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Under the Auspices of the Centre for Policy Research

New Delhi


@ 1988 Centro for Policy




Publisbed by Iriohan primlani for Oxtord & IBH publishing Co. pvt. Ltd. 66 Janpath, New Delhi ll0 0OI and printd at Sunil Printers, Ring,Road, Naraina, tcw pethi 1lO0Zg



Industrial policy has a special place in Indian economy as it is intimately woven with agricultural development and gives rise to the service sector. For our economy to grow at a healthy rate, industry has to take a lead role. Centre for Policy Research, therefore, asked Prof. P.D. Malgavkar to take fresh stock of the changing environmentboth national and international-and project possibilities of the industrial sector to the beginning of the twenty-first century.
His earlier study was published in 1977. Industrial growth is a complex phenomenon and depends upon a host of factors. It is susceptible to financial and fiscal policies, social and political environment, international conditions, developments in other sectors of economy, etc. The pre-

sent study restricts itself to the study of the industrial policy

instruments and their impact on industrial $ector, Besides projecting industries sector, the study looks at the employment prospects in the year 2001, taking into consideration the population in the working age group and the labour force in the year 2001. The study suggests that in the year 2001 only 10 per cent of the people could be below the poverty line with the envisaged growth rate; and that non-renewable resources and energy may not be the constraints for development. The major area of concern would be water whose total precipitation over the subcontinent .is finite whilst regional water shortages seem to be inevitable and are likely to increase, particularly in the arid and
semi-arid areas.

The study concludes that though the per capita GDP of India would be small compared to the developed and affiuent world, India wilt have the satisfaction to have moved out from the rank of low-income to middle-income countries and that it



a more healthy, a]nd educated population, with bright possibilities of reaching a net reproduction rate of one in the near future, Its saving rate r]vould be high, its ICOR would be reasonable, its tecbnologic{ progress satisfactory and it would be well poised to achieve accelerated progress and devewould have

We hope the study will e{courage critical evaluation of industrial policy debate on the c$urse of action to be taken and a commitment to high industrial] growth to overcome the constraints of poverty eradication anp employment generation.
Centre for Policy New Delhi December, 1987


V.A. Plr




When the Centre for Policy Research suggested that I update the earlier publication "Towards Industrial Policy 2000 A.D." written in 1977, I jumped at the opportunity, especially as there is a sea change in the industrial outlook since 1984. The spectre of energy crisis is over. On the other hand, the developed countries, despite their proclamations of free trade, are following more and more restrictive and protective import policies. Tbe price parity of products being exported by the developed countries as against those by the developing countries has gone against the developing countries. The international debt burden, high interest rates, reduction in concessional finance are
threatening the economies of the developing countries. Within India, our industrial base has widened considerably allowing for sophisticated manufacture with liberalization of the industrial policy, the urge to produce goods that can stand on

their own in the international market on the basis of quality, reliability, price and performance are forcing thc pace of industrialisation and technology upgradation. Success in this area has been appreciated internationally because of which the donor nations have increased their assistance to $ 5.4 billion in 1987. We have attempted to examine the implications of the national industrial policy issues vis-a-vis the pbpulation and labour force of the country. Though a large number of socioeconomic factors contribute to indusFial growth, we have analysed the specific instruments through which industrial policy is being implemented in India viz., public sector, import polioy, price control, d.ispersal, sectoral segmentation, investment and technology. We have considered how far the changes in policy will influence the industrial growth rate which had dropped from 8.25%, (1962'66) to below 5% between 1967 and 1983. Our

Cuaprrn I


Since bringing out the monognph Towards an Indusftial PolicJ) 2000 A.D., in 1977, both the national and international scenes have taken a fresh turn. Internationally, the energy crisis which

was the biggest bugbear earlier has lost its venom. Crude oil prices have not only steadied but gone down and there are strong possibilities that they may go down further. The stranglehold ofthe OPEC countries on crude oil prices has been remov' ed. Non-OPEC countries are producing more oil and are not toeing the line of high prices set b; the OPEC countries. On the other hand, the developed countries, despite the proclamations of their belief in free trade, are following more and more restrictive and protective import policies: restrictions on imports, multi-fibre agreement (said to be "restrictive agreement with the highest cost in terms of slowing the growth of developing coun' tries"), general system of preferences, the quota system restricting import of specific commodities through specific ports; and Common Agricultural Policy (CAP) in Europe etc., have led to drastic reduction io exports from the developing countries. Thirdly, the price parity of products being exported by the developed countries as against those by the developing countries have gone against the developing countries. The prices of primary commodities such as minerals and agricultural commodities, have steadied if not gone down whilst manufactured products coming from the developed countries have become more and more costly. Fourthly, developing countries are saddled with debt burdens, high interest rates, and reduction in concessional finance from international development agencies. This has

INousrR.IeL FoLIcy AND

2001 a.u.

forced them to run for

to the developed


whose bankers stipulate onero conditions for making avaiF able additional finance to bridee the critical gap.

has widened considerably and absorption of The Government is conscious that in order to foster fr industrialisation within the country the dichotomy between ional and international markets has to be removed so that ity goods at internationally acceptable prices can be prod within the country and sold both nationally and interna . The urge for upgrading technology is the main driving fo for further industrialisation with its strongest champion the Prime Minister of the country, who wants India to dopt the Iatest technologies whether in electronics, telecommunications, steel or textiles. Attempts are being to develop coordinated policies for industry, trade, and as it is realised that an integrated and well-coordinated approach from all fronts is necessary to take the country There is re-thinking on organisational $tructure, ement, interrelationship etc. The Government has realised policies working at cross purposes with one another will only to cotrfusion, frustration and a slowing-down growth. therefore. are on to coordinate the vadous policies to India's aspiration for rapid development. Assessment of constraints in development have brought out the crucial ro of infrastructure, finance, energy, and communication and are on to streamline and update all these. It is in this context of changes, both in the international and national scenes. we will look at the Industrial Policy and Prospects-2M[ A,.D.
sophisticated more sophisticated

Nationally, our industrial




We strongly believe that all policies including those of industry have to be focussed on the population of the country, the objeclive being to ensure a healthy population well informed and educated, so that the nation takes full advantage of the resourceE and processes, population size and growth rate, their influenco on development strategy, employment pressure, the agricultural development, the savings rate, the disposable income, the structure of industrial production and services, the distribution network, and the transport and communication system. We will, therefore, start by looking at the population soenario of the country.

The population of 685 million in 1981, with the decadal growth rate of 25 per cent between 1971 and 1981, emphasises that the spectre of population growth will be haunting the Indian economy for quite some time. Some of the salient issues in the population policy which we should tackle are:


Infant Mortality

refuses to decline and was ll4 pcr ia the year 1980. Developed countries have infant mortality rates between 7 and 12 per I,000 whilst Sri Lanka has brought it down to 32 per 1,000. Of course, Kerala has brought down the infant mortality rate to 42 per I,000. But in States like Uttar Pradesh the infant mortality ratc in rural areas hovers around 184 per 1,000. Thero is enorrnous scope for reducing the infant mortality rate and all efforts should be geared towards this eod.

The infant mortality rate


4 rlousrntll poltcY AND pnosprbrs-2o0l l.n.

Under-nutrition anrl Malnutritiqr

in nxortality was larg{ly achieved through the con' famines and epidemics fy mass immunisation programmes and public health medicdl services. But the spectre of nutritional deficiency with conse{uent vulnerability to diseases remains. Nearly one-third of the flopulation suffers from undernutrition and another one'third frirm malnutrition' The quantitative problem is one of achieving p steady rise in the production of cereals and pulses and the qualitative problem is one of raising the production of nutritive fdods such as milk, eggs, fish, meat, sugar, vegetables and frui{s. Sixty per cent of India's population, living mostly in rural areas, does not even get safe drinking water.
The rJecline

trol of


Status of Women

The World Bank has brought out the low status of women in India by giving the following figu{es: Ratio of adult male to adult f$male l'9 : I literacy Number enrolled in secofdarY schools in the Year 1981 a$ Per39 Male centage of the age grouP
Ever enrolled in primary scho


20 Female 84 Malc 48 Female

The one encouraging factor iir the latest Census is that the sex ratio-number of females to 1,000 males-has, for the first time, gone up by four points bet*een the years 1971 and l98l to Sj+I fhis snolvs that the downfard trend in the position and
status of women is arrested.

4) Birth


Birth planning technology took giant strides in the last few

nologioal development added o{al pills, intra-uterine devices'

decadJs. Besides the time imme{norial practices such as abstilence, abortion,'prolonged breast leeding, and rvithdrawal, tech-


more efective copper and hormone releasing LU.Ds, menstrual

regulation, male sterilisation, simplified female sterilisation by laparascopy and mini laparotomy, Iow estrogen pills with fewer side effects, progestin only minipills, barrier methods such as condoms, diaphragms, spermicidal jellies, and injectible contraceptives efective for two to three months. Research is now concentrated on improving the safety, convenience and life-span of existing methods, and developing new methods such as pills to induce menstruation, long-lasting bio-degradable hormonal implants for women, non-surgical, chemical sterilisation for men and women, pills for rnen, and anti-pregnancy vaccine for women. WHO researchers have developed a contraceptive implanted under the skin of a woman's upper arm, effective for
five years. The world-wide funding for contraceptive research amount-

ed to $155 million in 1979. As the funding is mostly from advanoed couatries with 72 per cent of it coming from the U.S.A. where population is not a grave problem, the funds being put to research in tbis area are declining in real terms sjnce 1972-73. Moreover, as it is a social work not immediately paying, commercial pharmaceutical firms and private traders' share in the R & D on population control has steadily declined from 32 per cent in 1965 to less than l0 per cent in 1979. It is not so much the development of new birth control devices that will hold down the population but the motivation towards smaller family and translation thereof into a birth pre-

vention programme supported by an infrastructure of family planning clinics and doctors. The biggest problem in India is to take the available techni' ques to the large masses in rural areas. About 28 per cent of the couples in India usb modern contraceptives. Says the World Bank Development Report, t984, "No other country at India's socio-economic development level measured by low literacy, high infant mortality and low per capita income has shown a lower level of fertility." Another striking point is that though it is presumed that at least 60 per cent of the population of reproducible age should be protectcd for achieving the net reproduction rate-I, Kerala with only 32 per cent protected by modern contraceptives has a total fertility rate of 2.7 (1981 birth rate and death rate of Kerala 26.0 and 6.9 respectively).



2001 e.o.

Projection to the Year

of Health's projections the lowest projected populains 1996-2000 crude birth th rate (CDR) at 8.25. The million and the high projecthe CBR will remain at 3l .06 to 8.86). Report 1985) projects India's standard fertilitv and mortafertility decline but with

After the

1981 Census, the

have taken a drastic turn

rion in 2001 beirNg 959,215,700 rate (CBR) at 20.78 and crude medium projection in 2001 as tion is 1,052 million (assuming whilst the death rate will go The World Eank (World population in the year 2000, wi lity decline, at 994 million; with standard mortalitv decline at

million, and with rapid fertility and mortality decline at 938 World Bank assumes that the present fertility rate of 4 would under stand ard condi-

tions decline to 2.9 and at rapid ine conditions so down to 2.2. Life oxpect&ncy would be 6l years under standard mortality decline; and 65 years with ra d mortality decline. Tbe CBR in India has not declined to any appreciablo extent since 1975 and has to be 33.3 in the year 1982 (sample registraltion The death rate, on the other hand, has gone down 15.2 to 11.7. Though the southern States like Kerala, T Nadu and Karnataka have [hown an apprebiable decline in rate, the northern States whioh are more populous are to have a hish birth rate. It would be unrealistic. bre. to assume that the birth year 2001. Of course, the rate would drop to about 2l by increasing concern of the about the population and the steady stream of publicity extonsion agencies and
the media of paper, radio and

on reducing the birth rate. We

birth rate would go down to 25 hand. to take CDR below 9 Gxtremely difficult task. Under tion in the year 2001 would be of the Ministry of Health, that
*H6alth Ministry's assumptions for

would have some impact therefore, assume that the , the year 2000. On the other cent bv 2001 would be an assumptions the populathe medium-term projection about 990 rnillion.*
lium projection arc:

Birth rata
Death rate Gencral ferlility rarte (GFR)


32.46 152

30.45 10.80



9.55 122



World Bank projects a hypotbetical size of stationary popu-

lation for India at 1700 million, assuming it reaches NRR-I in the year 2010. China, which is the most populous country now, would have reached the net reproduction rate of I in the same year but would have ultimately a stationary population of l57l million. Thus, India will have the dubious distinction of having the higbest population in the world supported by a much smaller share of natural resources, including land, as compared to
China. Reducing inlant mortality by tackling nutritional deficien' cies, improving the status of females through revising the legal marriage age, increasing female education and encouraging birth planning, ready availability of contraceptive supplies to the rural population, and giviug incentives and social prestig,e to small family norms would go a long way in reducing population growth. Population control will mean giving lamily planning a lead' ing role in our developnrent policies. A number of developing countries have shown that the birth rate can be brought down rapidly, examples, being Sri Lanka where the CBR came down from 33 in 1965 to 27 in 1983, Thailand from 43 to 27, RepubIic of Korea from 36 to 23, Malaysia from 41 to 29, Parrama from 40 to 28, Cuba from 34 to 17, Chile ftom 32 to 24' Singapore from 3l to 17, Lebanon from 43 to 29 and China

from 39 to


If other

developing countries can achieve such phenomenal

in a span of l8 years (1965-1983) it should not be dimcult for India to achieve similar, if not better results by thc year 2O00, provided there is a national will, at both the political and people's level concerned at the spectre of population growth and a desire to overcome the menace of population growth'



Labour lTorce

As per l98l

Census, the mair]r workers

in India numbered

222,516,574 or 33.44 per cent of lhe population. The proportion

labourers to the main workers to the l97l percentage of 69.66 which shows that there is a deni in the percentage reduction of agriculture labour. Both cultivators and agricultural labourers
was 66.52 per cetrt compared

of cultivators and agricultural

have shown a decline between t$e years

percentages being:

l97l and l9gl,



curtivators 'ii.';


labourers 16.69 59.66


Fernale work participation, on

to 13.99 in The working age



other hand, increased from

as given in the World Bank is 57 per ccnt. The World age population as between ion the social norms and

Devsl6pmgrl Report,
15 and 64 years.



Bank, however, considers the


in India it

Taking into co would

between l5 and 59 years as of the population of working age I total population. As the main the working age population, the ing age population (mostly fi either because of unwillingness

fair to take the population ing age. As per l98l Census

to 59 is 54.1 per cent of the
ers constitute 62 per cent of 38 per cent of the work-

) is not in the labour market

of lack of oooortunities

(A small percentage of

enter the labour market or





in the

age group


15 to 25 is engaged



The main workers for the year 2001 are already born' As' suming 36.80 per cent of the population to be the main workers, their number, in 2001, would swell to 364.32 million because of the greater percentage ofpeople being in the working age group and greater participation of females in the work force. In other words, between l98l and 2001, 142 million extra persons will have entered the labour market, To provide job opportunities for this number within a span of20 years will strain the resources of the country.


