Examining poor showing of Indian industry

A STRIKING feature of India's economic development has been its deviation from the stages-of-growth pattern that has characterised almost all developed countries. The growth paradigm has been so pervasive, it is now almost an economic law. Countries start out as being primarily agrarian. As industrialisation progresses, the production and employment structure gradually shifts in favour of the industrial sector. With further development, the two sectors require a greater input of services. Income growth also leads to consumer demand shifting in favour of services. As a consequence, the service sector grows and eventually overtakes the industrial sector, leaving the agricultural sector behind.

In India, however, the middle stage -- industrial predominance -- was simply by-passed. The country moved from a period when agriculture had a 50 per cent share in the GDP to one where services took over that mantle in just five years (1974 to 1979). The industrial sector has languished at the 20 per cent level for the past 30 years. This calls for an explanation. Efforts at raising industrial growth rates, including the so-called liberalisation of the Rajiv Gandhi era (1984 to 1989), have all had mixed fortunes. This book seeks to examine some of the issues underlying the less-than-satisfactory performance of the Indian industrial sector.

The book originated in a seminar organised by the Centre for Development Studies, Thiruvananthapuram, in 1986. In view of the rather rapid policy changes that have occurred over the past two years, one would be tempted to suspect this is an outdated idea. But scholarship is never wasted. Indeed, the introduction to this book by Arun Ghosh shows amazing foresight, and one can scarcely believe it was written in 1986.

The book is of importance because the various policy changes have yet to substantially alter the industrial structure in India. There is still time to re-examine the basic assumptions underlying reforms and to fine-tune the policy environment, and the studies in this book can help considerably in the reappraisal.

As is to be expected in a collection of this kind, the quality of the studies varies widely. Some have obvious topicality, while others are peripheral. The most important, perhaps, are the six studies that examine various aspects of the Indian industrial economy as a whole. These analyses indicate the strengths and weaknesses of the sector and explore the likely consequences of liberalisation measures that have been or are in the process of being implemented.

Besides these, there are seven studies that investigate individual industrial products in terms of market structure, technology and competitiveness. Some also shed light on what went wrong and what needs to be done at the sectoral level. Of course, some are merely descriptive, but one has to take the bad with the good. Unfortunately, there is only one study at the company-level -- where business decisions are made and strategies for coping with changes are evolved. One had hoped for more of such studies, but given the paucity of research on industrial economics, beggars can't be choosers. Pronab Sen is economic adviser to the government of India.

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