectors was at a five month high of 52. thanks to a sharp increase in buying levels coupled with a record drop in stocks of finished goods.56 billion) in the last 12 months from . Investments In a major boost to the 'Make in India' initiative. has launched the ‘Make in India’ initiative to place India on the world map as a manufacturing hub and give global recognition to the Indian economy. Infrastructural bottlenecks and high costs.6 points in August 2015. Market Size India’s manufacturing sector could touch US$ 1 trillion by 2025.3. The adjustment process is industry in response to increased competition in the form of Mergers and Acquisitions is taking longer time than expected. 5.10. 3. the seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) stood at 52. from 16 per cent currently. Introduction The Prime Minister of India. Low levels of productivity due to low economies of scale. the Government of India has received investment proposals of over Rs 1.000 crore (US$ 16. 4. The Government of India has set an ambitious target of increasing the contribution of manufacturing output to 25 per cent of Gross Domestic Product (GDP) by 2025. In August 2015. Lower speculative demand for sectors like automobiles and real estate due to expectation of lower prices and reduction of taxes and duties in the short term period. communications and power sector. 2. Unreliable supply of services in transport. High interest rates.

65 million) by 2020. India has become one of the most attractive destinations for investments in the manufacturing sector. Samsung. Prime Minister of India.various companies including Airbus.160 crore (US$ 36. Gujarat. Sanofi SA.  India is currently among the top 10 sourcing countries for IKEA. Thomson. "The localisation efforts will reduce the waiting period and accelerate the servicing process of our cars as we had to (previously) depend on our plants overseas for supply and will help us on the pricing front. which has an assembly set up in Noida.13 billion) in India to add 4. near Ahmedabad. an insulin product to treat diabetes. pitched India as a manufacturing destination at the World International Fair in Germany's Hannover earlier this year.000 in the country.9 billion in 2014. Some of the major investments and developments in this sector in the recent past are:  Siemens has announced that it will invest € 1 billion (US$ 1. Phillips.42.  Taiwan-based HTC has decided to manufacture products in India. “Samsung India Electronics is committed to strengthen its manufacturing infrastructure and will gradually expand capacity at this plant to meet the growing domestic demand for mobile handsets.  Samsung Electronics has invested Rs 517 crore (US$ 77. Mr Narendra Modi. helping the country maintain its position as the seventh largest clean energy investor in the world.000 jobs to its existing workforce of 16. Mr Modi showcased India as a business friendly destination to attract foreign businesses to invest and manufacture in the country.82 million) towards the expansion of its manufacturing plant in Noida. Government Initiatives In a bid to push the 'Make in India' initiative to the global level.  Foxconn is planning an aggressive expansion in India. as per the company.  US-based First Solar Inc and China’s Trina Solar have plans to set up manufacturing facilities in India. Uttar Pradesh (UP). LG and Flextronics among others. HTC is believed to have partnered GDN Enterprises.”  Suzuki Motor Corp plans to make automobiles for Africa.  BMW and Mercedes-Benz have intensified their localisation efforts to be part of ‘Make in India’ initiative.45 billion) during a two-day Global Investors Meet in September 2015. Clean energy investments in India increased to US$ 7. the company’s next big bet.  Shantha Biotechnics Private Limited has started building a facility to manufacture Insuman. The plan is to double sourcing from India to €630 million (US$ 711.24 million) to build the facility. will invest Rs 460 crore (US$ 69. building up to 12 new factories and employing as many as one million workers by 2020  The State Government of Tamil Nadu has signed investment agreements worth Rs 2. . as well as for India at its upcoming factory in Hansalpur. which acquired Shantha Biotechnics.

Government of India.000 crore (US$ 752. 2015 .520) and Rs 1 million (US$ 15.  Government of India has planned to invest US$ 10 billion in two semiconductor plants in order to facilitate electronics manufacturing in the country.covering loans between Rs 50. Exchange Rate Used: INR 1 = US$ 0. and automobile manufacturing that require large capital expenditure and revive the Rs 1. have set up or are looking to establish their manufacturing bases in the country.covering loans up to Rs 50.13 million)  Dr Jitendra Singh. With impetus on developing industrial corridors and smart cities.000 crore (US$ 27. oil and gas. Some of the notable initiatives and developments are:  The Government of India has asked New Delhi's envoys in over 160 countries to focus on economic diplomacy to help government attract investment and transform the 'Make in India' campaign a success to boost growth during the annual heads of missions conference. India is an attractive hub for foreign investments in the manufacturing sector. luxury and automobile brands.000 (US$ 752).266 crore (US$ 943. the government aims to ensure holistic development of the nation.5 million (US$ 7. The three products available under the PMMY include: Shishu . Union Minister of State (Independent Charge) of the Ministry of Development of North Eastern Region (DoNER). The corridors would further assist in integrating.85. MoS PMO. Public Grievances & Pensions. Several mobile phone.052). Mr Modi has also utilised the opportunity to brief New Delhi's envoys about the Government's Foreign Policy priority and immediate focus on restoring confidence of foreign investors and augmenting foreign capital inflow to increase growth in manufacturing sector.58 million) for setting up mobile manufacturing units in the state. and Tarun . among others. Atomic Energy and Space.  The Government of Uttar Pradesh (UP) has secured investment deals valued at Rs 5. Personnel.520).The Government of India has taken several initiatives to promote a healthy environment for the growth of manufacturing sector in the country. Kishor .85 billion) Indian capital goods business.  Entrepreneurs of small-scale businesses in India will soon be able to avail loans under Pradhan Mantri MUDRA Yojana (PMMY). monitoring and developing a conducive environment for the industrial development and will promote advance practices in manufacturing.covering loans between Rs 0.5 million (US$ 7. Road Ahead The Government of India has an ambitious plan to locally manufacture as many as 181 products.01505 as on September 15.  The Government of Maharashtra has cleared land allotment for 130 industrial units across the state with an investment of Rs 6. has announced the 'Make in Northeast' initiative beginning with a comprehensive tourism plan for the region.000 (US$ 752) to Rs 0. Prime Minister. The move could help infrastructure sectors such as power.