Ind try-A


1979-80 to a growth of as 1976-77 (Table 4.1). Rangara industrial production may be put because the index is based the registered manufacturing o weights in the current index of

Analysing the recent trends ia pointed out that industrial prod rate of 7.8 per cent in the deca growth fell to 4 per cent in the 5.1 per cent in the subsequenr rate of growth has varied from

from the contribution to value by various industries as of 1970. Some of the new and growing industries such as crude oil, petroleum and certaia g ittdustries have far outstripped their weightage value. The slow rate of growth of ustrial production was explained as due to supply bo s, inadequate performance of infrastructure, demand ts emanating from reduction in import substitution, slower in agriculture and changos in income distribution. Agricu has a major influence on industries, as agro-based i bave a weightage of 34 per cent in the index of industrial uction and agriculture influences indusrry through fluctuating nd depending upon the

growth, Rangarajan Il] n Incteased at an avefase following 1955. This rate of 1966-75 and increased to years up to 1982-83. The decline of 1.4 per cent in as 9,6 per cent in the year cautions that the index of imating the level of outon the data derived from ons only. Moreover, the ial production are derived

agricultural prosperity. Rangara

rcasonably strong correlation ture and output of consumer

opined that there


performance of agriculs industries with a one-year


lag. He, however, emphasised that as there had been no significant change in the trend rate of growth in agriculture, this by itself could not explain the slower rate of growth in iadustry in
the last decade-and-a-half as compared to the earlier decade.
Table 4.1

Year-to-Year Rates of Growth in Industrial Production (In percentage)


cfal) index industries goods goods'indusApril-March industries tries

(Finan- General

Basic goods

Capital Intermediate



1962-6t +9.4 1963-64 +9.4 1964-65 +8.7 1965-66 +5.3 Average + 8.25 1966-67 +0.6 1967-68 +1.2 1968-69 +6.6 1969-'10 +7.7 i1970-?1 +4.0 Average +4.02 1971-72 +5.7 t9?2-73 +3.9 1973-74 +C.8 1974-75 +3.2 1975-76 +7.2 Average +4.16 1976-17 +9.6 t977-78 +3.3 1918-19 +7.6 1979-80 - 1.4 198G81 +4.0 Average +4.62 l98I-82 +8,6 1982-83 +3.9

+16.4 +1r.r + 4.0 + 7.7


+23.9 +14.8 +21.s

9.8 5.1 + + 2.7 + 10.7 + 8.9 + 3.4 + 6.16 + 6.2 + 4.8 - 2.0 + 6.5 + 15.4 + 6.18 +11.7 + 3.2 + 6.0 - 0.5 + 3.9 + 4.9 +12.6 + 8.2

6.4 8.6 4.3 2.8



+ +

s.5 0.54

+ 1.7 + s.3
+ 2.3 + 5.14


.5 + 0.7 +8.9 + 3.3 +7.8 + 8.7 +1.3 + 5.6 +6.4 + 4.s7 +0.5 + 1.0 +3.2 - 1.0 +5.1 + 1.9 +4.0 + 13.3 +0.8 + 5.0 +2,72 + 4.04 +'1.3 + 4.8 +4.s + 2.1 +2.7 + 0.4


0.6 2.6


+ 7.2 + 5.82 + 7.t


+4.8 +3.5 +4.9 +3.5 +7.5 +1.8 +1.3 +3.8 +4.2 +2.6
1984, page 26'

- r.>

'f t.L




+ 6.3 + 8.0
+ +


5.4 8.2 3.1

+ +

,torrce: Reserve Bank of India Bullctin, January


rNousrnral, poI,rcy AND pno$prcrs-20Ol a.o. Rangarajan emphasised tho


output ratio by increasing the p{oductive efficiency of the capi. tal for which he suggested: l) An overall improvement Jn efficiency in the formulation
and constructicn of projects; 2) Selective investment in a flew sectors or projects whose shortfall in output acts as a conEtraint on the growth ofoutput of other sectors. Apart from selfctive investments for overcoming inter-sectoral imbalances, evpn within each sector there may be opportunities for increasing optput capacity through balancing investments rather than throqgh the creation of fiesh capa-

for reduction in the capital


tion were equally important. Rangarajan stressed that an ff to l0 per cent growth rate in industrial production was esseirtial if the economy was to achieve an overall growth rate o{'5 per cent. He concluded by suggesting better project formulajion and implementation, selective investment in a few sectors t{ improve overall capacity utilisation, setting up of plants and Nocating them with due regard to economies of scale and upgfadation of technology over a wide spectrum of industries as q strategy designed to- improve the productivity of capital and thereby to accelerate industrial growth.

4) Optimum size plants a6 advantageous locations for achieving a planned economy. Uneconomical plant sizes, disadvantageous locations and fragfrentation of industrial capacity have all resulted in high production economy; 5) Upgradation of its techtrology. Enterprises also must make serious eforts to strength4n their own R & D departments. The in-house facilities of t[re enterprises must be enlarged not only to develop nerv prodlucts and processes but also to absorb, aDsorb, adapt and lmprove impofted technologies. As a part of improve i the increase in project export to other developing countries, technological upgradation of pr<ijects and their timely comple-

3) Improvement in powerl generation and utilisation. Although the plant load factor fdr thermal plants increased from 44.6 per cent in 1980-81 to 46.1 ier cent in the first nine months of 1983-84, the rw6rvuer imbalarices were acute. Improved llt,, luv regional rruust.r4lvD wets (luu[G. IurpIovgu efficiency. in the operation of powen plants and better lroject formulation seemed to be the need df the hour:


1. Recent trends in inCustrial grorrlh, Keynote

address at the Tentt) Annual Regional Meeting of the Association of kdian Engineering Industry (WesterD Region) on March 3, 1984, by Dr. C. Rangarajan, Deputy Governor, Reserve Bank of India, published in Reserve Bank of India Bulletin, January 1984, pp.25-29.


Chenery compared the data of bout 100 countries over the post-war period and came to the nclusion that "rising income is associated with svstematic ns in almost every feature of the economic structure." He the need to shift the resources according to changing tterns of demand and opportunities for trade. He then d rcd a Table to measure the changes at different stages of capita income in accumulation, urban/rural population, labour force and trade (Table 5.1). The data on which Chenerv his observations is no longer fully valid, especially with escalating inflation that has taken place since 1964, the oil through which the world
economy had to pass in the I and the explosive technological and environmental developments are currently taking place. All the same, Chenery's data in the directions in which the economy ntay move and the in the structure both of

the GDP and the industry that

is likely to take place when

the country advances from one of Gross National Product (GNP) per capita to the next (T ble 5.2). India's economic deve till 1965 moved very well Industrial production went up almost 9 per cent y.u, b.1ween 1961 and 1965. The Fo Plan projected a " large-scale manufacture growth rate at 9.3 cent and of the smallscalo manufactures at 5.2 per cent. the country has not been able to achieve the 9 per cent growth rate since 1965. The manufacturing $ector's contri ion to the domestic product




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Structure of lhe Indian Economy (Based on Chenery's table)

Year of



ratio at


for India

pcr capita


Gross national savings


of GDP

1984-85 1980-81

22.6 23,8


Gross domestic investments as % ot cDP School nrolment ratio % 6-l I years


36.2 36.s

Adult litcracy rate

t98l l98l-82

Primary share of GDP I Industries share of GDp ){
Services share 41.8 46.4 13.5 34.6


of GDp


Utilidshare of GDP


l98l-82 r98l-82



total]labour force


; .

Industrial labour as |o of totalllabour forcc 1981 Utilitics and services labour asl%lof total labour force l98t Urban population as fi of total population 1981




Birth rate per 1000 population Death:rate per 1000


1982 1982



Exports of goods and.
services as

of GDP





rNousrnrll poI.rcy

Tablp 5.3

PEcrs-2001 A.D.

Imports of goods and I of GDP Primary impotts as I of total exports

services as





Primary impotts as % of




*Primary imports and exports a) Food and livo animals b) Beverages and tobacco c) Crude materials, inedibles except d) Mineral fuels, lubricants and c) Animal and vcgetable oils and

9 food and 35 fuels.


matcrials, and

went up from 13.2 per cent in 954-55 to 18.2 per cent in the year 1965-66, Thereafter, it fell to 15.4 per cent itr the yeat 1973-74 and was l5 per ceRt the year 1982-83. (Table 5.2). Manufacturins iustead of a propulsive growth sector of the economy, hps remained since 1965. The structune of the Indian omy in 1980s is given in Table 5.3 which shows that in me respects such as savings
aDd investment. school enro age of GDP, India's perfo The study of value added
sector to India's GDP between cates a structural change of tho

t, industry's

share as percent-

exceeds expectations.

in the organised

years 1960 and l98l-82 indidustries. The cotton textiles

alloy industries from 7.52 cent to 72.1 per cent and machinery and machine tools fro 3.24 per celt to 7.2 per cent. (Table 5.4). With the era of hieh technology industries dawning in India there will have to be ition of new industries such as electronics, telecommunications. and biotechnology, whose share may be conspicuous in year 2000.

industry which contributed 30.7 per cent of the value added in tbe year 1960 has come do to 8.3 per cent in the year l98l-82, the share of electricity, the other hand, has increased frone 2.61 per oent to 15.5 per cent; chemical and chemical products from 9.11 per cent to L9 per cent; basic metals and



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Industry: Policy
./ .t

The Prime Minister is advocating hightechnology and would like the country advanced economically so that it can be on par

with the advanced countries. As per the World Bank Devdlop' ment Report 1984, India today is in the low-income category (less than $400 GNP per capita) with per capita GNP of $260 (1982). Industrial market economies have per capita GNP exceeding $5,000. Even assuming India's per capita income of1985 as $300, to reach the level of $5,000 by 2001 the yearly GNP growth rate has to be about 18 per cant, It is in this context that we have to see the possibilities of India's achieving levels of income commensurate with those of the developed countries. Referring to the World Bank Development Report 1985, the highest growth rate of GDP witnessed during the period 1970-82 was 7.6 per cent for Rumania, 8.6 per cent for the Republic of Korea, 9.9 per cent for Singapore and 7,7 per cent for Malaysia' Japan had a growth rate of 10.4 per cent between 1960 and 1970 which came down to 4.6 per cent during the years 1970'82. To achieve these growth rates, the industrial growth of the countries had necessarily to be higher. For instance, the average arlnual growth rate of industry for the Republic of Korea during the period 1970-82 was 13.6 per cent; Rumania 8.6 per cent; Singapore 8.9 per cent. Japan's industrial growth rate was 13 per cent between 1960 and 1970 and 5.6 per cent for the period 1970-82. Looking at the performance of the economies of various countries it would be reasonable to state that the highest industrial growth rate that can be reached over a period of 15 years


rnnusrnru por,rcy AND


2001 e.o.

could be about 15 per cent, (e. South 13.6 per cent between 1970 and 1982). In in the past, however, right through 1960 to 1982 had an a industry growth rate of about 5 per cent (Table 4.1, ,I Review, Chapter 4). Aware of the poor performances in the the present Government has launched bold policies for ing the growth rate and advancing the technological of the countrv. It would be worthwhile considering the e implications of the policy being followed by the Go The study Regulation and opment by S.S. Marathe has summed up the following as instruments of the industrial policy in the country: 1) Public sector. 2) Imports substitution,

sectofs. These very instruments act as the constraints to industrial growth. Besides these constraints, two other factors. investment and technology influence the ind growth rate. Having consiidered the o growth rate achieved by other countries it would be lr hile evaluating the impact of

3) Pricing, 4) Dispersal of industry, an 5) Segmentation of industry

the present policies of the Gov

trial growth rate. We have noted fluencing the growth of Indian mum growth rats at 15 per cent, in all could be considered as l0 existing industrial growth rate of cult to give proper weightage to rately. No singlO factor, without other areas, can influence the extent. Moreovef, the influence cumulative. However, for no almost equally the overall impact would be responsible for between growth rate. Weightage given to Table 6.1. We will now eval infiuence these factors and arrive
the coming years.

of India on the indusabove seven factors as in. If we assume tho opti-

impact of these seven factors

cent over and above the per cent. It would be diffich one of these factors sepaa conducive climate in the rate to any appreciable
these factors can only be rl purposes even if we divide of these factors, each factor .25 and 1.5 per cent of the each factor is indicated in how far. the present policies t a feasible growth rate for

INDUST&Y : POLICY 25 Table 6.1

Industrial Growth Rate : 1985-2000

(Per cent)

1985-90 1990-95
Normal growth rate Policy induced grotrth rate





Public sector Import policy Price controls
Dispersal Sectoral segmentation INeslments
1.50 1.25 0.25

1.50 1.50 1.50 1.50 15.00

0.50 0.50 0.25 0.25

0.50 0.75 1.00 0.50

1.50 1.00

0.75 1.00 1.00 0.50 0.75 1.50

1.25 11.75

Private sector Capital market Technology



Public Sector
base, the Government had to play an active and dominant role in providing inlrastructure for the industrial growth as also in the development of a wide range of industries of national importance. As per the Bureau of Public Enterprises (BPE) survey, by l98l-82, 1E7 public enterprises were established by the Central Government with a capital of Rs. 21,865 crores and employment of 1.9 million. These figures exclude departmental enterprises like the railways, posts and telegraphs, telephones, nationalised banks, insurance cornpanies as also enterprises established by the State governments such as State Transport Corporations, Electricity Boards, and irrigation works. Although the total picture of the entire public sector, that is Central, State and local including departmental undertakings is not available, it is surmised that the public sector excluded from the Bureau of Public Enterprises survey is rnuch larger than the Central public sector included in the survey. An estimate made by the Centre for Monitoring Indian Economy in March 1983 places the total investments in the enterprises coveled by the Bureau of Public Enterprises review, at about 40 per cent of the total and in terms of emploiment the

Till recently, with a low industrial



2001 ,c.o.

BPE units account for less than quarter of the employment in all public sector enterprises. Pre-tax profits of the BpE that is, after providing for


interest, were as little as Rs. 18.7 res on a total investment of several thousands of crores of in the year 1980-81. The highest returns of Rs. 421 cro for the year 1976-77 were less than 4 per cent on the capital in that year. The per-

in the year l98l-82 f

pre-tax profits of Rs.


The total number of ises incurring losses went up from 56 to 65 in the year l98l-82 nd the total losses made rose from Rs. 614 crores to Rs. Zl0 if one considers enterprises engaged in non-man ing activities, a total of ?8 enterprises ineurre<! losses the year l98l-82. As Indian industrial sectors, both public an private, have got increasingly diversified their inter-linkages ha increased and will continue to grow. The poor performance the public sector will have a profound effect on the overall eco omy of the country. Though the public sector envisaged to engage in the commanding heights of the eco to transform the economy of the country, it began to be inv lved with every sort of activity such as scooters, rubber goods glass, bread, footwear, tea, textiles, hotels and beverages. O course. some of these undertakings were taken over by the S as they faced failure in the private sector. AII the same, f ories for the manufacture of bread, scooters, automobiles, e , were deliberately started by

crores gave a return of little less 5 per cent. The profits of the Central sector, however, from compauies which have a monopoly in their activity or concerned with hieh return industries such as oil, For i the State Trading Corporation, and Minerals and Metals T g Corporation make their profits largely from the monopo conferred on them; Oil tndia, Indian Oil Company and Oil Natural Gas Commission make their profits because their igh proftabiliry is a consequence of the pricing policy for oil. The crude oil price of Rs 380 per tonre was raised to ll82 with effect from Julv 11, 1981,* and this alone a for the increase of over Rs. 700 crores in the profitability public sector enterprises.


