INDUSTRIAL

DEVELOPMENT
DURING
PLANNING PERIOD
 Introduction
Before the arrival of Britishers, India was industrially more
advanced as compared to the economies of the West
European countries. The Britishers systematically destroyed
the industrial base of India. As a result, India inherited a weak
industrial base.
Industrial Development Since Independence:
Since Independence, India is trying to build up a sound
industrial base. In post-independence period, India started to
develop different types of industries with the help of
economic planning. The contribution of the industrial sector
to the gross domestic product (GDP) of the country which was
15% in 1950-51 gradually increased to 22.3% in 1970-71 and
then to 24.1% in 2005-06. But in spite of all its efforts, India is
still considered as an industrially backward country.
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Industrial Development During The
Five-year Plans
After the introduction of planning in India, the industrial sector
of the country started to develop at a considerably higher
rate.
On the eve of first plan, the industrial development in India
was confined largely to the consumer goods sector. Thus, the
industrial structure exhibited the features of an Under-
developed economy. Industries manufacturing ‘intermediate
goods’ like coal, cement, steel, power, alcohol, chemicals etc.
were also established but there production was small as
productive capacity was considerably below the requirements.
On the whole, while consumer goods industries were well
established, producer goods industries lagged considerably
behind.
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 INDUSTRIAL DEVELOPMENT UNDER
FIVE-YEAR PLANS
OBJECTIVE ACHIEVEMENT FAILURE
Emphasis of the first The first plan was a great The fist plan did
First plan was on success as the production not envisage any
Plan increasing the targets were more than large scale
(1951-56) capacity of the then fulfilled. Important programmes of
existing industries projects established industrialization.
rather than during this plan include- The main thrust of
establishment of new Hindustan Machine Tools, the first five year
industries. Hindustan Antibiotics, plan was on
Hindustan Cables etc. agricultural
development.
The second plan set The second plan The second plan
Second out the task of successfully achieved the failed to achieve
Plan establishing basic and dispersal of industries into its target growth
(1956-61) capital goods the backward areas. rate of 10.5%. The
industries on a large annual growth
scale. rate during this
plan was 7.25%.
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 OBJECTIVE ACHIEVEMENT FAILURE
The third plan tried to The third plan was a The third plan was a
Third obtain an integrated realistic and more thorough failure because
Plan and balanced balanced of the first two the country suffered
(1961-66) development of plans. The third plan from one of the severest
industries so that the accorded top-most priority famines during this plan.
growth of the on the completion of Besides, India had to go
economy in the ongoing projects initiated through two major
subsequent plans during the second plan. conflicts with China and
could become self- Pakistan.
sufficient.
During the Fourth It was during the fourth During the Fourth plan,
Fourth plan, there was much plan when much progress the performance of
Plan emphasis on the was made in alloys, industrial sector was not
(1969-74) agro-based industries aluminium, automobile- at all encouraging. The
such as sugar, cotton, tyres, electric goods, rate of growth of
jute, vanaspati metal machine tools, tractors industrial production
based and chemical and special steel. during this plan was
industries etc. restricted to only 5% as
against the target
growth rate of 9% per
5
annum.
 OBJECTIVE ACHIEVEMENT FAILURE

The fifth plan The steel authority of The fifth set a target of
Fifth started with its India (SAIL) was annual growth rate of
Plan twin objectives of constituted during this 8.2% in the industrial
(1974-79) achieving self- plan. Moreover, drug sector but the actual
reliance and growth manufacturing, oil average growth rate
with social justice. refining, chemical realised during the
The main stress of fertilizers and heavy plan period (1974-75)
this plan was on engineering industries to (1977-78) was only
rapid growth of made steady progress. 6.0% which was much
steel plants, export below the target.
oriented articles
and goods of mass
consumption.

