India's Industrial Development

Topics: Industry, Capitalism, Private sector Pages: 13 (3956 words) Published: May 1, 2012
Industrial Development Since Independence.
1. The British regarded India as source of supply of raw materials and market for British manufacturers and hence, at the time of Independence, India was industrially an underdeveloped economy. 2. The poor industrial sector was domintaed by consumer goods industries like cotton textile, jute, sugar, salt, paper, soap, etc. 3. Industries producing intermediate goods like steel, coal, cement, alcohol, power, non-ferrous metals were poorly established in terms of productive capacity. 4. Capital goods industries hardly made their presence felt. 5. In the post independence period, India embarked upon industrial development under the five year plans GROWTH IN PRE REFORM PERIOD (1947-1990)

6. The major changes during the pre-reform period can be analyzed by diving the period into three phases: A. Phase 1 (1951-1965) Establishing Industrial Base
During the first five year plan, which was based on Harrod Domar's model, only 2.8 percent of the total investment was made in 'Industry and Minerals' as the agricultural sector was hit hardest by the partition of India and needed more investment. Industries like Indian Telephones and Indian Cables were set up. Penicillin factories were established. During the second five year plan, which was based on Mahalnobis model, a whooping 20.1% of the total investment was made in Industry and Minerals. The second five year plan focused on establishing basic and capital goods industries on a large scale. Three major steel plans of one million tonnes capacity were started at Bhillai, Durgapur and Rourkela. The third five year plan focused on expansion of heavy industries and also invested 20.1% of the total investment in Industry and Minerals. The average growth rate of industrial SECTOR during this phase was more than 7% per annum and of basic and heavy(capital goods) industries was more than 10% per annum. B. Phase 2 (1966-1974) Slow growth

The average growth of industrial sector during this phase declined to 5% per annum. The slow growth was attributed to inadequate investment in infrastructure sectors such as power and transportation, acts like MRTP( Monopolies and Restricted Trade Policies) and FERA ( Foreign Exchange Regulation Act), wars with Pakistan in 1965 and 1971 , draughts in 1965-66 , oil crisis in 1973 and slow growth in agricultural sector. [Post independence, many new and big firms had entered the Indian market. They had little competition and they were trying to monopolize the market. The Government of India understood the intentions of such firms. In order to safeguard the rights of consumers, Government of India passed the MRTP bill. The bill was passed and the Monopolies and Restrictive Trade Practices Act, 1969, came into existence. Through this law, the MRTP commission has the power to stop all businesses that create barrier for the scope of competition in Indian economy. The MRTP Act, 1969, aims at preventing economic power concentration in order to avoid damage. The act also provides for probation of monopolistic, unfair and restrictive trade practices. The law controls the monopolies and protects consumer interest. FERA imposed stringent regulations on certain kinds of payments, the dealings in foreign exchange and securities and the transactions which had an indirect impact on the foreign exchange and the import and export of currency.The purpose of the act, inter alia, was to "regulate certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency, for the conservation of foreign exchange resources of the country".Coca-Cola was India's leading soft drink until 1977 when it left India after a new government ordered the company to turn over its secret formula for Coca-Cola and dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1993, the company (along with PepsiCo) returned after the...
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