The public sector has almost the sole responsibility in of much of the infrastructure, such as generation and distribution of electricity, mining and supplying of coal and mineral oil, rail transport, communications including telephones, teleprinters, wireless and transport. Shri B.K. Nehru has stated, "As the commanding heights of the economy, coal, steel, oil, electric power, railway transport, telecommunications, banking and insurance are all in the public sector and as they are all inefficient the rest of the economy which must rely on the inputs they provide is necessarily hampered." The continuing failure ofthe public sector to generate adequate surpluses from their working has led to the support of these loss-incurring undertakings from the general revenues ofthe State. The linkage effects ofthe inadequacies of the performance of the public sector are all pervasive-. powercuts, unscheduled interruptions, and trippings and wide voltage fluctuations not only curtail production but increase the wastage, damage equipment and lead to idling of the capital invest: ment. It may be safe to say that a 10 per cent power cut leads to about 25 per cent extra capital outlay for the same production. The intermittently operative communication system leads to costly delays in information collection and manaserial deci. sions and discourages clispersal of industries. Pronouncements of the Government indicate that the public sector will continue to be relied upotr as a major instrument of growth. However, because of its poor performance to date, eforts will be made to improve the management, project plan. ning and implementation and technology. Simitarly, employment must be streamlined and units that cannot be revived should be closed down. The strong will of the Central Government may, perhaps, streamline the public sector enterprises run by the Central Government. The trouble, however, is that several enterprises have been started by State Governments which perpetually run into loss, managerial strength of which is weak and they are in areas of industries where the State has no business or justification to enter. Many Chief Ministers when they come fresh to a State are frightened at the colossal losses of the State enterprises and they appoint committees to investigate if any ofthem could be closed. The committees' reports, however, are never implemented as these enterprises give berths to



2001 a.o.

politicians who oannot be accom ted elsewhere. The oositiors of Chairnlen and Di in State Covernmeut enterprises have often been used as patronage to be given by the

Taking the public sector a whole, even if the Central Government is given full credit for initiating the policy of improving the performance of the sector so that they are run efficiently and effectively, that organisation is tuned to productivity and performance, technology is updated, and sufficient resources are for updating the technology, rve still have to contend with p$blic sector units managed by State Governments and local Even if we give equal weightage to the Central sector vis others we could take credit for 0.75 per cent increase !n the growth rate when the Central Government fully its policy. The other 0.75 per cent which could have been ted by the undertakings of the State Governments will nod contribute to any progress in the improvement of industrial grdwth. Import Substitutlon
Ever since the mid-fifties, the ind

through indigenous materials and where increased ion was attemoted it could be at disproportlonally high cost. Import restrictions, high customs duties, and shortage of all encouraged high cost

import substitution as an i reliance. Import substitution acute shortage of foreign excha favour of import substilution at allocation was made on a halfno long-range production plan takings. Production, therefore, i foreign exchangd. This also and increase in production cost ed to the extent of foreisn duction could, however, be

policy lays emphasis on part of the strategy for sellthe norm because of the which resulted in a bias in y cost. The foreign exchange ly basis with the result that be drawn up by the underlimited to the availability of in a curb on productivity factory production was Iimitallocation. Increased pro-

indigenous production as a , and not cost, was the criterian for selling the product. The bilateral aid also led to high cost imports as there could no international competition
when the foreign exchange is

to one country. Moreover,


the pervasive fear of concentration of industry led Government to divide even uneconomic demands into a number of units, thus perpetuating a series of uneconomic high cost manufacturing units. Assured markets at home because of pent-up demand and lack of imports led to a lag in technology, all resulting in the local prices often being two to three times higher than prices abroad. The import restrictions coupled with high customs duties led to a protected market for local manufacturers, who, whilst being completely out of tune with the international market, could sell all their goods at a very high cost within the country. Moreover, the basic cost ofraw material such as steel, and aluminium, are far too high as compared with international prices. Current steel prices are 60 to 80 per cent higher than the international prices which makes it very difficult for the local manufacturer to compete with international manufacturers. The same is the case with chemicals. Government recently announced a three-year valid import policy. It has liberalised import of technology and would like the manufacturing sector to achieve international parity in costs, quality, reliability and technology. It has removed constraints on the production capacity and size of units. It will, however, take a decade to realise the full impact of this policy. Under

favourable conditions we may assume that the curreot policy would add 0.5 per cent to the industrial growth rate in the period 1985-90,0.75 per cent between 1990 and 1995, and I per
cent thereafter.

Price Controls

In the past, price controls have been used extensively. The methodology used for determining the price to be paid to the producer has often been biased in favour of protecting, in the short run, the interest of the consumer, but has generally ignored the longer term interest of the consumer. Initially, the main emphasis on price controls was on the regulation of food-grain prices, By the seventies the pressure on prices had accentuated. Price controls, therefore, were used not only for stabilising prices of esseutial consumer goods like foodgrain and edible oils, but also for regulating prices of industrial raw materials. By 1977, the Government had realised that the resulation of orices


rNousrnnr, pot,lcy ANr)

-2001 a.o.
production less attractive. keeping prices Iow through interest of the economy. have to be lower than the , t that unless price elasticity of Ie, lower levels of controlled between demand and n to the available supply nly be taken care of by some ines the quantity available to is relatively easier to operate and users thereof require quantities. Even in reflects the true economic rgin of profit to attract addithe imbalance between effecwould. aggravate as was d sugar. control is the system of dual ;is that certain specified respect of all users should be y be related to cost of prointain a satisfactorv level of lled supplies sold in the the overall profitability of

of industrial products had

ma There was a growing recognition

price controls is not often in the Controlled prices, of necessi market prices. Marathe points deimand for that item was nesli prices would aggravate the im supply. An excess of demand in

at a given controlled price can system of rationing which each user, A system of ratio when the product is ho the product in rnore or less
such cases, unless the controlled cost, (input cost plus adequate

tional investment), over a period

tive demand and available

witnessed in the case of cement

One of the methods of prices, The logic behind dual end-users or limited quantities made available at prices which duction but are not adequate to profitability for bn industry. open market are expected to the undertakings. Control on cement prices cement industry, so much so

led to the attrition of the

the country had to annually

import large quantities of

t from foreign countries.

cost of freight. The freight mium on the locations which rather than to the markets. northern and eastern regions cent of cement, that is a little o ments, whilst the balance was average lead distance (in from 377 in 1960-61 to 635 km

Cement also suffers from defect, that is, uniform F.O.R. prices throughout the country by ling the transport cost. This has led to a lop-sided location of industry irrespective of the

n policy has put a precloser to the raw material more or less equal demand, er produced only 31 per 60 per cent of its requirein south and west. The ) for cement has gone up 1973-74. The reluctance to


invest in Cement plants also resulted

has come up.

control of prices of cement was introduced that the iroduction

in obsolescent plants and unremunerative technology being perpetuated which is costing dearly to the consumer. It is only since Iggl when partial


many cases are uncontrolled. An elaborate and cumbrous system of price controls tends to put a premium on the prices at which a medicine is available
as distinct

tion and black market. The ill-effects of the Drugs price Control Order are being felt even now. There are around 25,000 fonnulations and 75 ba_sic drugs (-excluding imported ones) manufactured by over 5,000 units of which 130 are in the organised sector. The Drugs Price Control Order tries to control the retail prices to be charged uniformly in all parts of the ccuntry fo. proJurt, *nor" consumption depends not on prices but on thi recommendations of the medical practitioners, and the input costs which in

In dual pricing the leakage from the receivers of goods at controlled prices to the open market such as in cement and sugar is quite common. Moreover, the criterion for releasing goods at controlled prices to particular categor.ies of consumers leads to political.intervention and opens up-avenues of corrup-

from the ready availability

concern, however, is based upon the margin that the company gets over and above its cost, it would be more interested in seliing non-essential or less-essential drugs where margrns margin,

prescliption drugs and formulations. As the profitability of a

needed. The emphasis on the price aspect becomes even more irrelevant when it is recognised that the price of medicine (or injection) constitutes only a small part oi the total cost borne by the patient who is more interested in the availability of the medicine when needed than about the priie to be paid for it. It is argued that the price control is used more for ihe fixation of prices of essential and life.saving drugs, and to permit somewhat more generous mark-ups on direct costs in the case of non-

of the

medicine when

higher and curtail production of essential drugs w-here the



any, is negligible.

is the amendment ofthe patent Act. patents for food and drugs are applicable for seven years from the ciate of filing or five years

Much more important in the consideration of R & D costs




2001 e.o,

frorn the date of sealing. Und find it diflicult and unrem On the other hand, Indian
their innovations and depend

this Act, foreign companies to file applications in India. are unwilling to patent
on trade-secrets. No wonder

the number


1974-75 to 1019 No\ry that the Government

patents sealed in the year

sone down from 3944 in

delicensed 94 mass consump-

tion bulk diugs and formulatio pervasive exception of MRTP

(subject of course to the all companies, reservation for small-scale industries, and n in cities with over five lakh population) strong pressure is ng brought on the Governmpanies to maintain statusment by Indian pharmaceutical quo as otherwise they fear multinational comoanies wiIl industry. swamp the pharmaceuticals and In short, concludes set of controlled prices leads a more so to the stasnation of to the stagnation of industry technology as ttre interest of is more in controlled prices being higher or in higher sale in the open market than to improvo the prod As the quantity to be allocated to the controlled market is a specific porcentage of the production capacity or actual uction of the industry, the producer would be more i in reducing the production or getting the production ty reduced on paper so that prices the price of goods with lesser goods available at in the open market would be hi Instead of increasing the production and productivity, bre, such controls lead to lowering of production, obso of teohnology and general scarcity of commodities. Tbe Government is gra ally reducing price controls, though the pre$sure from ; lobbies will not allow speedy

implementation of this policy. For instance, the agri(ultural lobby will strongly press for ttinuance of controls ori sugar cane prices, which perforce di tates dual prices for sular. Of course, as therp is no control r gar prices, and the khbndsari lobby seeks continuance of concessions, the production will suffer. We would thereof sugar and the consutrrer fore, not be wrong in assuming t the policy of discrete withdrawal of prica controls would if at all. be effective after a decade, which would allow to expect 0.5 per cent rise in


industrial growth during 1985-90; and I per cent during 1990-95 and thereafter.
Dispersal of Inilustry Industries have a tendency to congregate near one another as they need infrastructural facilities, .skilled labour, repair and maintenance service, supply of raw material, tools, parts and components from trade and are helped by inter-industry counselling and sales. Added to these general causes is the availability of service facilities such as banking, telecommunication, market, transport, freight, etc. On the other hand, such congregations lead to over-crowding, development of slums and deterioration

in the quality of life.

Though public sector etrterprises such as steel mills were set up in undeveloped areas their spin-off effects for developing other industries around them were limited. A deliberate attempt was made in the seventies through subsidy and concessional finance schemes to take industries to industrially backward

The criteria for identifying industrially backward States were developed by the Pande Committee whilst the Wanchoo Committee recommended fiscal incentives. Capital subsidy is available to the industry during the construction stage, interest concession helps in the earlier stagcs of production, whilst tax concession is attractive when production begins. The capital subsidy is limited to a ceiling of Rs. 15 lakhs, the amount given on concessional terms is limited to Rs. 2 crores; whilst 20 per cent of the taxable profits are exempted from taxation. The Central Subsidy Scheme is limited to 101 districts, whilst concessional finance is available in respect of investment in all 241 districts declared backward by the Planning Commission. In the earlier years industrially advanced States and those with a relatively well-organised administration like Maharashtra, Gujarat and Karnataka accounted for a substantial portion of disbursements from the Central Subsidy Scheme. Moreover, the subsidy scheme has benefited those areas which have attracted more large-scale units and which. were located in the industrially-advanced States like Tamil Nadu, Maharashtra, Gujarat

and Karnataka. Says Marathe, the incentive scheme for deve-


rNDusrRIeL poI.tcy AND

2001 e.o.

tricts. Category 'B' consists of districts formerly eligible for Central subsidy excluding included in category 'A', and category 'C' oomprising the districts eligible for concessional fnance excluding in categories 'A' and 'B'. The subsidy for category 'A' was to 25 per cent with a maxi'B' and 'C' districts if they had mum of Rs. 25 lakhs. already attracted an in exceeding Rs. 30 crores because of the subsidy scheme, were no to be eligible for further investment subsidy.
Moreover, the Central the cost of inftastructural

lopment of backward districts has tended to remain skewed in favour of the more industriallv States and the districts near the established industrial In April 1983 divided backward areas of the 'A' consists of no- induscountry into three categories. try district, plus special like Assam, J & K, Himachal Pradesh, Arunachal Pradesb. d hilly areas totalling il8 dis-

shares up to one-third

growth centres in no-industry of Rs. 2 crore$ per district. more than 50 per cent of
employment level

t in one or more identified zubject to a maximum

units which would have


the direct employment are


tion and which have


would be entitled to Central

MRTP/FERA companies are


at least three times the level as nucleus plants which Subsidy. Of course, the

licensing vas deliberately used as an irstrumeni fog pushing to no-industry districts which meaqt pressurising people into politically acceptable to the Minister concerned or to fhe Government of the dav.


from such subsidy. Fur.

The no-industry-district

tion disqualified districts

ancillary units or a mechanised saw mill. As a result, a siruation arose where there were Stdtes like Maharasbtra which did not have a single no-industry or Gujarat which had one such district only. This Ied the Ntates to carve out districts with a view to get benefts of the no-ilndustry district scheme.
Instead of industries congrebating near one another because policy forces industries ro go into no-industry areas which alsb means areas that would have no infrastruotsral facilities, no skilled labour, no suppliers of

which had rural industries such hs a cement or sugar factory and

of infrastructrlral facilities, th{




tools, components or raw materials, no ancillary industry and no market. Against this background, the Sivaraman Committeo appointed for the development of backward areas by the planning Commission opted for "growth centres approach', rather than "area approach". The growth centres would have a degree of urbanisation, would have a population of 50,000 or more; would have less than 10,000 workers in non-household manufacturing; and they should not be near an existing centre with a level of employment in non-household manufacturing exceeding 10,0O0 as per the l97l Census. To ensure adequate continuity and time for the development of growth centres, the selected centres would remain eligible for special assistance for a decade. Accordingly 126 centres qualified to be considered as potential growth centfes. . Instead of developing the infrastructure and skills of the Iabour force, and encouraging units based upon socio-cultural environment and skills the concept of forcing industries to go to no-industry land is to force industries to go in for an obstacle raoe with all odds against their success; or alternatively, to keep them alive at high cost to the community, both in price and quality. Backward areas lack minimum infrastructural facilities such as road network, communication, water supply, power, besiries facilities such as health-care, education, training, entertainment, sports, higher education and speedy communication wbich arc all pre-requisites for attracting industry. It has to be accepted that when large industry comes about it leads to rapid urbanisation. The policy, therefore, has to tie up the process of urbanisation, infrastructure development and industrialisation rather than force industries to the backward regions at all costs, thus Ieading to high cost and poor quality industrialisation and low, industrial policy of the country, we may not expect much contribution to the industrial growth rate from the policy of dispersal of industries. We will therefore assume a modest contribution of 0.25 per cent to growth rate from this avenue durine l9g5-90
and 0.5 per cent thereafter.

if any, stress on high technology and process improvement. As the pulls of the region will continue to dominate tbc


Illousrntlr, PoLtcY


-2001 r.n.

