SCENARIO OF INDUSTRIAL SECTOR IN INDIA WITH REFERENCE TO MAHARASHTRA STATE

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1 SCENARIO OF INDUSTRIAL SECTOR IN INDIA WITH REFERENCE TO MAHARASHTRA STATE Kuldeep Shamrao Powar Research Student, Department of Commerce and Management, Shivaji University, Kolhapur Ms. Rupali Sadashiv Sasane Research Student, Chh. Shahu Institute of Business Education and Research, Kolhapur Abstract The level of social and economical development of any particular country directly depends on the development of industry sector of that country. The problems like poverty and unemployment cannot be addressed without the development of economic sectors in general and industrial sector in particular. In fact poverty and unemployment are interlinked. Planners cannot eradicate poverty without boosting the level of employment, and employment cannot be boost until basic infrastructure and financial access are made available easily to the entrepreneur or the industrial sector. Since independence Government of India has taken keen effort for the industrial development. Government has undertaken huge investment in basic infrastructure for the industry. The present paper attempted to study the developmental scenario of the industrial sector in India with special reference to Maharashtra. The study is purely analytical since it is exclusively depends on the secondary data. It has covered the contribution of economic sectors in GDP, growth rate of economic sectors in India. In addition, in the context of Maharashtra, it has covered investment, employment, MSME, MIDC, FDI and Export from Maharashtra. However still there are certain weaknesses (like defective infrastructure, high prices of electricity, complications in land acquisitions, complicated administration like obtaining approval etc.) which become obstacles in the golden development path of Industry. Key Words: Industrial Sector, Investment, Employment, FDI, MSME, Export Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 1

2 Introduction Recognizing the contribution of the industry sector in the economic development, the Government of India has adopted liberalization policy in 1991 which facilitated speedy growth and brought out structural changes in the industry sector. Maharashtra has rich natural resources, skilled manpower and quality education facilities to harvest the industry sector. The State had to frame its industrial policy to address the challenges of globalization, liberalization and privatization. The State, therefore, adopted first industrial policy in the year 1993 which was revisited in 1995 and Latest industrial policy was introduced in 2006, which aimed at 10 per cent growth in the industry sector, 12 per cent growth in the service sector and generation of additional 20 lakh employment by State has nearly achieved these growth targets. Under this overall backdrop present research paper attempted to study the developmental scenario of the industrial sector in India with special reference to Maharashtra. The study is purely analytical since it is exclusively depends on the secondary data. It has covered the contribution of economic sectors in GDP, growth rate of economic sectors in India. In addition, in the context of Maharashtra, it has covered investment, employment, MSME, MIDC, FDI and Export from Maharashtra. The main objective of the study is to review the developmental position of industrial sector in India and Maharashtra. Objectives of the Study 1. To study the role of industrial sector in economic development of India 2. To study growth of the Industrial sector 3. To review the regional industrial development in Maharashtra 4. To study the progress of Industrial sector in Maharashtra Methodology and Data Source The present paper is purely analytical type which is entirely based on secondary data. The percentiles, standard deviations, coefficient of variance and compound annual growth rate have applied for the data analysis. The figures are also used wherever necessary. Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 2

3 Industrial Sector in Indian Economy In the direction of industrial development Government of India announced new industrial policy in The Industrial Policy 1991has opened a new chapter in India s economic history. Earlier reforms tinkered with license-permit raj, but left it intact in all its essential aspects. The new policy finally and explicitly admits that the license- permit raj has hampered instead of helping over development and therefore, need to be scrapped. Right from the commencement of new industrial policy, industrial sector playing very significant role in the economic development. Contribution of Industrial Sector in GDP The share of industry which includes mining, manufacturing, electricity, gas & water supply and construction has shown a steady increase from 15 percent in to 24 percent in and 25.8 percent in The major components of industry are manufacturing and construction. The share of manufacturing increased from 8.9 percent in to 14.5 per cent in Similarly, the share of construction improved from 4.4 percent in to 7.3 percent in However the share of industry in the GDP of developed countries is significantly higher than that of India Economy. Table 1.1 Economic Sector Wise Share in GDP Economic Sectors I Agriculture and Allied Services II Industrial Sector III Service Sector A. Commodity Sector (I+II) B. Service Sector (III) Source : Handbook of Statistic of the Indian Economy( ) The table 1.1, indicates economic sector wise share in GDP. It is seen from the table that in agriculture sector was the main pillar of the economy, as it had contributed around Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 3