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 OBJECTIVE ACHIEVEMENT FAILURE

The sixth plan During this plan, the Indian The new industries had
Sixth finalized its economy made an all- tended to gravitate
Plan strategy for round progress and most towards existing
(1980-85) industrial of the targets fixed by the centers and the
development in planning commission were backward areas had
order to achieve realised. The sixth plan remained substantially
structural noted that the industrial untouched by
diversifications, production had increased planning. During this
modernization and by about five times during plan, the annual
self-reliance. The this period. growth rate of
main emphasis in industrial output was
this plan was on merely 6% as against
producing goods to the target of 7.0%.
exploit the
domestic and
international
markets. 7
 OBJECTIVE ACHIEVEMENT FAILURE
The Seventh plan The seventh was a great During the seventh
Seventh attempted to success because the plan, the pattern of
Plan accelerate the growth Indian economy recorded industrialization in
(1985-90) in foodgrains about 8.5% annual growth the country has
production, increase rate of industrial been resulting in
in employment development as against concentration of
opportunities and the target of 5%. economic power in
raise productivity. In the hands of few
other words, the large industrial
focus of the seventh houses and thus
plan was Food, Work failed to achieve the
and Productivity. objective of planning
in reducing
concentration of
wealth and
economic power.

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 OBJECTIVE ACHIEVEMENT FAILURE
The main emphasis of During the eighth plan the During the eighth
Eighth the eighth plan was policy of liberalisation was plan, the share of the
Plan on the removal of adopted for the public sector in total
(1992-97) regional imbalances investment of foreign investment had
and encouraging the multi-national companies declined considerably
growth of to about 34 per cent.
employment in small
and tiny sectors.

The development The ninth plan put It is observed that

Ninth strategy of ninth plan adequate stress on the although the ninth
Plan envisaged an industrial sector. The govt. plan had set a target
(1997- important role for the undertook some serious to achieve annual
private sector and for measures to make growth rate of 8.5% in
2002) market forces. The necessary economic the industrial sector
main emphasis of the reforms in the industrial but the achievement
ninth plan was on structure of both the remained far below
cement, coal, crude public as well as private the target envisaged.
oil, consumer goods, sector of the country.
electricity, refinery
etc. 9
 OBJECTIVE ACHIEVEMENT FAILURE
The development During this plan period, The tenth plan failed
Tenth strategy of the steps were taken for to achieve its target
Plan tenth plan was to removing infrastructural annual growth rate of
(2002-07) liberalise and constraints, liberalization 10%. The annual
privatise and to of industrial licensing growth rate attained
give more space to policy and other in the industrial
the private sector regulations and also for sector was 8.2%.
to expand its making provision of
activities. incentives for rapid
development of key areas.

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 OBJECTIVE ACHIEVEMENT FAILURE
During the During this plan, huge Govt. has realised that in
Eleventh eleventh plan, investments were made in recent years although
Plan target for growth the public sector in economic growth has
(2007-12) in the industrial backward states for their accelerated but it has
sector was kept at industrial development. failed to be ‘inclusive’. In
10% per annum. Various fiscal incentives, other words, benefits of
The eleventh plan capital subsidies and other growth have not
gave priority to facilities were introduced reached all the sections
agriculture, for industrial development of population
irrigation and of backward areas. particularly small
water resources, farmers, landless
education, health, labourers and persons
infrastructure and working in unorganised
employment. sector have remained
beyond the benefits of
development

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Twelfth Five-Year Plan (2012-17)
 The Twelfth Plan proposes an outlay of Rs. 3,77,302 crore for
the industrial sector which is 4.9% of the total outlay of Rs.
76,69,807 crore.
 The target for industrial growth has been kept at 10% per
annum.
 The twelfth plan stresses the importance of infrastructure
development especially in the power sector and removal of
bottlenecks for high growth and inclusiveness.
 It also sets targets for various economic and social sectors
relating to poverty alleviation, infant mortality, job creation etc.