Segmentation into lnilustrial

has tried to split indusThe industrial policy from its initi .tries into sectors such as ionals, foreign companies, industries and cottage .monopoly houses, large industries, household industries. Initially the support for small, and and

cottage and household industry employment potential and to avenues of employment. Successi reduction in employment in tradi

returns received bY those many a time would not even be of the persons or families engaged ing conditions and Practice of hold industries aggravates the produotion and stagnation of

on the grounds of its the traditional crafts and studies have shown the industries, and the low in these industries which

trend in the overall in that industry. Despite the disastrous effects of the sectoral segmentation, the litical support for their surprotected sectors have gathored or quality of goods but production vival as it is not bY. nal support that these political and o only through reservation of commodities sectors can continue. This has led bY sectors, subsidies to be to be exclusively manufactured marketing of goods as in production given for equipment, in the small'scale khadi, excise levy concession on ion in progressive and effiof industries sector, banning cient sectors, price preference in the purchase o[ goods bY

ient to meet the daily needs them. The unhealthy worklabour within the house-

overnment, etc.

All efforts


tbat eftcient units are curbed duction are somehow kePt into way of strangulating the I smuggling of goods within the demands for quality produts. to the perpetuation of machinery and equipment, out stagnancy in innovation, research

to enforcing disincentives inefficient sectors of pro'

ion. wlon,. This is the surest sector and encouraging untfy to meet the peot-up oreover, such a PolicY leads
technology, obsolescent production processes and

d development, and techno-

The Governr4ent was wary more than his licensed caPacitY. ed production tbe PolicY and production. The PolicY which

a manufacturer producing of encouraging increasstagnation in productivitY icts freedom in produc'


tion and at the same time lays emphasis on maintenance of the

existing employment acts as a major inhibitor for the adoption of new and cost-effective technologies. It is axiomatic that if labour displacement is to be avoided it can only be either by increasing production or by diversifying. Greater freedom in expansion and diversion, therefore, is necessary for a firm to. enable it to absorb new technology without creating any indus-. trial relations problems. The policies announced by the Government recently have some good features such as the delicensing and decanalisation

of industries, and broad-banding of production whether for automobiles, electronics, textiles or typewriters. In some areas such as electronics, reservation for small industry has been
brushed aside. The stringent price control on all commodities is being relaxed. All the same, one is uneasy to see that the open' ing and liberalisation of industries is still subject to special constraints on FERA companies and large companies with over Rs. 100 crores of assets and continue to give special protection to small and household industry. The policy-makers have to realise that just as special concessions given to the powerloonl industry and the constraints imposed on the organised textile industry led to a crash of the textile industry which at one time,

led the international market, similarly protection and conces-.

sions given to specific sectors develop lobbies for the perpetuation of the concessions and hamper the process of liberalisation and growth of industry. It would be in the interest of the country to encourage industries to develep on the strength and suitability of their size and structure for a particular industry rather than for sentimental purposes. Instead of increasing employment this would be a sure way of declining the importance of industry and the employment therein. As strong lobbies have come about to perpetuate the sectoral division of industry, we may expect only a modest growth from this source in the next decade. We will assume the contribution of0.25 per cent during 1985-90,0.5 per cent during 199&95 and 0.75 per cent thereafter.
Investment Some of the facets

of the curent investment policy would



ttOUSrnW pOLtCy


a positive impaot upon the growth avenues for attracting investment (NRI) and from foreign co non-resident Indians and foreisn into the country, open up aven technology within the country. Their add to the scarce capital resources would also lead to value additi employment generation. Indica Indians will be investing both in the as also in "plateau" industries such understood that a group of non-resi Rs. 700-crore fertiliser plant in U shore gas from the Arabian Sea. this group going in for a steel mill
Rs. 2,500 crores in Goa. The Japanese and French Governments expect considerable investment industrial and infrastructural The second source of growth areas for investment by the private

-2001 l.n. e. One is the opening of m non-resident Indians

Technologically qualified
bringing technology

for the introduction of

would not only base

of the country but


skill development and

are that

high technology industries fertilisers and steel. It is Indians is putting up a Pradesh based on the offare also possibilities of th an investment of over
s negotiations with the d industries lead one to foreign sources in the nt of the country. be the opening of fresh r. The number of indusgovefnment such as tele-

tries hitherto reserved exclusivelv

communications. fettilisers. are now being opened to the pri

has gone further and is consi private investment for the of inlrastructure such as bridges, roads and helicopter Added to this is the bright future for the capital market. The phenomenal response to the debentures issue ofthe Reli Textiles industry wherein they got applications for over 390 crores shows that the capital market is on the upswing a large number of middle class persons enterirlg the capital The Reliance Industry claims that it has over l5 lakh lders which shows that a large segnrent of housebolds is g the capital market. The insatiable appetite of the institutions or high yielding securities to deploy their large cash surplus a rapid growth in the
placement of debentures. With the logy conscious and projects registered an upswing. The total went up from Rs. 264 crores in I
moters becominE technoequity. issues also

generation, refi neries, etc., sector. The Government the possibilities of getting

I to Rs. 1.452 crores in


in the market

INDUS1RY: POLICY 39 1984-85 (reckoned July to June) registering a compound annual growth rate of 53 per cent. The present boom in the stock capital market is in response to the 1985 budget and the Government's new policy framework. It is estimated that each percentage point rise in the flow of household savings into the capital rnarket means a sum of Rs. 300 crores based on the 1983-84 prices. Besides, large portions of the black money (estimated at around Rs. 35,000 crores by the Raja Chelliah Committee) would be attracted to the handsome returns being offered in the capital market, especially as the opportunities for generating black money would be reduced with the reduction of controls and with the opening of the economy. This flow of money to the capital market is complemented by the flight of capital from other speculative businesses like commodities, construction and diamonds. In 1984-85 capi-

tal consents (separate from actual capital issues) amounted to Rs. 2,000 crores compared to Rs. 1,080 crores in 1983-84. If the last five years' growth rate is maintained, the capital market alone would go up to Rs. 30,000 crores during the Seventh Five Year Plan and will touch Rs..12,000 crores annually by 1990. With easy access to rapidly growing markets, venture capital will be easier to come by. We may expect the investment climate to contribute I per cent growth rate in the period 1985-90 and a full 1.5 per cent

Technology is one ofthe important sources influencing produc-

tivity and .the rate of growth. A study at the University of Chicago concluded that the marginal rate of return from the

additional dollar spent on R & D was about 50 per cent. Data for about 900 manulacturing firms in the U.S.A. showed that the rate ofreturn from R & D was about 17 per cent. Edward Denison observed that technological change was responsible for about 4O per cent of the total increase in national income per person employed during the period 1929-57 in the U.S.A. A $tudy by the University of Pennsylvania in 1977 of 17 innovations showed a median social rate of return which included diseconomies involved in the earlier obsolescence of older techno-



-2001 e.o.
ur, at about 55 per cent. The showed that technological 5 per cent of the nation's econoalso showed that from 1957-73 ies' output grew 45 per cent

of U.S. Commerce Dapartment innovation was responsible for mic growth from 1929 to 1969.
logies and the displacement

technologically intensive faster than that of other ind cent faster; output per work increased half as fast. Technology put man into
ance, expanded man's po penetrated the deepest reaches revolution possible and also

employment increased 88 per 38 per cent faster while prices unlocked material abundadvanced the quality of life and knowledge. It made the green capacity to manipulate materials goods and services ranging

to provide a host of new and from computers to telecomm Innovation is a change in the resources through new wa cal with invention thoush

impact on the economic

wealth-producing capacity of of doing things. It is not identiit will follow from it. It is the


produce and utilise

resources with which innovati

is concerned.

gone all-out to ensure a tech-. the 2lst century. Conscious of the technological and slide-back in the high technologies like electronics, mmumcatlons, computers etc., and the stagnancy of in industries such as textiles, steel, drugs and chemicals, the Government is keen that industries make technological hea at the earliest.

The present Government

nological thrust to take lndia

logical era the process of and assimilation takes consi lists have to develop a culture give due emphasis to research
cal innovation so that a

Despite the Government' keenness to usher in a technological identification, adoption time. Moreover. industriad an organisation that would
development and technologiis created

within the country to

develop indigenous strength to

vate products and services

external demand with quality, reliability and

t will meet both internal and

te goods and services
at comDstitive costs.

technologies and to inno-



In the overall



srowth rate we would

give a weightage of 1.5 per cen growth rate to technology. We expect the technological factor contribute 0.75 per cent to the



growth rate during 1985-90, I per cent during 1990'95 and 1.25 per cent between 1995 and 2000. We are now in a position to bring together the contribution that these seven factors could make to the industrial growth rate during the period 1985-2000. We noted that the normal indus' trial growth rate for India was limited to 5 per cent. We would assume this 5 per cent growth rate and add thereto the policyinduced growth rate for the coming years. The result of the analysis made in previous paragraphs is consolidated in Table

It will be seen that though the optimum industrial growth rate could be 15 per cent, our analysis indicates that during the period 1985-90 this growth rate would be 8.5 per cent. It would increase to 10.75 per cent Curing 199G95 and to 11.75 during the period 1995-2000 provided the present will and drive for ensuring a steady industrial gtowth rate and technology thrust
are continued during the period.



Regulation and Development: India's Policy Experience of Controls over lndusfy. Sharad S. Marathe, Sage Publications, 1986.


Ind try:


stage it would be worth referring to the Lima Development Objective (LIDO) model developed by the United Nations Industrial Development ion (UNIDO) as it indicates the possible growth rates achieve specific goals by

At this

the year 2000.


UNIDO in its Lima target the developing countries' in manufacturing value added for the worli as a whole to go up from 9 per cent in the year 1975 to 25 per cent in the year 2000. UNIDO developed the L[ma Development Objective model to help formulate giowth tarlgets for the perioO up to the year_ 20@ reflecting the sect$ral growth ;ecessary for the developing countries to attain this objective. The LIDO model in its modified form is a muflti-period model generating achievements necessary for 19g0, l9D0 and 2000 to accomolish the Lima target (Table 7.1). In the LIDO model there are tliree exogenous assumptions regarding the values of economic v{riables ior the target year. First, the growth rate of GDp in devblopeC countries was taken
as per Table 7.1.

Secondly, the Lima target of 25] per cent regional share in total world manufacturing value aitded (MVA) is assumed to

Thirdly, the overall trade surplus of fhe indusrriuiir.i "ountri", for the year 2000 is taken as $134 billion in 1975 prices which represents I per cent share of their tdtal GDp in the year 2000. This would also look after the target set by the U.N. fo. "on""r_

have been achieved by the year 2000 by the developing countries.


Key Assumptions in the Original and Modified Scenarios

(per cent)


Moditied scenarios

scenario 1975-80 t9E0-90


GDP (Average annual growth rate)

Developed countries Developing countries Average annual agricultural growth rate of the developing countries
4.0 3.5 6.2 3.7 7.4 3.9 8.4


sionary aid flows of 0.7 per cent of their gross national product (GNP). The first step in the operation of the system is to estimate the average growth rate of the gross domestic product (GDP) for each region, the growth rate in the industrialised countries having already been stipulated exogenously. The final demand is examined under four heads, namely Consumption, Investment, Exports and Imports. For each region, each of these components is considered as a vector distinguishing agriculture, mining, manufacturing and others. The sum of consumption, investment, and exports, Iess imports gives the GDP. In its present form, the LIDO model distinguishes four regions, namely Africa, Asia, Latin America, and the Middle East, and one economic group ofthe industrialised countries; and divides the economy into four sectors of agriculture, mining, manufacturing, and others.

Having outlined the assumptions and the structure, the

sector-wise value added in 1975 dollars, and the average annual growth rates between 1975 and 2000 have been estimated as in Tables 7.2. and 7.3. The structural shifts implied by the scenario are outlined in 'table 7.4 and the regional share of world GDP and exports are indicated in Table 7,5, This shows that GDP of the developing countries must grow at an annual rate of 8.4 per cent over the 1990s in order to reach the Lima target. To achieve this growth rat the LIDO model visualises that

44 INtusrnrtl



-2001 Lo,
, for the Year 2000

Value Addcd, by

lions of 1975 dollars)

Region/Economic GDp

47.2 39.8


Africa Asia Latin America Middle East


635.?5 1715,03 2831,63 985.48



120.0 419.7 779.4 179.9


536.1 8118.3



2s7 .2

Value Added


Growth Ratcs, 1975-2000


Region/Economic grouping

6.2 7.5 8.0 6.6 7.4


Manufacturi ng



Latin America Middle East

Developing countries Industrialised oountries

2.6 3.7 4.5 2.4 3.6 2.8


6.0 '1.4 6.5 3.8 5.2 0.1

8.5 9.4 8.4 9,4 8.8 4.2

8.4 8.5 8.4



Sectoral Shares in Totat V

Addd (GDP), 1975 and 2000



ion/Econornic grouping

34.3 12.3

Mining Manufac- Others


r97 5



Latin America Middle East

Industrialised countris


6.8 6.7
18.8 18.7


tl.4 15.7 22.4 7.9 29.t 18.9 ?4.5 27 .5 18.3 33.4

46.3 46.4 60.7 39.2

54.9 54.5


') 'l

Latin America
Middle East Industrialised countries

6.7 5.0 4.3


4.8 1.9




Table 7.5
Regional Shares of World GDP and Exports (pcrcentage)




-r9i3-----70004.1 4.8 4.9 8.5







Latin America
Middle East Industrialised countris




th investment rate in the developing countries will have to go up from 23.4 per cent to 32.7 per cent. (Table 7.6).
Table 7.6

Final Demand : Components' Share of GDP,

Econcmic grouPiog

1975 and 2000



Invest- Exports Imports



Dweloping countri3 Industrialised countries



24.6 16.4 24.0 20.3

21.O 16.5

Developing countries

lndustrialised countries

69.5 76.2

32.7 22.8



increase in the per capita net national product which was Rs. 633 in 1970'71, and though at current prices in l98l'82 it was Rs. 1868, at 1970-71 prices it was only Rs. 7l 1. Similarly, the structure of the net domestic product shows that there was an improvement in the share of the manufacturing sector from 13.2 per cent in 1954-55 to 18.2 per cent in 1965-66. It has slipped back to about 15.5 per cent in the year 1981-82. ' The term "agriculture" includes agriculture' forestry, Iogging, fishing and mining and quarrying. The individual contribution in India for the year 1981-82 of agriculture is 38'2 per

The Indian economy has not shown adequate resilience and for the last few years there has not been any appreciable


rNnusrnrir, por,rcy


(percentage) Sector
1954-55 55.8 13,2

18.2 45.74 15.39 1.13 < A''



15.5 1.6

Electricity Construction Transport

Other serviccs Saarce
(C. S.O.