4 55.4 percent share in total GDP. In the share of agriculture sector in total GDP has gone down from 55.4 to 38.0 percent and further in i.e 16.9 percent. The structural change in the composition of national income by industrial origin is the consequence of the process of economic growth initiated during the plans. Since the growth process involved a rapid expansion of manufacturing in the organized sector, the share of manufacturing was bound to indicate a relatively sharp increase. Development of Industrial Sector in India FDI, Portfolio Investment, and Export The inflow of FDI is become an engine of economic growth in modern era. The foreign direct investment promotes economic growth, creates employment opportunities and helps in favorable balance of payment. The table 1.2 indicates FDI inflow, Portfolio Investment and Export in crore. The FDI and portfolio investment was highest in the year and then afterward both have decreasing trend, except slightly increase in FDI in The export is showing up and down trend. Table 1.2 FDI, Portfolio Investment, and Export (Rs. Crore) Year Net FDI Portfolio Investment Export Average Standard deviation Coefficient of variance CAGR % % -2.48% Source: Economic Survey Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 4

5 The CAGR of net FDI is negative which is indicates unhealthy industrial environment. The portfolio and export growth rate is also negatives which means need felt to pay special attention to improve it. Growth Rate Table 1.3 Sector Wise Average Annual Growth Rate Year Agriculture Sector Industrial Sector Service Sector GDP Source: Central Statistics Office 2013 Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 5

6 In the year the growth rate of industrial sector was just 4.6 percent which becomes negative -0.1 percent in The negative growth rate resulted in new economic reform. The growth rate of industrial sector was in double digit during the period to which means it is a boosting period of Industrial growth. The figure 1.1 shows growth rate of GDP and industrial sector. It clear that growth rate curve of industrial sector is inverse u-shaped. The variations in the GDP growth rate less than that of industrial sector. Contribution in Employment Generation The industrial sector plays very crucial role in employment generation. It provides employment to over 17% of workforce in the country. The highest number of employment is being offered by community, Social and personal services which is followed by transport, storage and communication industry. The table 1.4 shows contribution of industrial sector in employment generation. Table 1.4 Industry Wise Employment Generation in India (in Lakh persons) Sector Agriculture and Allied Activities Mining and Quarrying Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 6

7 Sector Manufacturing Electricity, Gas and Water Construction Wholesale and Retail Trade Transport, Storage and Communication 8 Finance, Insurance Real Estate etc 9 Community, Social and personal services Total Source: Central Statistics Office 2013 Growth of Industrial Sector in Maharashtra Manufacturing sector, maintains its existence due to large domestic market and availability of labour at low cost. The fluctuation in manufacturing sector reflects in its share of Industry sector in GSDP which is between 29 per cent and 32 per cent. Year was the year of global crisis as well, effect of which is reflected in the negative growth of Industry sector ( (-) 1.1 per cent). Since , Industry sector is able to maintain its growth at constant prices at 10 per cent or more except in The GSDP of Industry sector in at current prices is estimated at 3,23,311 crore (30.3 per cent of total GSDP). The share of Industry sector in GSDP reached at its peak value of 29 per cent in from where it again started declining and reached 28 per cent in The growth in Industry sector at constant prices is more than 8 per cent except in , where it decelerated to 4.4 per cent and now again has moderated at 7.2 per cent in Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 7

8 FDI in Maharashtra As per the latest available data, during the period August, 1991 to September, 2010, the State received 4,221 number of Foreign Direct Investment (FDI) proposals amounting to Rs. 84,958 crore of which 42 per cent were completed and 7 per cent are under execution, which constituted 52 per cent and 9 per cent of investment respectively. The United States of America and Mauritius are the two prominent countries investing in industrial sector of Maharashtra with 16 and 14 per cent share respectively in total FDI. Details of FDI proposals in Maharashtra is given in Table 1.5 Table 1.5 Industry Group wise Approved FDI Proposals in Maharashtra (August, 1991 to September, 2010) Industry Group Percentage of Investment Percentage of Number of Number of Amount (Rs. Investment Proposals Proposals Crore) Amount IT Industry , Financial Services , Hotel & Tourism Industry , Business Management & Consultancy , Transportation , Cements & Ceramics , Power & Fuel , Chemicals & Fertilizers , Electrical & Electronics , Paper & Paper Pulp , Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 8

9 Industry Group Prime International Research Journal Percentage of Investment Percentage of Number of Number of Amount (Rs. Investment Proposals Proposals Crore) Amount Textiles , Food Processing , Drugs & Pharmaceuticals , Automobile Industrial Machinery Plastic & Rubber Goods Machine Tools/ Industrial Instruments Others , Total 4, , Source: Directorate of Industries, GoM Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 9

10 IT industry and financial services groups continued to receive sizeable FDI proposals in the state. The industry group wise approved FDI proposals since August, 1991 to September, 2010 is given in Table 1.5. Export from Maharashtra The main products exported from the State are gems & jewellery, software, textiles, readymade garments, cotton yarn, metal & metal products, agro-based products, engineering items, drugs & pharmaceuticals and plastic & plastic items. For recognition of efforts put up by the exporters and to boost the exports, State is taking initiatives like giving The Export Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 10

