Industrial Slow Downs in India
During 8th Five Year Plan, the performance was best in 1995-96, when industrial production increased by 12.8%. But during the year 1996-97 industrial growth slowed down considerably to 5.6%. The slow down of industrial production was mainly due to the poor performance of Electricity generation and Mining.
The slow down of industrial growth in 1996-97 and 1997-98 did not cause much panic as it was expected to be a cyclical downturn of a Normal Business Cycle. It was not indicative of an Industrial Recession. The slow down in 1997-98 was more pronounced for the manufacturing sector in particular. Industrial output growth recovered in 1998-99 and 1999-2000. This did not prove to be a sustained industrial recovery. The ‘average growth rate of industrial production, from 1992-93 to 1999-2000 was also lower in comparison to period 1980-81 to 1991-92, particularly in Manufacturing, Mining and Electricity Sector .
The Industrial Growth Slowed Down in 2000-01 and 2001-02 was widespread covering all broad sectors such as Manufacturing, Electricity and Mining and all end use groups such as capital goods, intermediate goods and consumer goods, both durables and non-durables. Manufacturing sector growth declined to 2.9% in 2001-02, which was lowest growth in the last ten years.
The Industrial Slowdown, particularly in the year 2000-01 and 2001-02 was due to a number of Structural and Cyclical factors, such as Normal Business and Investment Cycles, declining trend, internal and external demand, continuing high level interest rates, infrastructure bottlenecks in power and transport, lack of reforms in land and labour markets, inherent adjustment lags resulting from Industrial Reconstructing through merger and acquisition, and delays in establishing appropriate Institutional and Regulatory frameworks in some important sectors.
Rationalisation and Simplification of Taxation will increase the competitiveness in our industrial sector. Government of India declared for reduction maximum of customer duties from 35% to 20% in 3 years. Present Industrial pattern have introduced several reform measures to revive Industrial Investment and Growth in India, which is needful for the acceleration of overall growth and generation of employment.
Government of .India have adjusted various remedial measures for the removal of Industrial Slowdown, as under:
- 100% FDI (Foreign Direct Investment) has been permitted in various sectors such as : B to B commerce, manufacturing activities in special economic zones (with leaving some exceptions) many activities of Telecom sector, Airport, Courier services, For development integrated towns, drugs and pharmaceuticals, hotel and tourism sector.
- Defence Industry Sector has been opened up for private sector participation with FDI Investment permitted up to 26%
- Foreign equity up to 100% will be permitted in Non-Banking Financial Companies (NBFCs).
- Excise duty rationalized to a single rate of 16% (CENVAT).
- Central Excise Net” Value Added Tax Rules, 1944 were simplified and a drastic reduction of rules made.
- Peak duty of customs reduced from 38.5% to 35% with the abolition of 10% surcharge.
- Interest Rates have been reduced.