0.9 4.7

J.J 23.6


4.42 27.7


: National Account Statibrics at lgi.}-71

covt. of India).

prices, January 19g4,

cenl forestry and logging 0.6 per cent, fishing 0.6 per cent, and and mining and quarrying 1.2 per (ent. In other words, the share ol of the agriculture sector at 38.2 per cent and of manufacture at at 15.5 per cent are very much n]ear LIDO model share for Asia for the year 1975 (Table7.7).
India's gross r'nvestment ccimes to 23.g per cent of GDp for the year 1984-85. Continuou$ eforts will have to be made to increase the savings rate and dreate an investment climate so that the investment visualised in the LIDO model can be

the population to be 990 mill{on with GDp of Rs. +I:,AZO crores) would come to Rs. 4,tr90 in the year 2001. If, on the other hand, India can achieve growth rate of 7.5 per cent for I all this period, as visualised in tfie LIDO model for A.iu, th" p., capita income would conoe tQ Rs. (092 (GDp Rs. 603, i00

The economic and induslrial policies ushered in by the Government are Iikely to stimufate development and growth. At the same time, we have to accept that we have lost irrevocably the period 1975-85, and may, therefore, not meet the tarset visualised by the LIDO model {or the year 2000, though wc niay be able to achieve the growth pattern visualised in ihe model for the rest of the period up to fhe year 2000. The Planning Commissiori visuaUses GDp srowth rate of 5 per cent for the Seventh pla$. If this growth ite is taken as the norm up to the year 2001, the per cafita income (assuming

achieved during the rest of the ireriod.


As per our analysis in the previous chapter, the industrial growth rate in the coming years will be as follows:
Industrial Growth Rate I985*2000
1985-90 1990-95




methods of fertilising, waste and weed control are remote. The improvement in electricity generation, distribution and supply will take some time. We are, therefore, doubtful if the 4 per cent growth rate 'assumed by the planning Commission can be achieved in the Seventh plan. We are led to assume that agricultural growth rate during the Seventh plan would, at best, reach 3.7 per cent. In succeeding plans the supporting systems for agricultural growth would have sufrciently developed. We would also visualise greater mechanisa-

The Planning Commission has assumed a growth rate of 4 per cent in agriculture. Agricultural growth rate is dependent on the inputs such as pesticides and herbicides from industries, besides the infrastructural strengthening such as electricity, irrigation, transport, and market network. It is also dependent on the development of new varieties of seeds which would eive greater production and would be resistant to pests, drought -and unfavourable soil and weather conditions. The impact of highyielding varieties in wheat and rice has reached a plateau. The possibilities of biotechnology improving the agricultural productivity and development of better varieties and new'

tion and better


management in agriculture. We, therefore, an agricultural growth rate of 3.7 per cent during 1985-90, 4 per cent during 1990-95 and 4.2 per cent during As pointed out by Rangarajan,.ths'incremental gross output

ratio measured in 1970-7 | prices went up from 3.2: 1 in the First Plan to 5.7 : L in the Fourth plan, whilst tho aggregare ICOR using the CSO data comes to 6.1 I : l. The growing concern of the Government in improving the infrastructural
facilities such as power supply, transport, communications and


rupustnler, pot.tcy AND p

2001 a.o.

telecommunications, the in and management, awareness of

upon better maintenance

people of the advantages of materials intensiveness, in-

production, productivity and ra crease in the production of nsumer goods and services sector, structural change in the industry would all help to (ICOR) to 5: l. improve the incremental output We expect the utilities secto such as transport, construcsector with a growth tion, etc., to keep pace with the rate of 8.75. 10.75 and 11.75 in three five-year periods up
to 2000.

We visualise the


slightly above the GDP growth

r maintaining a growth rate but lower than the indus-

tries growth rate. ture, industries, utilities and The impact of growth in a GDP growth rate of 6 per sector would result in services during the period 1985'90, 7 per cent durilg the period cent 5-2000. 1990-95, and 8.5 per cent during
Table Sectoral and GDP

Growth rate percentagc

Agriculture Manufacturing/Industries

995-2000 4.2
11.75 11.75


4.0 10.75 10.?5 7.5



1984'85 Prices we

the GDP to be as


Table 7.9.

GDP at Ycar
1985 1990 1995




547 ,

5 7.5 8.5


Assuming these growth rates, the per capita income visualised in the year 2001 with a population of 990 million would be the economy Rs. 5,532 at 1985 prices as against Rs. 4,160 progresses at an annual GDP growth rate of 5 per cent.



Employment frrospects in zMI

UNIDO examined whether the a capacity of the economic system of the developing is sufficient to accommodate the vastly increased labour forces of the future. While analysing the employment po the study had to combine mining, manuflacturing and The most striking feature of this modifcation is the services sector will have the highest expansion rate which primarily due to the inclusion of mining in "industry", has a slow rate of growth. On the modifed basis. the growth rates of GDP and sectoral value added, by regions, 1975-2000. are as given in Table 8.1.
Table Annual Growth Rates of G
and Scctoral Value

(in prccntage)
Economic grouping Developing countries DeveloDed countries Source : Table

Industry Services Total


7.46 8.42


2, p. 21, Industry Publicarion. 1981.


Employment potential dependg upon labour force requirements which are determined by the corresponding economic developmont and labour produotivity (output per capita) in each




sector and region. After studying the table of productivity for 196G75 and sub-periods thereof the study gives the actual levelr of labour demand and its sectoral distribution in 1960 and 1975 and its projection to the year 2000, The assumed elasticities of productivity growth with respect to value added, 1975-2000 for Asia aro as follows :




Serviccs 0.45


: 'hble 3, p.21,

Industry and DcYclopment No' 6, UNIDO -

Publication, 1981.

Tho study emphasises that the specific growth rates and elas' ticities are quite close to historical values. Given the rationalisatiot potential indicated by large inter-country productivity difftentials in many indusfies and taking a not too pessimisiic view of future investments and innovations, the study assumes that labour productivity would not come to a standstill but would proceed at the assumcd ratcs. Thi labour forcc requirements by the economic sctors as per tbc modified LIDO scenario, taking into consideration the elasticity values of productivity growth for Asia, are given in Table 8.2.
Table 8.2

Labour Forc Requiremcnts (rnillions of pcrsons)

Region/Economic grouping Asia
1960 1975



Services Total


236.3 294.1 464.3

Publication, 1981.

32.8 53.0

53.3 85.4 193.8


322.4 432.4

Source: Trble4, p.22, Industry



52 nousrnnr

por,rcy AND

2001 ,r.o.

The percentage-wise demand

for the Asian region comes to :

Percntage-wise Demand for

r labour by economic sectors

by Economic Sectors




ccs 16.5

68.0 58.5



Source I Table 5,

p. 23, Industry Publication, 1981.


No. 6, UNIDO

It will be seon from the a cultural labour comes down from 2000, that of industry increases


that the percentage of agrF in 1975 to 58.5 in the year


from 19.8 to 24,4. The


to l7.l and that of

above target ensures that the the economic system by 2000, ment opportunities wilt be

growth implied in the

ur force will be absorbed bv

rapidly growing labour force. application of historically p productivity development to cconomic growth leads to a for the year 2000.

the increase in employto provide work for the

study concludes that the relationships concerning

scenario of an accelerated well-balanced picturc

tion in 1985 (population assessed 4t 229 ;illion) as labour forcg the labour force in 1985 comes t4 247.5 million. Assuming the percentage of agricultural labour {t 66.2 per cent, the same as in the fhl lear 1981,The agricultural l{bour iorce in l9g5 would be 164,6 million. rest of the labQur force namely 82.9 million would be working in industries, sefvices and utilities. Assuming the sectoral contribution in 1994-Sb to be the same as in ]ggl_g2 and based upon the assumed grbwth rates of tie respective , sectors in the period 1985-2001 t{e share of the various sectors in the GDP of 1985 and 2001 wQuld be as in Table 8.4.

We bave alroady estimated thE labour force in India for the year 2001 at 364.32 million. Takifig 34 per cent of the popula_


IN 2OOI 53

Share of GDP

Tablc 8.4 of Various Sectors in 1985 and 2001

Manufacturi Jervlces

1984_85 -e;t---i%t-



g/Ind ustries

32421.6) 58017.6 i


(210.6) (17.1)1 (30.6; I 112622.4 | 22183.2 i (f r.7) J

150623 180748

(27.5) (33.o) 402574 (13.0)



The accelerated rate of growth of industries, services and utilities sectors visualises a steady stream of workers from rural areai formerly engaged in agricultural activities to industrics, utilitios and services. The impact of mechanisation and technology would be greater in industries and utilities as compared to agriculture. Vsualising productivity growth rate per employe in the agriculturo sector at 2.97 per cent and in industries and utilities sectors at 4 pet cent we expect that of the 364.32 million labour force in the ycar 2001, 55 per cent or 200 million would be working in agriculture and 45 per cent (164.32 million) would be working in the rest of the economy. The GDP contribution pcr worker in 1985 and 2000 in thc agriculture and the rest of the sectors would be as shown in Table 8.5.
Table 8.5

GDP Contribution per Worker in 1985 and 2(n0

1985 (million) l%,

Population Labour force (total) Labour force (Agriculture) Labour force (Iodustries
and Services)
247 .5



36.8 55.00 45.00






33.48 164.32

per labour in Agriculture





Rs. 13585

Rs. 24500
2.97 4.00

Productirity in i Agriculture Industry




2001 e.o.

workers' contribution was During 1985 industries and This ratio would enhance 2.9 times that of agricultural ' to 3.37 in tbe year 2000 because of greater mechanisation and -.technological inputs in the ' sector. 3 per cent then there would If produotivity was lower use of the frustration resulthave been cause for concern rtional gains for the workers. ing in working without any sector would be aearly As the productivity of the 3 per cent and that of the ' sector 4 per cent, we visuation despite modernisation lise a comfortable employment oftho high growth in indusand technology upgradation beca dia's employment potential tries and utilities and services. with the assumed growth rates, is conformity with the UNIDO of the economic system. study on the absorptive


Persons Below the Pouerty Line in 2001

it is difrcult to visualise any reduction in the income inequality between different deciles of tho population. The qucrterly journal of the National Couacil of Applied Economio Re5earch in l9?4 gives the ratio of income for different deciles of population. This ratio is almost the same as that worked out in the year 1964. In Table 9.1 are given some of the highest percentage distributions to the lowest deciles of the population outside the
income centrally planned economies.
Table 9.1 Incom Distribution

We will now see how far the economy will affect the number of persons below the poverty line. With the very low per capita


Lowest 20%


Quintile Quintile Quintil


Third Fourth Highest Highest 20% lO%

,0 24.8
23.1 17.5

Japan (1979) 8.7 Srl Lanka (1969-70) 7'5









39.7 37.5 43.4 49.4

22.4 28.2 33.6


Tablc 28 (page 228), World Devclopment Report, 1985.

. We will attempt an exercise in reducing the inequality of income assuming an income distribution of 25 per cent for the






OOOOrrrrr+ rat \9 t- -



se33$ $sfiFx


-c5C I z

olo L-o 'E





R*A3gtfrn *\oO:tOO-\OQ t+qOlNa{(ia4v




4 eE rIJEg





oEq Z'' .=

lr.t 6 o\ d


..r a.l r rr r\ 6 l_ \o r._ ..r


qE|eEllitrEctr LroorDi)iD!.lon, xx*!r<xxxr<x o)ruooru()!ri)rp



2OO1 5'I

lowest 40 per cent,40 per cent for the next 40 per cent' and 35 per cent for the top 20 per cent. We must however caution that -oo ,oootry outside the centrally planned economies has succeed' ed in reducing income inequality to this extent. Income distribution between different deciles as given in the

NCAER journal and the hypothetical income distribution spread out in deciles is given in Table 9,2, We Lave projected tle income distribution based on 5 per cent growth rate envisag-

ed by the Planning Commission, and the growth rate visualised by us for the year 2fr)1. We have also projected the income distribution under the hypothetical distribution of income in thc ratio of25 : 40 : 35 for the year 2001 in Table 9.2. The Government has recetrtly stated that 40 per cent ofthe people are below the poverty line now, which means that persons

having an income higher than Rs. 1955 are above the poverty line. It will be seen from Table 9.2 that with the 5 per cent growth rate envisaged by the Planning Commission, 20 per cent of the populatiornvill Le below the poverty line in the year 2001' With itre growttr rate envisaged by us, only 10 per cent of the people will-be,below the poveity line in the year 2001' In fact, the incid' .n." oi thi. growih rate would be so profound that 90 per cent of the people tlll hu.'. a per capita income enjoyed by the top 50 per beni ofthe people in 1985. In other words, even if the present pou.tty line is ixtinded to 50 per cent of the population, in the poverty line with the envisaged growth rates',In- oase one can achievi the hypothetical income distribution, all the people will be above the poverty line by the year 2001. ' Besides income distribution' the policies of the Government also will lead to softening of the incidence of income inequality' The universal free education envisaged for the people, pro: gramme of health-care for allo the- distribution .of subsidised ioodgrain for the needy, an improved communication and trans' -network, port the emphasis on ecological improvement will not iiscriminate between rich and poor. In fact, all these programmes will be helping the poor more than- the rich' On thc ither hand, prrroo, io the higher deciles will be subject both to direct and indirect taxes which will bring down their disposable

y"ur jOOt, only l0 per cent of the


will be b:low the

income considerablY.

Cneprpn l0

Adequacy of Non-renewable

One of the major constraints in the possible shortage of pect of the deplctlon of natural reBort of the club of Rome.


of development is rcsources. A grim proswas drawn in the first

mined witlrout the need for increased n,in.rui-p.ia*'o, majo, breakthroughs. The second fl!1.o-t".lt:rl, KaserzKt, Includes rserves at one "on".fi,-oot"o ry pnd of the scale and grades, down to the finite limit of an eleme{t represented by ih" uu"rug" amount present in the rock of a regfon (including offshore areas and the oceans). The total resources ponsist of reserves, currently

The UNIDO study already brred to looked at the adeof non-fuel minerals, esl as the first study by the lyacY Club of Rome had warned ihat mineral resources would be totally depleted within the next study .onria-"rJ'bnith", th... was adequacy or rne non-tuel mtneral resources f$r future growth ^"Jn-":Tl?omineral resources non-Iuel and economic dgvelopment. It considered twp conceptJof the availability of minerals, otre, as the quantity of] ore availabl.'in it e g.ounO which is exploitable under the prfsent economic-auJ ie"nuicat A.s ne* deposits are identified unJ u.-"t i,, ::,i91,]i":; mrnrng technotogy and economic cdnditions "og". make hitherto subeconomic deposits economically etrptoitaUte, ifr" ,r*ru" ngur" can be expected to rise. Thus the ,araru" figu.". certainly not be taken as indicatord"urrarrt "an of furure avaitaUitity; ttey rcrve, rather, as a nneasure of the ar[ount of mineral that can be



known deposits which are not exploitable for economic and/ or technical reasons and finally, the currently unknown deposits. Thus, most of the resource estimates are, in one way or another, the result ofpast exploration activities and an evalua' tion of technical possibilities, the totals being arrived at by summing up the available estimates of known and likely resources of individual deposits, regions, etc. The study made estimates of world mineral resources and teserves of aluminium, copper, iron, tead, nickel, tin and zinc' The study noted that between 1947-48 and 1976 the reserves increased at annual rates that were in general comparable to the gfowth rates of goods production and raw materials consumftion, that the supply of minerals had, up to then, been sufrcient and that there were no signs of imminent shortages' Tho costc and prices of almost all extractive output had in the long run been faling and that in the more recent past this fail had either continuJd at a slower pace or had come to a halt' The study summed up that there was very little evidence of any critical ;hortage of mineral supplies. On the contrary, estimated proreserves had been steadily increasing; the ratio of reserves to duction had in most cases at least been maintained, and the economic indicators (costs and prices) had given tro clear signal of imminent shortages. The study concluded that none of the currently known reserwould be exhausted by the year 2000. Even on the most ves extteme assumption that technological development would come to a standstill and that no new discoveries would be made' currotrt rescrues were adequate to meet the demand for minerals even in the case of a relatively high growth indusffialisation soenario. The study, however, warned that further continuation of the trends up to the year 2000 would lead to the exhaustion of reserves within surprisingly short periods after the
year 2000. A more detailed analysis of important non'fuel minerals' vhere shortages sem most likely to occur in the next century' ahows that fotential supplies can be expected to suffice for a considerable time to come, either because alternative sources havc been found or because improvements have been made in

mining technologY. The Sixth Five Year Plan' 1980-85 gives the balance life of


known mineral resefves at Table 10.1. l0.t

Ievels as in

Balance Lifc of Known Reserves at 1994-95 Consumption Levels Implici in Long Term production, Export and Projections

le 1979-95 in



life afrer tW+95



2. 4.

