INDEX OF

INUSTRIAL
PRODUCTION
Introduction
■ The Index of Industrial Production (IIP) is an index that shows the growth rates in different
industry groups of the economy in a fixed period of time.

■ It is compiled and published monthly by the Central Statistical Organization

(CSO), Ministry of Statistics and Programme Implementation.

■ IIP is a composite indicator that measures the growth rate of industry groups classified under:

• Broad sectors, namely, Mining, Manufacturing, and Electricity.

• Use-based sectors, namely Basic Goods, Capital Goods, and Intermediate Goods.
■ Base Year for IIP is 2011-2012
■ The eight core industries of India represent about 40% of the weight of items that are
included in the IIP
Significance of IIP

■ IIP is the only measure on the physical volume of production.

■ It is used by government agencies including the Ministry of Finance, the Reserve Bank
of India, etc, for policy-making purposes.

■ IIP remains extremely relevant for the calculation of the quarterly and advance GDP
estimates.
Performance of core industries

■ Index of Eight Core Industries (ICI) measures combined and individual performance of
production in selected eight core industries

■ The combined Index of Eight Core Industries stood at 134.0 in July 2021, which
increased by 9.4 per cent (provisional) as compared to the Index of July 2020

■ Detailed performance:

https://eaindustry.nic.in/eight_core_infra/eight_infra.pdf
Corporate sector performance
■ The responsibility for collection, compilation, maintenance and dissemination of basic
statistics on the Indian Corporate Sector is vested with the Department of Company
Affairs (DCA)

■ Due to COVID-19, the Indian Corporate sector witnessed a sharp decline initially

■ Growth returned in Oct-Dec. quarter, 2020

■ While the agriculture, manufacturing and construction sectors posted growth, the
contraction in trade, hotels, transport and communication was milder as compared to the
July-August quarter.
■ Moving towards recovery

■ The net sales of companies in the manufacturing sector grew at above 10 per cent

■ Corporate India showed a growth of almost 5 per cent in net sales after five quarters of
contraction

■ Increase in new work intake

■ With improvement in business sentiment, and greater capacity utilisation, employment

scenario is also expected to improve
INDUSTRIAL PRODUCTION
AND PRODUCTIVITY
INTRODUCTION

▪ During the first FYP, the industrial structure exhibited the features of an
underdeveloped economy

▪ The Second FYP accorded top priority to programmes of industrialization

▪ Heavy expenditures made to promote industrial development

TRENDS IN INDUSTRIAL PRODUCTION

▪ Phase 1 (1951-65): Covered the period of first three plans

▪ Phase II: marked by industrial deceleration and structural retrogression

▪ Phase III: Industrial recovery

▪ Phase IV: Post-reform period

PHASE I (1951-65): BUILDING UP OF STRONG
INDUSTRIAL BASE
▪ Second plan based on the Mahalanobis model emphasized the growth of capital
goods industries and basic industries
▪ Acceleration in the compound growth rate of industrial production
- From 5.7% in First plan to 7.2% in Second Plan to 9% in Third plan
▪ Rate of growth of capital goods industry shot up considerably
▪ Rate of growth of basic industries also increased
▪ Massive expansion of investment in the public sector
 PHASE II (1965-80): INDUSTRIAL REGRESSION
AND STRUCTURAL RETROGRESSION

▪ Period of 1965 to 1976 was marked by a sharp deceleration in industrial growth

▪ From 9% to 4.1%
▪ Barring the year 1976-77, growth rate was even lower for the other years
▪ Capital goods sector grew at only 2.6% as compared to a double digit growth in the previous
phase. Same situation for basic industries
▪ Causes:
- Wars of 1965 and 1971
- Drought
- Infrastructural constraints and bottlenecks
- Oil crisis
- Low growth of agricultural sector
PHASE III (1981-1991): THE PERIOD OF
INDUSTRIAL RECOVERY
▪ Rates of industrial growth based on the revised IIP, indicated industrial growth

▪ Value added in the manufacturing sector grew at the rate of 7.5% p.a. in the first
half of 1980s

▪ Growth was based on better productivity performance and not factor inputs
CAUSES OF INDUSTRIAL RECOVERY

1. New Industrial Policy and liberal fiscal regime

2. Contribution of the agricultural sector

3. Growth of service sector

4. The infrastructure factor

PHASE IV (THE PERIOD OF 1991-92
ONWARDS)
▪ New era of economic liberalization
▪ Reduction in industrial licensing, simplification of procedural rules and regulations,
reductions of areas especially reserved for the public sector, disinvestment in PSUs,
increasing the limit for foreign equity participation, liberalization of trade and
exchange rate policies etc.
▪ Rate of growth = targeted rate of growth = 7.4%
▪ In the Ninth FYP, rate of growth was only 5%
▪ Dismal performance in the last year of Ninth FYP
CAUSES OF UNSATISFACTORY
INDUSTRIAL PERFORMANCE
1. Exposure to external competition
2. Slowdown in investment
3. The infrastructural constraints
4. Difficulties in obtaining funds for expansion
5. Sluggish growth in exports
6. Anomalies in tariff structure
7. Contraction in consumer demand
PERIOD SINCE 2002-03

▪ Tenth FYP witnessed a revival of industrial growth- 8.2%

▪ Eleventh plan- 6.9% instead of a target of 10% p.a.