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 Industrial Growth In India
-Four Distinct Phases
Industrial development during the period of planning
can be divided into the following distinct phases:
 Phase I which covered the period of the first three
phase (i.e. the period from 1951 to 1965)
 Phase II which covered the period from 1965 to 1980
was marked by industrial deceleration and structural
retrogression
 Phase III which covered the period of 1980’s (1980-
81 to 1990-91) was marked by industrial recovery
 Phase IV covering the post-reform period (i.e. the
period 1991-92 onwards) 13
 PHASE I (1951-65)
Building up of Strong Industrial Base
The First Phase of industrial growth broadly consists of the
first three plan periods which had built a strong industrial
base in India. Phase I laid the basis for industrial development
in the future. The second plan, based on Mahalanobis model,
emphasized the development of capital goods industries and
basic industries. Accordingly, huge investments were made in
industries like iron and steel, heavy engineering and machine
building industries . The same pattern of investment was
continued in the third plan as well. As a result, there occurred
a noticeable acceleration in the annual compound growth
rate of industrial production over the first three plan periods
upto 1965 from 5.7 % in the first plan to 7.2 % in the second
plan and further to 9.0 % in the third plan.
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 TABLE
Annual Compound Growth Rates In Index Numbers of
Industrial Production, 1951 to 1965 (Phase I)
Use Based or 1951-1955 1955-1960 1960-1965
Functional (4 years)
Classification
1. Basic Goods 4.7 12.1 10.4
2. Capital Goods 9.8 13.1 19.6
3. Intermediate 7.8 6.3 6.9
Goods
4. Consumer 4.8 4.4 4.9
Goods
(a). Durables ---- ---- ----
(b). Non Durables ---- ---- ----
5. General Index 5.7 7.2 9.0
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 PHASE II (1965-80)
Industrial Deceleration & Structural
Retrogression
The Second Phase of industrial growth broadly covers the
period of three Annual Plans , the Fourth Plan and the Fifth
Plan. The period from 1965 to 1976 was marked by a sharp
deceleration in industrial growth. The annual compound rate
of growth fell steeply from 9.0 % per annum during the third
plan to a mere 4.1 % per annum during the period 1965 to
1976. The last year of Phase II i.e. 1979-80 recorded a
negative rate of growth of industrial production of -1.6 % over
the preceding year. The Second Phase clearly experienced a
fall in annual growth rate of capital goods industries and basic
industries which was a clear case of structural retrogression.
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 TABLE
Annual Compound Growth Rates In Index Numbers of
Industrial Production, 1965 to 1980 (Phase II)
Use Based or 1965-1976 1974-1979 1979-1980
Functional (Fifth Plan
Classification Average)

1. Basic Goods 6.5 8.4 -0.5

2. Capital Goods 2.6 5.7 -2.3
3. Intermediate 3.0 4.3 1.9
Goods
4. Consumer 3.4 5.5 -4.4
Goods
(a). Durables 6.2 6.8 5.6
(b). Non Durables 2.8 5.4 -6.1
5. General Index 4.1 6.1 -1.6 17
 Causes of Deceleration and
Retrogression

The main causes of deceleration and structural retrogression

during the Second Phase include:
 Exogenous factors such as the wars of 1962, 1965 and 1971;
 Oil crisis of 1973;
 Unsatisfactory performance of the agricultural sector;
 Unequal distribution of income and wealth;
 Wrong industrial policies, complex bureaucratic system of
licensing, irrational and inefficient system of controls;
 Supply constraints like infrastructural bottlenecks;
 Successive droughts of 1965-67 and 1971-73 etc.
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 PHASE III (1981-1991)
The Period of Industrial Recovery

The Third Phase of industrial growth in India covers the entire

period of 1980’s consisting of both the Sixth and Seventh
Plan. This period of 1980’s can broadly be termed as a period
of industrial recovery. During this phase, the consumer
durables industries had recorded a considerable growth in its
output. Chemicals and petrochemicals played a dominant role
in determining the growth of industrial sector in general.
Thus, during this third phase, there is a clear shift in the
pattern of industrialization in the country.