Non-coking coal Prime coking coa{

2,640 2,700
9,300 330 936 62

Iron ore hacmatite


Mangancse ore



126 74


245 519


29 32
38 17




Lead Crude oil Table 2.13, page 28, Sixth Fi

24 3.20 6.00 2.25

6.50 o.77


36t Year Plan.

..epergy',. when we consider the resource ..epergy,,. Encouraging finds of mineral nodut.. rich in manganese, cobalt, copper, etc., in the sea be{s by the National Institute of oceauography open up the possiblritiis of further increasing the non-renewable resources of the cobntry. Nations, thereforg are vying with one another to extend theii ctaims on the seas; ttre claims increased, a short span gf time, from 3 to 12 to 2W miles, and now, to mid-ocean. Bebides under-water exploration and fuller and doeper exploratio4 on land and underground

- It will be seen from Table 10.11 that only in the case of crude oil the estimated balanoe life was one year;frer fSgi, wnnst for the rest of the minerals sufficient ,.r.*., pro:*rra .u." at'ter after 1995. We will examioe the pil reserve. io'gr!ui", "i. examine reserves in'grlater o.tuit detail



beneficiation bf low grade ores, improvembnts in exploration, mining and processing technology, advances in recycling etc., would stretch our resources considerably. True conservation, however, is not hoarding but efiicient and intelligent use of our resources. The development of alloy steels enabling a five to ten times the performance of ordinary steels, the basic oxygen process (Linz-Donawitz) reducing the steel conversion cycles from hours to minutes, continuous casting etc., are all revolutionising the steel manufacturing process. Powder metallurgy and ferrous pressure casting show fresh avenues of economising the use of steel as most of the steel ingots have to be scraped, cut, bored, ground, honed, erc., to make the finished components. These operations can be eliminated with powder metallurgy and ferrous pressure casting. Material substitution-aluminium for copper, etc.,-or development of synthetics is another way of overcoming materials
constraiDts. The change in the industrial structure also leads to conservation of resources. Reduction in the proportion of production of aluminium, steel, etc., which are heavy consumers of energy, as compared

in Japan has led to reduction in lhe requirement of eneigy to the growth of GDP in Japan.
Raw Material Intensiveness

One of the sources for making raw materials go a long way i$ raw material intensiveness for development. Japan gives valuable clues of the likely requirements of raw materials and services (such as fuel energy) to sustain the anticipated production in India. Between 1954 and 1968 the industrial production in Japan went up five times. During the same period the expenditure on commodities per unit of production for the 6nal production came down by 52 per cent. We may alternatively state by 52 per cent whilst production rose by five times. This saving in raw materials consumption has been achieved by technical and technological advances, material saving, restfucturing of economy, energy fuel-commodity composition balances, organisational and management improvements, incentives, upgrading skills, zero-defect movement, etc. Concretely, improve-

that the raw material intensity in Japan came dowtr


rnpusrnler, por.rcy AND pnobprcrs-20Ol


matelials and processing, introdue+ tion of substitutes, reduction in non-productive losses, use of secondary raw materials and sc{ap were systematically resorted to. For instanoe, in non-ferroug fnetallurgy, besides basic metal, rare metals such as indium, g(rmanium, selenium, tellurium, thorium were oibtained frod the same raw materials. Beeausc the sulphur dioXide is extracted from oil refining, half the mines for sulphur dioxide were closed [n 19?0. Moreover, as most raw matlerials have to be imported into Japan, shipping costs constitute a sizeable proportion of thc total cost. Shifting location of iaw materials consumption to near the coast; going for Iargf cargo and specialised ships, modernising ponts and warehous$s, helped in reducing the overall raw material cost. Between 1960 lnd | 966, the use of large catgo ships alone brought down petroleum costs by ll.9 per cnt and rteel by 3.1 per cent. Technological developments and optimum size plants redu. ced the coke cdnsumption per tpnne of pig iron from 901 kg in 1950 to 474 kg in 1970. Iri shipbuilding, improved hull design .reduced the pr tonne st{el requirement of ships by 5 to 6 per cent. A conscious policy support Say help India to reduc raw materials intensity on the same $cale as achieved in Japan. What with new finds, sucoegs in coneervation, alternative sources, twhnology spurts an{ raw materials intensiveness, tve may not have to woffy aboqt raw materials shortage up to 200t.

in the initial raw

The Report of the Working Groirp on Energy Policy, 1979 pr'a. jected the energy requiremelts u]p to 2001, both as 'referencd level forecast' and as 'optimal level forecast'. In the lattor forecast the Group considered vafious ways in whioh the demand could be reduoed without affepting the development plans. Increasing efrciolcy offuel utilisltion, reducing energy consumption by using more efficient teclinology, reducilng the demand for transport services by more optimal planning of production and consumption locations, redircing energy intensity of industries by adoptiqg different etratepios of iadustrial growth and



by inter-fuel substitutes, and stress on renewal type of energy and non-conventional energy, were some of the methods taken into

consideration in optimising the energy demand. The overall optimal level forecast (OLF) for 2000 to 2001 is: coal 426 million tonnes; oil 69.00 million tonnes and electricity 464.2 TWH. As oil consumption in 1984-85 touched 38,1 million tonnes, it would

be difficult to contain our requirements to OLF projection. The reference level forecast is as given in Table 10.2,
Table 10.2
Reference Level Forecast of Energy Demand 1982-2000

(in original units)

Energy Coal


Unit Million tonncs







150.0 34.8 1r5.?

44.8 228.6

289.0 56.9
JJJ. /

91.8 )JI.b

Source z p.59, Rcport of thc Working Group, 1979,

between the optimal and refereace level forecast.

The Advisory Board on Energy (ABE) estimates energy requirements in the year 200+2005 as, coal 2371283 million tonnes; oil 73193 million tonnes, and electricity 5101612 BKWH depending upon low (4 per cent) and high (5 per cent) growth rate. We visualise the actual demand in the year 2001 to bo

In forwarding the report of the Working Group on Energy Policy (WGEP) to the Planning Commission, the Ministry of Energy emphasised that coal in the years to come would have to find its true value not so much as a fuel but as a reductant in metallurgical industry, as a feedstock for liquid fuels, and for a wide variety of synthetic products such as fertilisers.
Non-commercial Energy The National Council of Applied Ecodomic Research (NCAER) study reporting 1978-79 data estimated urban fuel-wood consumption to be l6 millioo tonnes out of which 14 million tonnes was purchased at a cost of Rs. 50G600 crores. The WGEp esti-

mated that the urban population spent Rs, 9@-1000 crores


Though the price of energy content of frewood is chulha is seldom over 5 to 7

have an efficiency of 30'40 per about one-fifth the firewooc stove is possible, as can be seen As per the Working Group

as the efficiency

is higher per unit, costwise of a firewood

cent, whereas kerosene stoves Thus, kerosene energy costs , if investment in a kerosene

Table 10.3.
n Energy Policy (WGEP) conin India in coal replace-

sumption of non-commercial ment measures in the year 197 6 amounted to 194.6 MTCR (Million tonne coal replacemen consisting of firewood (126.5 MTCR), agricultural waste (38 MTCR), and cowdung (29.2 total commercial energy conMTCR). In the year 1975-76 to 252.7 MTCR. The total sumDtion in India was
energy consumption both co

ial and non-commercial came

to 447.3 MTCR in the year the total energy was

of which 56.5 per cent of and 43.5 per cent was non76


Oil is considered to be the moqt critical of the non-renewable resources. The steep rise in cruHe oil prices effected by OPEC and the fear that the reserves qf petroleum were fast getting exhausted led to a series of remepial measures. Firstly, with the increase in the price of crude oili it became commercially feasible to prospect for oil reserves. Moteover, increasing commitment by nations to overcome tlhe scarcity of petroleum helped discover fresh reserves of petrolelrm in several places such as the North Sea, Alaska, the offshore lregions of China and BombayHigh in India.
The discovery ofnew sourcels is very encouraging, so much so that the known reserves of petroleum increased from 533


T rA d{

F-$al \oa\N --.i \c +

::;E E.;
I Oco



E j



';: - ':: E AX'5

s o 5'o

F- oo

59 '66
1.!c) ;-d.E .=c
:^a -



E9f h*
.9 0G
an: =g

U A,\,
: JZtov r"iOtr vot

- E q< a =

..too\ od .i oi



Y= .:1 : C>r x! y ..:oh




-9 -o





*_g x 9E .! QA
6pa E 't 9c :G
:xil-:' 6it



,Ez :
!+< o=



olz q) I a 9t-; tr 99 ()

'oolr) oo(,


.e$6_.= E;i iI ei 4 ".-...X


I t&vx








-2001 e.o.

n barrels in 1985, notwithleum during this period, as can be seen from Table 10.4. known reserves as of date are sufficient to last for 35 years, provided the consumption of petroleum is limited to that of year 1984. There is possibility that the petroleum reserves at and to be discovered in future may together meet the for another 75 years.

billion barrels in



standing the consumption of


(In l0 billion barrels)
Addition to known
reserves 4.5





1973 1974

53.3 57.8 60.0

57.7 59.1

t .74





1978 1919 1980

1983 1984 1985

59.5 58.8 61.0 60.8 61.9

66.5 67.5 67 .5 69.9

2.12 2.12 2.02 2.19 2.26 2.29



reduction rcduction

IJ 2.28 2.13 2.01





t.0 0.t

"Sakal" (Marathi daily),

of October 21, 1985.

Secondly, conservdtion of and a search for alternative Conservation itqelf has helped in oil by over 15 per cent. For in capita consumPtion of crude barrels as compared to 5.48
The ABE estimated the oil equivalents in the year million tonnes and 123 million

was pufsued with vigour of energy was launched. ucing the demand of crude internationally the per il in the year 1984 was 4.38 in the year 1979. d for oil products in terms of

in India varying between


(hydrocarbons), the upper



estimate being for the growth rate of 5 per cent per annum. The. Department of Petroleum estimates about 3,000 million tonnes of initial geological reserves of oil. With an oil recovery factor of abotrt 22.5 per cent the balance recoverable reserves amounted to 527 million tonnes (over three-fifth in the offshore area and the balance in the onshore area). The ABE feels that if this recovery factor could be raised to about 33 per cent or so-as in the case of the U.S.A. and U.S.S.R.-by adopting enhanced oil recovery methods, it would add 250-300 million tonnes to current recoverable reserves. Further, ONGC has predicted an addition to the initial geological oil reserves of between 330O and 4300 million tonnes between 1984 and 1990 which would mean another 500-600 million tonnes of recoverable oil reserves. If no new significant additional recoverable reserves are established, the production rate of 30 million tonnes per year would virtually exhaust the recoverable reserves of oil, (The 1984-85 oil consumption was estimated to be 38.1 million tonnes, a growth of 22 per oent over the previous year,) If the oil industry succeeds in finding out additional geological reserves as also in recovcring greater percentage of oil, a production level of 30-50 million tonnes could be sustained up to about 2014-2015, Although self-sufficiency in petroleum requirements is still distant for our country, the recent discoveries of petrolcum in offshore areas on the Western coast and in the Godavari basin

indicate encouraging prospects even for this critical raw material. At the same time, large finds of gas in the country are straining the resources of the Government to make full use of this source through a network of fertiliser plants, generating stations or even direct supplies to consumers.


of the major forms of energy required for

industry and

MW of electricity is produced in the country with an investment of Rs. 52,0ff) rores. By the end of the century about 110,000 MW of electricity will be required. Although thermal plants are the principal
households is electricity. Currently, 43,000

contributors to electricity, the capacity of the railways for carrying coal to these platrts is very limited and this would cast a very heavy load upon the transport system. There is also a fear that



poLrcy AND

?000 e.n.

the collieries may be overloa power-houses may be starved of

with coal stocks while the


ting up of large thermal plan Chandrapur, Koradi Extension are the precursors of

of transport bottlenecks. The po

coal requirements because

visualises, therefore, the set-

at or near the collieries.

Ramagundam, Singaroli

electricity is depcndent upon may have to be made to set up small rivers to produce electricity is the prerequisite fi r the development of the country, a network (grid) for icity supply will have to be spread throughout the country, Iosses incurred in the transmission of electricity will have to be reduced, and production and utilisation of energy have to increased. Transmission of high-voltage D.C power is an effo in this direction. The ABE arrived at a ive on demand for electrical energy in India up to 2004 to 2005 as is shown in Table 10.5.

per-thermal plants. Hydrorenewable resources. Efforts i hydro-electric plants on ' for surfounding areas. As


Forecast for Encrgy nstalled capaciry as on 3l-3-1985



Capacity up to
20M-2005 (29.87%)




14,4ss (33.5%) 26,9?4 (63.08%)

(37.07%) s1,4s0
(s9.06%) 120,256

|,33O ( 3.11%)
42,759 (99.99%) I t5,1

( 3.86%) 10,000 ( 5.2 %,

t,75o ( 0.e
2,8-iO 1.5 %) 192,326 (gs.syA)









Nuclear Energy India today has five nuclear reactors in operation, two each at Tarapur and Kota and one at Kalpakkam with a combined installed capacity of about 1,095 MW representing about 2.5 per cent of the total power capacity in the country. Five more

units are under construction at Kalpakkam, Narora ,and Kakrapar while the site of the sixth station has yet to be
announced. The Bhabha Atomic Research Centre (BARC) at Trombay is now joined by the Reactor Research Centre at Kalpakkam which concentrates on fast breeder reactors. These institutions together spend about Rs. 60 to 70 crores annually and employ over 12,000 people. Uranium is mined by the Uranium Corporation of India at Jaduguda in Singhbhum, Bihar, and some more mines are likely to be opened up shortly near Jamshedpur. Uranium is formed into pellets at the Nuclear Fuel Complex at Hyderabad and the pellets are enclosed in zircaloy tubes to make fuel rods for nuclear reactors. Except for the Tarapur reactor, all others operating and under construction are of the CANDU. type and use heary water. They are fuelled by natural uranium which can be manufactured at home, which makes India independent of foreign suppliers. This strategy will work only iflndia can produce enough heavy water. The present capacity of the three heavy water plants rn operation at Nangal (14 tonnes), Baroda (67 tonnes) and Tuticorin (71 tonnes) comes to about 150 tonnes a year. Two more plants are being commissioned at Kota and Talcher. Most of the world's heavy water is produced in the U.S.A. and Canada using a hydrogen sulphide/water exchange process. But as the U.S.A. and Canada would not share the knowhow with India, Indian engineers had to design the process themselves. All the heavy water plants except the one at Nangal (which was built by West German contractors) are problemridden.