▪ All broad sectors of the IIP witnessed volatility in growth

▪ Capital goods and the intermediate goods were the most volatile
THANK YOU
MSME SECTOR
Subtitle
INTRODUCTION
⦿ According to the provisions of Micro, Small & Medium
Enterprises Development (MSMED) Act, 2006 MSME are
classified in two classes:

1. Manufacturing Enterprises

2. Service Enterprises
FURTHER CATEGORIZED BASED ON INVESTMENT IN EQUIPMENT AND
ANNUAL TURNOVER:
STATUTORY BODIES
⦿ Khadi and Village Industries Commission (KVIC)

⦿ Coir Board

⦿ National Small Industries Corporation Limited (NSIC)

⦿ National Institute for Micro, Small and Medium Enterprises,

(NI-MSME)

⦿ Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)

SIGNIFICANCE
Contribution to GDP

Exports

Employment

Entrepreneurship development

Capital formation
GOVERNMENT SCHEMES
⦿ Prime Minister Employment Generation Programme and Other Credit
Support Schemes

⦿ Development of Khadi, Village and Coir Industries

⦿ Technology Upgradation and Quality Certification

⦿ Marketing Promotion Schemes

⦿ Infrastructure Development Programme

⦿ Scheme of Surveys, Studies and Policy Research

⦿ Scheme of Information, Education and Communication

RECENT GOVERNMENT POLICIES
⦿ June 2021: simplification of process for registration of micro, small
and medium enterprises.
⦿ Budget allocation for MSMEs in FY22 more than doubled to Rs. 15,700
crore vis-à-vis Rs. 7,572 crore in FY21.
⦿ The government announced Rs. 3 lakh crore collateral-free automatic
loans for businesses.
⦿ In Union Budget 2021, the government announced Rs. 10,000 crore for
‘Guarantee Emergency Credit Line’ (GECL) facility to eligible MSME
borrowers
REFERENCES
⦿ https://msme.gov.in/all-schemes
⦿ https://www.ibef.org/industry/msme.aspx#:~:text=The%20Micr
o%20Small%20and%20Medium,of%20the%20country%20and
%20exports.
⦿ https://msme.gov.in/about-us/about-us-ministry
WTO AND INDUSTRY
 INTRODUCTION

• A number of provisions in the WTO rules deal with various measures that members can

use to protect domestic suppliers and promote exports and technology transfer

• Tariffs can still be used to protect infant industries and develop domestic capacity
 IMPORT PROTECTION

• Tariffs, non tariff measures and subsidies protect domestic firms from import competition
• local content protection
• Later included in TRIMS - prohibited
• Import protection can also be achieved by challenging the fairness of the competition by using
anti-dumping or safeguard measures
 SUBSIDIES AND EXPORT PROMOTION

• The Agreement on Subsidies and Countervailing Measures (SCM) increases disciplines

on the use of subsidies and the use of countervailing measures to offset any injury
caused by subsidised imports
• Three areas of subsidies-
1. Enterprise-specificity – a particular company or companies is targeted
2. Industry-specificity – a particular sector is targeted
3. Regional specificity – a particulars region is targeted
• If a subsidy fits the specificity definition, it is placed into one of three categories:
prohibited, actionable, or non-actionable
• Action under the SCM relies on proof that subsidies are having a negative effect on the
trade of another member.
• The main message of the SCM agreement is that subsidies that have a direct effect on
trade are explicitly prohibited
• For developing countries the SCM is a two-edged sword
 AGREEMENT ON TRADE RELATED INVESTMENT MEASURES

• TRIMS recognizes that certain investment measures can restrict and distort trade
• WTO members may not apply any measure that discriminates against foreign products or that
leads to quantitative restrictions, both of which violate basic WTO principles
• Article 4 allows developing countries to deviate temporarily from the obligations of the TRIMs
Agreement
• The five year transition period (seven years) was not enough time for the countries to benefit
from these policies
 TRADE RELATED INTELLECTUAL PROPERTY
RIGHTS (TRIPS)
• The agreement consists of thee parts: standards, enforcement and dispute settlement
• Designed to strengthen the protection of intellectual property rights (IPR) and have a positive
impact on local innovation, foreign direct investment and technology transfer
• Negative impact for developing countries: : higher prices for protected technologies and products
and restricted abilities for diffusion through reverse engineering
• In the case of domestic firms it means there is an incentive to innovate and compete dynamically
• For foreign firms it means that, where permitted, market access through a commercial presence
may now be viable since they have better IPR protection
 GENERAL AGREEMENT ON TRADE IN
SERVICES (GATS)
• Positive listing of sectoral commitments on market access and national treatment
• Agreement allows sectoral bindings on four modes of supply: cross-border supply, consumption
abroad, commercial presence and presence of natural persons
• The effect of the GATS is twofold:
• First, market access makes it possible to develop export sectors
• Second, bindings have the effect of inducing competition in home markets.
 REFERENCES

• Pg No. 18-23 of pdf