11 Award and organizing exhibition of products in foreign countries. During the year , sixteen international exhibitions were organized in various countries. Exports from the State and India are given in Table 1.6. Table 1.6 Industrial Exports from Maharashtra Year India Maharashtra Percentage to India ,13,700 4,54, ,42,945 5,71, ,72,846 6,40, ,26,794 8,39, ,28,184 8,45, Average Standard Deviation Coefficient of Variance Compound Annual Growth Rate 19.02% 16.75% 1.94% Source: Directorate of Industries, GoM It is clear from the CAGR that industrial export from Maharashtra is grown by percent per annum. The percentage of export to total India is growing by around two percent per annum. The CV is moderate in both export scenario of India and Maharashtra. Micro, Small, Medium and Large Enterprises The manufacturing and services categories of enterprises have been classified into micro, small, medium (MSME )and large enterprises based on their investments in plant & machinery for manufacturing enterprises and on equipments in case of enterprises providing or rendering services. Details of MSMEs and large enterprises are given in Table 1.7. Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 11

12 Table 1.7 Details of MSMEs & Large Enterprises as on 31 December 2011 Region MSME Employment in Lakh Large Enterprises Employment in Lakh Mumbai (10.6) (17.8) (6.3) (4.2) Kokan (13.1) (14.5) (24.9) (21.8) Nashik (15.5) (14.8) (13.5) (13.5) Pune (40.9) (31.3) (30.3) (36.2) Aurangabad (7.5) (8.4) (10.9) (9.9) Amravati (2.9) (2.4) (3.0) (2.8) Nagpur (3.4) (11.0) (11.0) (11.6) Maharashtra Source: Directorate of Industries, GoM (100) (100) (100) (100) Note: Figures in parentheses show percentage to All It is clear from the table 1.7 that around 31.3 percent of total employment of MSME is being provided by Pune which is followed by Mumbai. Out of the total MSME 40 percent are located in only in Pune region. In case of large industries Pune is emerging region in Maharashtra, since it contributes nearly 30 and 36 percent of the total large scale industries and total large scale employment. of the Maharashtra respectively. Industrial Units, Investment and Employment in MIDC MIDC is the State agency constituted for development of industrial areas. MIDC has developed industrial areas with essential infrastructure like internal roads, water, electricity and other internal services for entrepreneurs. As on 31st March 2011, about 89 per cent Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 12

13 developed plots are allotted to entrepreneurs. Details regarding industrial units in MIDC are given in Table 1.8 Table 1.8 Industrial Units, Investment and Employment in MIDC No. of Units Investment in (Rs. Crore) Employment (in Lakh) Region Mumbai ,400 3, Kokan 10,821 11,125 16,529 17, Nashik 6,057 6,135 2,151 12, Pune 7,603 9,273 20,032 24, Aurangabad 4,479 4,577 4,303 5, Amravati 1,441 1, Nagpur 2,649 2,687 8,609 8, Total Maharashtra Source: Directorate of Industries, GoM It is clear from the table 1.8 that no of industrial units in MIDC is highest in Kokan region followed by Pune. However the quantum of investment in Pune is more than that of Kokan region in both concern year. The share of Pune region in employment is also significant which is followed by Kokan region. Conclusion Industrial development in India is in the phase of take off. There is much more scope for industrial development as it has huge manpower, adequate natural resources and infrastructure. In the next few decades India will be among the one major country in world due its industrial growth potential. Still most of the resources are underemployed or remain unemployed which will definitely helps in economic development, if they used fully. No doubt that Maharashtra state is leading in the development of industrial sector. However the region disparities in the industrial development are not negligible. The region like Pune, Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 13

14 Mumbai and Kokan are emerging as industrial hub. On the other side Vidharbha, Marathwada are lagging behind in industrial development. References Directorate of Economics and Statistics, Planning Department Government of Maharashtra (2012), Economic Survey of Maharashtra Divatia P. J. (1996), Indian Industries in the twenty fist Century Vikas Publication, New Delhi. Bhattacharjee Sankalp and Chakrabarati Debkumar (2013), Financial liberlisation, financing constraint and India s manufacturing sector Feb 9, 2013 Das Abhiman and Singh Arvind Kumar, Raok s (2006), Commercial Bank Lending to small scale Industry economic and political weekly March 18, Ahluwalia I. J. (1985), Industrial Growth in India Stagnation since the mid-sixties, Oxford University Press, New Delhi. Nasir Tyabji,(1989), The Small Industry Policy in India Oxford UniversityPress, Oxford, 1989 Prime International Research Journal, Vol. III, Issue 3, June, 2016 Page 14