The highly toxic radioactive wastes generated by nuclear power plants pose the biggest problem to the nuclear industry.
The wastes have not only to be handled extremely carefully during the separation of plutonium, but also have to be stored for thousands of years. India's strategy is to build waste reproi

70 rlousrnrlr,

poI-rcy AND


2001 .c.p.

cessing plants near the atomic

went into oDeration at Tarapur and another is expected start at Trombay. A third is under construction at . Once plutonium is separated ut, the AEC (Atomic Energy Commission) plans to immobilise wastes by vitrifyirig fulassifying) and storing them in special ir-cooled structures for about 20 years. The wastes will have be stored finally in a place
wbere they will remain for thousands of years. Areas for and Andhra Pradesh are beine ia
(by water, earthquakes, war)

for transporting the dangerous Accordingly, a reprocessing

stations to reduce the need nces over long distances.

the wastes in Karnataka

amounts of electricity,

thorium in Kerala and Orissa. AEC believes that onoe this phase is reached, India can retically enjoy unlimited
nuclear programme which uclear capacity by 2000 at a s ten units already commismore natural uranium-

India's nuclear power is divided into three distinct technology phases. The first is natural uranium-fuelled nuclear reactors; the second is t set up fast breeder reactols fuelled by plutonium to be o by reprocessing the spent fuel from the natural u reactors; Kalpakkam has very recently succeeded in being critical in this strategy. The second phase will not only electricity but also convert thorium into uranium-233, a r r fuel. The third phase is thorium-fuelled fast breeders. India has vast reserves of

The Government has cleared aims at 10,000 MW of installed cost of Rs. 14,000 crores. This sioned or under construction plus fuelled reactors of 235 MW MW between t996 and 2001 and prototype fast breeder reactor, nuclear capacity to 5.2 per cent capacity. The history of nuclear there is gcnerally a delay of 7 to
year of completion and the actual

by 1995-96, ten units of 500 500 MW plutonium-fuelled

would take the countrv's tbe total power generation ts established indicates that 0 years between the planned

of completion.

is estimated that India receives -million hectare metres (mham) of


ually precipitation of 400 Out of the 400 mham

'og 'd 'sg6'l 'lu3ltruol!^ug puB 6tue'!3s roJ eJluec 'lqloc



.sg-tg6I .luerxuoJl^ug s."IpuI Jo ot"ls 5qJ : "',?os' (9t)

'11a tro,lleJpsuej{uorlejode a of






ajnlslotu^ 1!O9 Ol


lalP/\A S3E|.rn5











(9t) sl

sasn _laq10

sJa^U pue sUlea4s u! ,\ O]J


puP (90) 0t

(91.)9. ulo4
5uJea45 U! uo!leJauaOaU

alqel rap^^ ro 6tlsqlu

pu uolleJooe^3 (98)19rale/l^punoJO lElOl


/ ,:

saJE PqF6|.ll!


uol1elada^ laqlo Pue s19JO, UlOl (9t) zt





un4 rlernPurn6

Ol) Pooll

uoneQl.t! uto.u


q!B?45 UIOU


(9Z00tr uollellosuP4



(ol) 0t llos trro.t, uollelooe^a alPlpauuJl

alrqslotil l!06 oI

99 L)S9l

sqluoul 6u!ule'!al $'ll'3
arfeur erlcoq uonlrur

sr.lluo'.! uoosuot!



szo1) tL6l

pewullsll elpul Jo so3Jnosel lllerY\ lnuue aaere^ Jo uollnqFlslp

'l'oI 'EIl



of rainfall that India


p.t.olates into the soil. This is followed by a series the oi lrrtr.rnuog., between these three sinks' Finally' almost all (See Fig' l0'l)' pi..ipi,",i"t it returned to the atmosphere t fn" total aflnual surface flow from direct runoff is 115 of mham to which 20 mham are added from streams and rivers from underground water neighbouring countries and 45 mham adding up to 180 mham. Ii the year 1974,otttofthe 215 mham percolating into the soil 165 mham moistened it and the remaining 50 mham entermham ed the groundwater table. River seepage added about 5 mham were addEd to the iroundwater supply, and anolher 12 from liakage from irrigation, raising the total groundwater recharge to 67 mham. Of this 1l mham were used for irrigation and another 2 mham for other uses. Because of the higher groundwater use in the coming years' a steeper gradient and higher seepage from river beds is expect' ed. Percolation from irrigated fields will also increase as irriga' tion expands. The higher inflows will raise the total annual groundivater recharge to 85 mham out of which 26 mham is lxpected to be used for irrigation and another 9 mham for other uses. This indicates that in the yeat 1974;,'35 mham in all were used for irrigation and another 3 mham for other uses' It is . expected thatln the year 2O25,77 mham will be used for irrigation and 28 mham for other uses, thus increasing the total utilisation of water to 105 mham in 2025 as against 36 mham in

receives annualtry, 70 mham evaporates and immediately, I 15 mham runs off into surface water bodies'


In the year 1974 irrigation used about 92 per cent of all the in the country. Domestic and industrial uses tuta, "onru*.d remaining 8 per cent. Even if all domestic and accounted for the industrial needs are adequately met by 2025, irrigation withdrawals will still be about 73 per cent (See Fig. l0' 1)' Delhi, calculated an ultimate usable potential of 86'5 mham' while a tealn of lndian and American experts estimated it at 92.7 mham. Nag and Kathpalia arrived at a higher figure of 105 mhanr by u.rutittg recycling of mdnicipal and industrial waste *ut.r., ut well as the use ofnew tecbnologies' Even increasing the exploitation of precipitation from 38 mham in the year 1974
Scientists at the Indian Agricultural Research lnstitute, New


72 tNousrnrlr pol-rcy AND pR

-2001 .r.n.

to 105 mham ultimately, will t be adequate to meet the various water demands by the year 2025. Prof. Chaturvedi predicts a state of nationwide i uacy in as early as the next
decade. Regional water increase, particularly in

sufer from seepage and eva

Iace water storage requ ires

The Gangetic plain is one o the most well-endowed water regrons in the world. Go t's efforts to control. and if possible eliminate pollution of Gangetic waters nlay be a boon to the country as it may soil erosion, and also make available potablp water to a number of persons, For a country which faces ter scarcity, groundwater and its proper use is crucial. The se of groundwater offers a number of advantages compared surlace water, as it does not

th: arid nd semi-arid

are inevitable and are likelv to


developed quickly and near the

One of the most popular It is estimated that in tubewells all over India as Droughts and near famines about 172,000 tubewells a vear The phenomenal growth of tracts of India is due to the the fact that its operation is the farmer, which enables him of water at the right time to canal irrigated areas. As of 1 tubewells were located in puni Bihar and West Bengal. The Gangetic plain bring the co called "filter points" within the contrast, in the hard rock located at depths of 3@ meters than Rs. I lakh. Tubewells are although they also serve inigated 258,000 hectares or only


network which is costly. polluted and the expenditure can t"t waterlogging,

nspiration loss. It can be of use, whereas the sure sites and a distribution



recoveied faster.

likely to get It is also a

where the water table is ys of using groundwater is a

950-51 there were about 5.000

to 3.9 million


tubewell technology and were sunk in the last decadc.

irrigation in the a uvial of tapping the water and under the control of supply adequate amounts crops, in contrast to the , about 90 per cent of the , Haryana, Uttar pradesh. aquifers of the Indo-


n of shallow tubewells of individual farmers. By where groundwater is often

cost per tubewell is greater

primarily used for irrigation, needs, In 196l tubewells per cent of country's net


irrigated area. By 1974 they irrigated 5.56 million hectares or l7 per cent. In the same period, the total area irrigated by dugwells stayed at 7.5 million hectares. The spurt in the number of tubewells has led to the lowering of the water table. Tirere is a fear that groundwater withdrawal may be exceeding recharge in some of the districts. Rapid depletion of groundwater has increased the number of problem villages with no source of drinking water from 17,000 in 1980 to 23,000 in 1983 in the State of Maharashtra, says N.D. Jayal, Adviser to the Planning Commission. The deltas of Godavari, Krishna and Cauvery on India's east coast represent important pockets of groundwater. Exploitation of these reservoirs has increased with the emphasis on multiple-cropping and high yielding varieties which has heightened the threat of
salination. It is estimated that the groundwater reserves at a depth of 300 metres may be about 3,700 mham, almost ten times the annual rainfall, but the bulk is supposed to be non-replenish-

able. Recent investigation shows that the hard-rock formation of peninsular India may hold more groundwater than that estimated earlier. The latest figures by CGWB (Central Ground Water Board) put annual exploitation po te*ial at 42.3 mham of which l0 mham or 23.73 per cent is being exploited at present. It is evident, therefore, that the total precipitation in a year is limited to 400 mham, unequally distributed over the country, and will be one of the scarcest and precious resource in times to come. Addition to water resources is possible through desalination of sea water, reduction in transpiration and evaporation, and by better water management. In all these areas intensive
research and development is necessary at the earliest.



Samming Up

Our review compels us to accept a billion by 2001, with a

142 million more than the I I labour force. High irfant mortality, under nutrition and malnutrition, low status of
women, and ineffective populatio policy mark the demographic

population estimate nearing force of 364 million. some

The industrial sector, whicb at an average of 8.25 per cent during 1962-66 fell to a rate of 4.02 per cent during 1966-7 | and slowly rose to an of 4.62 per cent during 197G81. Despita a steady rise in gross capital formation .as a percentage of gross domestic from l0 oer cent in 1950-51 to 24.8 per cent in I 81, the rate of growth of income has not altered much as incremental gross capital output ratio measured in l97O-7 | prices has raisen from 3.2 : I in the the First Plan to 6.11: I in recent years.

The manufacturing share NDP. which had risen to 18.2 per cent itr the year I fell to 15.4 per cent by the year 1973-74 frorn which it has t risen till date. This stagnation in the manufacturing sector the result of the industrial policy and inept coordination of sefvrces. Surprisingly, the oil shock the 1970s benefited India as the soaring oil prices created power in the Arab world leading to increased hiring Indian workers and buying of Indian goods. Moreover, the of escalating oil costs led India to speed u,p its effort to d and develop its own oil

All the sarne, in


the Indian economy





gathered momentum and Dow promises to boost living standards at home and to change the place and image of India in the world. thanks to the earlier investments in infrastructure, basic industry, irrigation, and human capital. The
recent economic policies have given a boost to this process. The shackles of restrictive and complex regulations and admini-

strative procedures are being loosened as they resulted in restraint on initiative, depressed investment and led to politicising economic decisions giving birth to black markets and to the so-called parallel or subterranean economy. All these steps are likely to yield significant results. A large and growing middle-class estimated at 70 to 100 million accounts for an increasing portion of India's population of more than 700 million. Production is rising in the areas of agriculture, industry and energy. From a level of 50 million metric tonnes in the year 1950-51 food-grain production increased to more than 150 million tonnes in the year 1983-84. Wheat output in Punjab soared at an annual rate of 7 per cent for the past 15 years. Edible ojls and pulses are the only food items of which inadequate domestic output repeatedly burdens India's import bill, The gains in agriculture are in large part due to accelerated expansion of irrigated land and improved seeds. Since the mid-seventies India has addcd two million hectares of irrigated land annually. About one-half of the country's irrigation potential still remains to be exploited. Discovery of vast natural gas deposits helped to bring down fertiliser imports from a level of $827 million in 1980-81 to $l5l million in 1982-83. The verified gas reserves are more than sufficient to meet lhe input requirements of 10 large new fertiliser plants. lnvestments in agrarian extension, development ofl high-yield, disease-resistant seeds and expanded use of pesticides and other chemicals have further benefited India's agriculture. India can look forward to prosperous agriculture in the coming years. Initially, Government concentrated on investment in creating infrastructure and basic and heavy industries. It is now diversifying to meet market oriented national and consumer demand. With its diversified production, industrial products have become a growing compotrent of India's exports. The domestic output of crude oil has increased to over 26 million tonnes per year. The ratio of oil imports to domestic produc-


tnousrnrel pol-rcy


-2001 a.o.

policy of the Rajiv Gandhi following seven instruments of

tion changed from roughly 60: to better than 30 : 70 in the last five years. The savings rate achievedtbv is comparable to the rate achieved in the middle inco eal some high income industria)ome al Iised countries. Gross capital for. tion as a percentage of gross ,ital domestic product at the current market prices rose from l0 per rent cent in 1950-51 to 24.8 per cer in 1980-81. A sready flow of )er cent )ent remittances from Indians; workin abroad is continuins. :kin worki And yet lndia faces several ral ;everal to progress because of poorly run public and private cr rivate ivate .e ions and infrastructural breakdowns. ln spite of' the in inc in the investment-income 'owth ratio, the trend rate of growth o income has remained static as :ho irowth incremental capital-output ratio rt tio ut ratir risen to 6.11:1. This causes the goods to be priced t oo higb for the low-income domestic ro hig higb market as also impedes the grc gror he gror of the industrial sector and makes Indian manufacturers' extr rts less competitive. 'ers'extr rets'el Bureaucratic delavs. the lou per capita income, the large lo 'om wb subterranean economy fro whir little tax is collected, and the >m whir political clout of agriculture, co ure, con lre, India's problems. Moreover, the Government has been t protective of insolvent comls s panies. Militant unionismr in indu ies and outdated maoagement ind techniques adversely affect inr ffect ir 'ect production. Inequities between the rioh and the poo , persistence of malnutrition :he po 1 and hunger alongside bulging bod warehouses, widespread rulging ulging illiteracy alongside a vast: system f higher education, continuing systen population explosion in the norl he no regions against dramatic achievements in populatio sta isation in the South, and ion tion sr resurgence of ttr,e claims of Str as against some solutions to the Punjab and Assam all indicate the weaknesses and strengths of the Indian my. It is in this context that we to interpret the industrial


We identified the

2) Import substitution,
3) , Pricing,


industrial policy:

Public sector,

4) Dispersal of industry, 5) Segmentation of industry 6) Investment, and /,, r ecnnotogy.





