An Analysis of Investment in the Registered Manufacturing Sector in India”

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Paper for The Indian Econometric Society Conference….

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“AN ANALYSIS OF INVESTMENT IN THE REGISTERED MANUFACTURING SECTOR IN INDIA”

BY:

SANTOSH KUMAR DAS
Research Scholar in Economics,
Jawaharlal Nehru University,
New Delhi-67

Address:

Santosh Kumar Das
Room No-136,
Chandrabhaga Hostel
Jawaharlal Nehru University,
New Delhi-67
E-mail:
santosh.jnu@gmail.com
santoshkumar2k2@rediffmail.com

AN ANALYSIS OF INVESTMENT IN THE REGISTERED MANUFACTURING SECTOR IN INDIA

Abstract

The present paper is an attempt to study the pattern of growth and structure of investment in Indian registered manufacturing sector both at all India and state level. At the same time also tries to explore the factors those influence the level of investment in Indian registered manufacturing sector and finds out the reasons for uneven growth and share of investment across major Indian states. The study mainly relies upon the Annual Survey of Industries (ASI) data, published by Central Statistical Organization (CSO). The study intends to examine the above-mentioned objectives at 2-digit level of Industry classification. The period of study is from 1980-81 to 2001-02. Semi log linear model has been used to calculate the trend growth of GFCF and simple OLS method has been used to estimate the factors those influence the investment in the Indian registered manufacturing sector. To explain the variations in investment growth and share across states, relative income index and composite infrastructure index has been constructed. The study found, at all India level there has been investment boom in the first half of nineties and after that sharp decline in investment. The story remains same in case of majority of the states. The reasons for investment boom are, (i) increase in the share of profit during this period, (ii) declining share of depreciation, (iii) issue of new capital in the stock market by the non-government private companies. It found the rate of profit, interest payment and rate of value added are the three major factors those influence the investment pattern in the registered manufacturing sector. In regard to the variation across the major Indian states in terms of growth and structure of investment, the study found physical infrastructure as the most important factor, which affects the decision in regard to the location of new investment. It is seen that states with better infrastructure facility have higher investment share.

Full Paper
AN ANALYSIS OF INVESTMENT IN THE REGISTERED MANUFACTURING SECTOR IN INDIA The process of industrialization has been a striking feature of the Indian economic development. In order to become an economic superpower, India needs to accelerate its growth rate continuously for the next decade or so. For such a high level of sustained growth, the manufacturing sector has to contribute a lot. The success stories of the economies of Asian countries like Korea, Malaysia, Thailand, Taiwan and China[1] show that it is the manufacturing sector that is responsible for higher economic growth. Investment is an important component of rapid economic growth. The investment in manufacturing sector determines several key factors like productivity, wage rate, profit and employment and also the over all growth. In a highly globalised world where markets are well connected; investment becomes a crucial instrument in making the manufacturing sector globally competitive. In case of the Indian manufacturing sector, investment has a huge role to play so far as its growth and global acceptance is concerned. So it becomes extremely important to look at the investment behavior in the Indian manufacturing sector. The empirical literature on economic growth consistently showed that the rate of accumulation of physical capital or investment is an important determinant of economic growth (Nair, 2005). Particularly after the...
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