Changes In Industrial Structure In 1990
Important changes have occurred in the industrial structure during the period of the 1990s and some of them are the direct result of the policy of liberalisation being pursued vigorously by the Government of India since 1991.
The main changes are as follows: –
Shifts in favour of consumer goods and intermediate goods:
The structure of the industrial economy has shifted distinctly in favour of intermediates and consumer goods and reflects declining significance of basic and capital goods in the country’s industrial economy. This would be clear from the fact that while the weight of basic goods and capital goods declined from 39.4 and 16.4 in the old index ( base 1980-81 – 100) respectively to 35.5 and 9.3 in the new index (base 1993-94 = 100), the weight of intermediate goods and consumer goods increased from 20.5 and 23.6 in the old index respectively to 26.5 and 28.7 in the new index.
Structural changes within basic industries and capital goods industries :
At a somewhat disaggregated level, within the basic industries, it is primarily basic metals and alloys that have lost severely in terms of weight ( from 9.80 in the old index to 7.45 in the new index), while most capital goods have suffered weight loss in a more or less uniform manner.
Changes within intermediate goods sector:
The gain in weight in the case of intermediates has been largely on account of chemicals and chemical products whose weight rose from 4.00, in the old index to 14.00 in the new index. On the other hand, the weightage of rubber, plastic, petroleum and coal products declined from 12.51 in the old index to 5.73 in the new index.
Changes within the consumer goods sector:
In addition to a substantial gain in weightage in the overall index of industrial production, the consumer goods sector has increased by more than 100 per cent ( from 2.6 in the old index to 5.4 in the new index ). This is the direct result of the opening up of the industrial economy. Growth in this sub-sector has been supported by easy financing facilities being extended by a number of finance companies for the purchase of consumer durables. Another point worth noting is that there has been a significant gain in the importance, of good products industry (with its weight rising from 5.33 in the old index to 9.08 in the new index) and beverages, tobacco and tobacco products industry (with its weight rising from 1.57 onto 2.38 ) at the cost of the traditional cotton textiles industry. whose weight fell drastically from 12.31 in the old index to 5.52 in the new index.
The declining role of the public sector :
With increasing emphasis on liberalisation and privatisation, the Government of India is gradually withdrawing from the industrial sector. The Industrial Policy, 1991, has considerably de-regulated the industrial economy and industrial licensing has been practically abolished. The number of industries reserved for the public sector has been drastically pruned and the government has explicitly expressed its desire to bring down its equity si in all non-strategic public sector undertakings and to close down public sector units that cannot be revived. The emphasis of the government is now on the privatisation of public sector enterprises via disinvestment. The above analysis clearly brings out that the focus of the government in recent years has been on privatisation and consumer goods led industrial growth. In fact, because of the increasing thrust on encouragement to the development of consumerism ( via steps such as cutting down taxes and duties on consumer goods on the one hand, and reducing incentives to save by cutting down interest rates on the other hand), the government has made its intention clear to rely more and more on the consumer goods sector for the future growth of the industrial sector in the economy.
Check out the notes for Trend In Exports And Imports.