instrument, without conducive climate in other areas, can influence the growth rate to any appreciable extent, and that the influence of these instruments can only be cumulative. Based upon our evaluation of the time element for effectualisins the full contribution of the instrument, and the socio-economii and political environment that may adversely affect its contribution, we have estimated the industrial growth to be g.5 per cent during 1985-90, 10.75 per cent during 1990-95 and 11.25 per cent duriug 1995-2000, provided the present will and drive for ensuring steady industrial growth rate and technology thrust are continued during the period. We compared our assumptions with the Lima Development Objective (LIDO) model of UNIDO, which assessed the sectoral growth rate necessary in the developing regions to increase their share in manufacturing value added for the world to go up from 9 per cent in 1975 to 25 per cent in the year 2000. The model noted that the Asian region would have to annually increase its GD? at 7.5 per cent, for which the agricultural sector would have to grow at 3.7 per cent, mining at 7.4 per cent, manufacturing at 9.4 per cent and others at g.4 per cent. The Indian economy could not gear itself to LlbO expectations till 1985. But the policy changes announced in iSAS augur well, and the economy should do well in the remain_ ing years till 2001. With the industrial growth rate visualised above, GDP growth rate of 6,7.5 anC 8.5 per cent in the periods 1985-90, 1990-95 and 1995-2000 respectively would be achieved. In the process, the share of manufacturing/industries llould increase from l7.l per cent of GDp to 27.5 per ceot resulting. in per capita GDP of Rs. 5,532 at 1985 prices in the year 2001. Assuming that this growth rate would be feasible, we estimated the employment prospects for the 364.32 million labour force. The accelerated rate of growth in industries, services and utilities visualises a steady stream of agricultural workers from the rural areas to these sectors. With the increased volume of production and services, the entire labour force would be absorbed even after assuming an annual increase in producti, vity of 2.97 per cent in agriculture and 4 per cent in industries

We gave notional weightage to the contribution these instruments can make to the basic industrial growth rate, which has hovered round 5 per cent, though we appreciate that no single


ruousrnrar. PoLIcY AND




labour force engaged in agriand utilities. In the process, culture would reduce from 66,5 per cent in 1985 to 55 per cent 'in the year 2001. Numerically, number of persons engaged in agriculture will go up from 164.5 million in 1985 to 200 labour force, 61.32 million million in 2001. Of the electricity and construction, will be engaged in industry, mi in utilities and services. while 103 million will be en . The GDP contribution per tural worker will go up that of other workers will from Rs. 4,676 to Rs. 7,257 go up from Rs. 13,585 to Rs. ,500 at 1985 prices. sector would be nearly As the productivity in the sectot 4 per cent and as 3 per cent and that of the i visualise satislactory compenICOR would improve to 5 : I, growth rate. This, coupled sation to workers and a higher rate, would not only increase with a reduced population more disposable income, per capita GDP but would also and an environment for acceleincreased saving and in rated personal well being. with no improvement in The studv indicates that different deciles, the population 'income disribution between the current definltion of below the povcrty-line (based m 40 per cent in 1985 to l0 poverty) would come down to emphasise that besides per cent in 2001. We would
income distribution, the eradication programmes of the

Government*more esPeciallY, health care for all, emplo of subsidised foodgrain for tions. information and .logical improvement will all rioh. This will further soften
however, anticipate .a demand poverty with the rising income The study indicates no sho both nationally and in . which at one time had created

daunting. Though India is quirement of oil, the i

be reassuring. Besides, India

fuller utilisation of which will dence on oil. Our effort to

universal free education and guarantee scheme, distribution treedy, improved communicanetwotk, emphasis on ecohelping the poor more than the the incidence of poverty. We, r revision of the definition of improved conditions of life. of non-renewable resources, . Even the requirement of oil, frightening spectre, is no more to remain short of its full re' nal supply and price of oil will located vast quantities of gas, derably reduce our depene raw materials to go a longer




way and serve a greater use would help us to extract greater value from a given quantity of raw material, Oddly enough, we may face the severest shortaqe in an area which has scarcely been referred to, viz., water. The-total annual precipitation is limited to 400 mham of which by 2001 about '77 mham would be used for irrigation and another 2g mham for other uses including industry. This is unequally distributed over the country, and will be one of the scarcest and precious resource in the time to cofile. All efforts to improve water managetnent, reduce its transpiration and evaporation, locate underground reservoirs and desalinate ,ru *ltr. should be

of tlte "low-income', to ..middle.income,, countri;;.lt would huu:, more healthy and educated populatiirn, with bright l. possibilities of reaching a net reproduction rate of one in the ne:ir future. Its saving rate would be high, its ICOR would be reasonable. Its technological progress salisfactory andit would be well poised to achieve accelerated progress aoj development.

launched straightaway. We have arrived at this unique industrial scenario on the presumption that the instruments of industrial policy modified to meet the altered socio-economic environment would be pursued with equal vigour and steadfastness for the next 13 years. In this process, we have taken into consideration the time span required for effectualising the respective instruments as also the inertia of the social forces and the influence of the political system in stalemating the ecouomic development. Any significant deviations from our presumptions wili have to Ue reflited in the scenario for the year 200I. Our study indicates that by the year 2001, India would have a stable economy, fuller employment and a low percentage of population under the poverty-lines. Though the per capita GDp yo.yld *_ small compared to the developed and afluent world, India will have the satisfaction to have moved out from the rank


Centre for Science and nment, The State of India's Environment 1984-85-The Citizen's Reporl, New Delhi, Centre for Science an Environment, 1985. Chenery, Ilollis B., "G and Structural Change," Finance and Development, 8( Sept. 1971.

Gwin. Catherine and La


A. Veit, "The


Miracfe," Foreign Policy, ing 1985. lndia, Annudl Survey of for the years 1960, 1965, ( .S.O.), Delhi, Controller of 1975, 1976, 1977 and 1979,
energy in

5. India, Advisory Board on options for meeting demand New Delhi, 1985.

An Analysis of supply India in 2004-05,

lndia, A perspective on for energy in India up to 2t"04-05, New Delhi, 1984. 1ndia, C.S.O. Department o Statistics, Nalional Accounts Statistics January 1984, Controller of Publications. 8. lndia, Census of lndia 1981, i. Controller of Publications. 1984. 9. India, Ministry of Health, C tral Bureau of Health Intelligence, Health Statistics ol L 1983, Delhi Controller of


The Sixth Five Year Plan, India, Planning Commissio Delhi, Controller of Publica ons, 1981. lndia, Report of the Wor Group on Energy Policy, New Delhi, 1979. Malgavkar P.D. and V.A. trial Policy: 2000 4.D.,
Research, 1977, Towards an IndusCentro for Policy

13. Malgavkar, P.D., Techno


Economic Development,



Oxford & IBH Publishing Co. Pvt. Ltd., New Delhi, 1987. 14, Marathe, 5.5., Regulation & Development : The IndianPolicy Experience of Controls Over Industy, Sage Publications India Ltd., New Delhi, 1986. 15. Rangarajan, C., Dy. Governor, Reserve Bank of India, Recent trends in induslrial growth, (Keynote address at the 10th Annual General lvfeeting of the Association of Indian iudustry, Western Region, on March 3, 1984), Reserve Bank of India Bulletin, Bombay, January 1984. 16. Reserve Bank of ln.dia, Report on Currency and Finance,
1983-84, Vol. II, Statistical Statements. 17, "Sakal," (Marathi daily), Pune, October 21, ard October 23, 1985. 18. UNIDO, Industry and Development No. 6, UNIDO Publication, 1981. 19. World Bank, World Developtnent Report 1984, New York, Oxford Univorsity Press, 1984. 20. World Bank, Itorld Development Report 1985, New York, Oxford University Press, 1985.


Advisory Board on Energy (ABE)

63, 64, 67, 68 Afriea 43, 44, 45

Bombay High 54 Bureau of Public Enterprises 25, 26 Canada 69

growth rate 47
waste 64 Alaska 64

Capital formation 76
market 38, 39

American 71 Andhra Pradesh 70 Arab world 74 Arabian Sea 38 Arunacbal Pradesh 34 Asia 43,44, 45,46, 5l Asian 52
Assam 34, 76

Capital output ratio 12

Cauvery 73 Census 4, 6, 8, 35

Centre for Monitoring Indian

Economy 25
Chandrapur 68 Chaturvedi (Prof.) 72 Chenery 14, 19 Chicago Univcrsity 39 China 7, 64

Atomic Energy Commission (AEC)


Backward areas 33, 34


Baroda 69 Bihar 69,72 Birth planning

Club of Rome (report) 58 Common Agricultural Policy (CAP)

Cuba 7

funding for

Death rate

methods 4, 5

R&D5 World Bank

Report 5



Chenery's table 16

Birth ratc 6 all-India

Kerala 5 Delhi 64,71 Denison, Edward 39

Developed countries


Chenery's table 16 developing countris

Developing countries

l,2,3, 50. l, 7, 42,45,

Kerala 5 Black moncy 39

Dichotomy 2 Drug price control order 3l



potLlcY AND

rnosrnQrs-2O0l e.o.
Hipachal Pradesh



forecast for energy hydel capacity 68


Hiderabad 69

production from nuclear plants ICIR 47, 48, 74,76,78,79

rcquirements 68 thrmal capacity 68


IniPort substitution 28

Iniome distribution (1985-2001) 56

(Hypotheticat) 57

Employment potential 50
prospects in 2001

Energy 60, 62 commercial 64 conservation 66 cost of fuel 65 non-commercial 63,64


Inbia 2,5, 6,7,8, 14,20,23, ?.4,41, 45,46,52, 55,61,62, 64, 66, 69,
70, 73,74, 75, 76, 78

Indian 7l

Agxicultural Rsearch Institute



conomy 19,20,45,71,76 industrv 24.26. 32 industry 24,26,

manufacturers 76

FERA (companies)


oil comPanY


rate: Kerala

projection to year 2001 6 Firewood 64 Foodgrains (production) 75 French 38

workers 74 Inbia's economic development 14 lnbigenous 40

base 2


contraceptive research
14, 15, 16,

17, 19, 20,23,44,

contribution per worker

growth rat 43, 48,49,50,


53 53,77,

growth rate 10, 11, i2, 24,25,135, 40,41, 47,74,77 policy 23, 24,74,76 production l0 sesmentation of sector 36 InHuirialised countries 43,44,45 Inhustrialisation 2, 35 Irldustry
agro-based 10 area'approach for 35 basic 25 concentration of 29
consurner goods 10

{apan 6l per capita7g General fertility rate

Goa 38 Godavari basin

GNP 14, 15,23, river



67 26, 46'

Govetnment (Central) 2,24,25,

47, 57, 67, 72,75, 76, 78 Government of India 22

27,28,29,32,34,38'39, 40'

disincentives 36 dispersal of 33 excise levv on 36 FERA companies 37 growth-centre approach for 35 in backward areas 33.35


33,34 72

Indian 32 influence of agriculture on l0

investment 12 licensed capacity 36
prospects for 42


Infant mortality general 5,7
developed countries

female ,l

Kerala 3 Sri Lanka

low (in India) 5


male 4

Uttar Pradesh
Instruments /o Investment

Innovation (stagnancy) 36

of industrial

policy 24,

International scene 1 growth rate 38, 39 industry 10 (in) infrastructure ?5 policy 37, 38
Jaduguda 69

Maharashtra 33,34, 73 Malaysia 7, 23 Malnutrition (India) 4, ?6 Manufacturing value added 42, 44 Marathe, S.S. 24, 30, 32, 33 Middle East 43, 44,45 Ministry of Health (Govt. of India) 5

Modified Scenario (LIDO) 43 N4ofiality 5,6,7



Jamshedpur 69 Iapan 23 , 55 , 61 , 62
Japanese 38

Jayal, N.D. ?3

Nag & Kathpalia 71 Nangal 69 National Accounts Statistics 46 National Councial of APPlicd

Economic Research (NCAER)

55, 56, 57, 63

Kalpakkam 69, 70 Kakarapara 69 Karnataka 6, 33, 70 Kerala 3, 5, 6, 70

National Institute



National scen 2

Koradi Extension Scheme Korea (Republic) 7, 23 Kota 69

Krishna (river) 73


18, 46, 74

Nehru, B.K. 27 Net Reproduction Rate (NRR)


Labour force agricultural labourers 8, 52 cultivators 8

estimatcd in 2001 52 femalc work ParticiPation

Kerala 5 No-industry district 34, 35 Non-OPEC countries I Non-renewable resources, 58 balance of life (mineral reserves)

conservation 61
gas reserves 75, 78 prices 59 reservcs 59

Lcbanon 7

19 8

main workers (in India) Latin America 43, 44, 45

Life expectancy 6 Lima 42

Non-resident Indians (NRI) 38

substitution 6l
Sea 64


Lima DeveloPment
42, 43, 46,

Nuclcar energY 69, 70

capacity 70 plants 70


Linz-Donawitz 6l


rNousrnrlt por,rcy


pRofpEcrs_200l A.D.
Raja Chelliah Committee 39 Rajiv Gandhi 76

70 waste z0

programme 70

Nucrear ruer comprex


ffffi:[T,%::, , n, B,47

demand ror (in rndia) geological reserves 66


Raw material intensivncss d1,62


reservcs (crude


oil) 66


of rndia 11, 13, 18


patcnt 31, 32 patent ect gl


panama 7 pande Commiltee


Segmentation_Industrial sectors 36 Services sector (growth rate) 4g Seventh plan 47


ratio (India) 4

"t"::tii 63,73

I:.:."::1"^::;l;' commission

university ;,"

3e ii, ou, _is,

33, 46, 47,

o, li:::f:".} " :;ff ffi,jf'r, s7,


iilli.'""#,J,Jl.r,u* r,
South Korea 24 Sri Lanka 3, 7, 55
(losses) 27 26

government 57 import industriar24, pricing 26 Population decadar growth India 3, 74



:::::3lu_:lg:"lporation Status of women in India 4

"a'ital 33, 34 central
investment 34 Talcher 69 Tamil Nadu 6 Tarapur 69 llechoical (advances) 6l

middre crass


stabilization urban 16

Power generatioo

utirization 12 price control 29


on sugar 32 Prime Minister (India) 2, 23 Productivity growth 51, 53 Publicsector 25, 2 6, 27, 29, 33
investments 26

on cement on drugs 3l on pharmaceuticals 32



backwardness 40

development 59, 62 factor 40 hcadway 40

identifieation 40
progress 79

profits 26
Panjab 72, 76

thrust 4l
fiechnology birth planning 4, 5

R & D (stagnancy)







(rechnology) consciou 3E general 27, 38

growth rate 25 high 20, 35 Valuc added 20,21, 5l
Wanchoo Committee 33 Water domestic use 7l Gangetic plain 72 groundwater 72, 73

import 12, 29
nuclear 70
obsolescent 36

stagnation 36 updating 28

upgadalion 2, 12, 39, 40

industrial use 7! precipitation (in India) 70, 71

scarcity 12
shortages ?9 tubewells 72, 73 West Bengal 72



Under nutrition (India) 4 UNIDO 42, 50,51, 54, 58,'77

West German 69

Uranium Corporation of India 69 u.s.A.5, 39,6?,69 U.S. Commerce Departmnt 40 U.S.S.R.67

Working Group on Energy Policy (WGBP) 62, 63, 64

World Bank 4,



World Bank Development Report 5,6,7,8,23,55

World economy 14

sector 48

Uttar Pradesh 3, 38, 72