Industrial Growth Trends in India Since 1951

The structure of industries is dynamic and keep changing from time to time. The change in Industrial structure or Industrial development or growth during the planning era can be divided into four phases discussed as follows

First Phase of High Growth

The first phase was of high growth between beginning of first plan to end of third plan i.e. 1950-51 to 1965-66. During this period, the central government led by Nehru laid great emphasis on industrialisation; particularly since the Second five year plan. Under the Industrial Policy of 1948 and 1956, huge public investment in heavy industries was done because such investment was thought to be out of capital-raising capacity of the private sector. During this phase, average industrial growth was nearly 9%.

Second Phase of Industrial Retrogression

Second Phase between 1966 to 1980 is called Low Growth Phase or phase of Industrial Deceleration in India or “Industrial retrogression” during fourth and fifth plan. During this phase, the average Industrial growth rate remained 4.1%. However, the capital goods industries registered a high growth during this period. There are several explanations of this phenomenon of Industrial retrogression between 1966-1980.

• As per the government, the wars of 1965 and 1971, back-to-back drought conditions, infrastructural bottlenecks were responsible.
• Some scholars held low farm growth responsible for slowdown, because it restricted the supply of raw materials.
• Others blamed the small size of market for industrial goods. Their argument was that such goods were not in the reach of the people beyond top 10% of the population (by income) because of huge inequalities of income and wealth. Once that market got saturated, there was no further expansion among the other strata of the population.
• Few more other blamed the wrong industrial / other government policies that led to complex licensing system, inefficient control and infrastructure bottlenecks.

Third Phase of Industrial Recovery

The third phase from 1980s to 1991 can be called phase of Industrial Recovery. During this phase, Industrial growth was between 6.4 to 8.3%.

• The main cause of this revival was gradual liberalization of the industrial licensing.
• The green revolution resulted in increased prosperity of the large farmers in some parts of the country, that led to increased demand of farm mechanization.
• Further, the government had taken several other budgetary / fiscal measures aimed at infrastructure investment. These measures included maintenance of heavy budgetary deficit and huge public borrowing (to invest in infra).

This period saw a changed consumption pattern in favour of Consumer durables. People started having Radio sets, TVs, VCRs, Refrigerators, Bikes, Scooters etc. in their homes. This was the reason that the consumer durable were called the “forefront of growth” during this phase.

Fourth phase of Industrial Reforms

The manufacturing growth was in negative zone in 1991-92 with a dismal overall industrial growth of 0.8%. After that, the PV Narsimharao government announced New Industrial Policy 1991 and growth started taking pace. However, there was no sustainable economic growth initially. As the Indian economy integrated with the rest of the global economy, it started responding to global slowdowns and recovery.