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 TABLE
Rate of Growth of Industrial Production (Use-based) during
Phase III (1981-1991)
Use Based or 1981-1985 1985-1990 1990-1991
Functional
Classification
1. Basic Goods 8.7 7.4 3.8
2. Capital Goods 6.2 14.3 17.4
3. Intermediate 6.0 6.4 6.1
Goods
4. Consumer 5.1 7.3 10.4
Goods
(a). Durables 14.3 11.6 14.8
(b). Non Durables 3.8 6.4 9.4
5. General Index 6.4 8.5 8.3
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 Causes of Industrial Recovery

The main causes of industrial recovery during the

Third Phase i.e. during 1980’s are as follows:
 New Industrial Policy and Liberal Fiscal Regime;
 Contribution of the agricultural sector;
 Growth of Service Sector and
 The Infrastructure Sector

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 PHASE IV
The Period from 1991-92 onwards
The year 1991 ushered in a new era of economic liberalization.
Major liberalization measures designed to affect the
performance of the industrial sector were – wide-scale
reduction in the scope of industrial licensing, simplification of
procedural rules and regulations, reductions of areas
exclusively for the public sector, disinvestment of equity of
selected public sector undertakings, enhancing the limits of
foreign equity participation in domestic industrial
undertakings, liberalization of trade and exchange rate policies,
rationalization and reduction of customs and excise duties and
personal and corporate income tax etc. The performance
during the later half of 1990’s deteriorated considerably as
compared with the first half of 1990’s Thus the performance of
the industrial sector during the post-reform period has been
highly unsatisfactory. 22
 Average Annual Growth Rate of Industrial
Production in Pre-reform and Post-reform Decade
Use-based or 1980-81 1992-93 1997-98 2002-03 2007-08
Functional to 1991- to 1996- to 2001- to 2006- to 2011-
Classification 92 97 02 07 12
(eighth (ninth (tenth (eleventh
plan) plan) plan) plan)
(1) (2) (3) (4) (5) (6)
1. Basic Goods 7.4 6.8 4.1 6.6 5.4
2. Capital Goods 9.4 8.9 4.7 14.4 14.3
3. Intermediate 4.9 8.5 5.8 6.2 4.0
Goods
4. Consumer 6.0 6.6 5.5 9.6 7.8
Goods
Durables 10.8 13.4 10.7 8.8 15.6
Non Durables 5.3 4.8 3.8 10.0 3.4
5. General Index 7.8 7.4 5.0 8.2 6.923
 Causes of Unsatisfactory Performance
in the Post–reform Period

The main causes for unsatisfactory performance of the

industrial sector in the post-reform period are as follows:
 Exposure to external competition;
 Slowdown in investment;
 The infrastructural constraints;
 Difficulties in obtaining funds for expansion;
 Contraction in consumer demand;
 Sluggish growth in exports ;
 Anomalies in tariff structure etc.

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 Trends In Industrial Production
In India
In India, industrial sector has achieved a significant
achievement in diversifying its productive capacities. In
respect of almost all consumer goods both durables and non-
durables, the stage of self-sufficiency has already been
attained. The country has also achieved an impressive
industrial productive capacity in respect of mining and
metallurgical industries. Moreover, significant progress has
also been achieved in building basic infra-structural facilities,
research and development (R&D) capability, project
management services etc. Thus, after more than sixty years of
planning the industrial production of the country has totally
been diversified. The volume of industrial production in
physical terms has also been multiplied.
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Problems and Obstacles to Industrial
Development in India
The following are some of the major problems and obstacles
that are being faced in the process of industrialization of the
country:
 Poor capital formation;
 Lack of Infrastructural facilities;
 Poor performance of the agricultural sector;
 Gaps between targets and achievements;
 Dearth of skilled and efficient personnel;
 Industrial Sickness;
 Regional Imbalances;
 Poor performance of the public sector;
 Concentration of Wealth etc.
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THANK YOU

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