scenario of industrial sector in india with...

Prime International Research Journal Double Blind, Peer Reviewed, Indexed Journal ISSN : 2349-2139

Prime International Research Journal, Vol. III, Issue 3, June, 2016

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



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 2001. 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 2010. 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.



Industrial Sector in Indian Economy

In the direction of industrial development Government of India announced new industrial

policy in 1991. 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 1950-51 to 24 percent in

1980-81 and 25.8 percent in 2008-09. The major components of industry are manufacturing

and construction. The share of manufacturing increased from 8.9 percent in 1950-51 to 14.5

per cent in 2008-09. Similarly, the share of construction improved from 4.4 percent in 1950-

51 to 7.3 percent in 2008-09. 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 1950-51 1980-81 2008-09

I Agriculture and Allied Services 55.4 38.0 16.9

II Industrial Sector 15.0 24.0 25.8

III Service Sector 29.6 38.0 57.3

A. Commodity Sector (I+II) 70.4 62.0 42.7

B. Service Sector (III) 29.6 38.0 57.3

Source : Handbook of Statistic of the Indian Economy(2007-08)

The table 1.1, indicates economic sector wise share in GDP. It is seen from the table that in

1950-51 agriculture sector was the main pillar of the economy, as it had contributed around



55.4 percent share in total GDP. In 1980-80 the share of agriculture sector in total GDP has

gone down from 55.4 to 38.0 percent and further in 2008-09 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 2009-10 and then

afterward both have decreasing trend, except slightly increase in FDI in 2011-12. The export

is showing up and down trend.

Table 1.2 FDI, Portfolio Investment, and Export (Rs. Crore)

Year Net FDI Portfolio Investment Export

2009-10 157800 154000 863300

2010-11 132400 139400 1165700

2011-12 155000 85600 1482500

2012-13 89000 32200 800700

Average 133550 102800 1078050

Standard deviation 31802.463 55501.35 313210.7

Coefficient of variance 23.813151 53.98964 29.05345

CAGR -17.38% -40.65% -2.48%

Source: Economic Survey 2012-13



The CAGR of net FDI is negative 17.38 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

1950-51 1.9 4.6 2.3 2.3

1991-92 -1.4 -0.1 10.8 1.4

2000-01 0.3 6.5 4.5 4.3

2001-02 5.5 2.7 7.1 5.5

2002-03 -4.9 7.1 7.7 4

2003-04 8.2 7.9 5.8 8.1

2004-05 1.1 10 8.7 7

2005-06 4.6 10.7 12.6 9.5

2006-07 4.6 12.7 14 9.6

2007-08 5.5 10.3 12 9.3

2008-09 0.4 4.7 12 6.7

2009-10 1.5 9.5 9.7 8.6

2010-11 7.5 9.5 10.1 9.3

2011-12 3.1 3.8 11.7 6.2

Source: Central Statistics Office 2013



In the year 1950-51 the growth rate of industrial sector was just 4.6 percent which becomes

negative -0.1 percent in 1991-92. The negative growth rate resulted in new economic reform.

The growth rate of industrial sector was in double digit during the period 2004-05 to 2007-08

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 2006 2007 2008 2009 2010 2011

1 Agriculture and Allied Activities 4.69 4.75 4.71 4.77 4.78 4.77

2 Mining and Quarrying 11.46 11.37 11.21 11.12 11.03 10.9



Sector 2006 2007 2008 2009 2010 2011

3 Manufacturing 10.92 10.87 10.44 10.6 10.66 10.16

4 Electricity, Gas and Water 8.49 8.49 7.96 8.39 8.35 8.31

5 Construction 8.94 8.66 8.52 8.45 8.59 8.47

6 Wholesale and Retail Trade 1.82 1.78 1.65 1.74 1.71 1.7

7 Transport, Storage and

Communication

26.75 26.37 26.34 26.01 25.29 23.84

8 Finance, Insurance Real Estate

etc

13.9 13.69 13.47 13.56 14.13 13.61

9 Community, Social and personal

services

91.76 90.9 88.54 90.11 90.51 90.95

10 Total 178.73 176.88 172.84 174.75 175.05 172.71

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 2008-09 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 2004-05, Industry sector is able to maintain its growth at constant prices

at 10 per cent or more except in 2008-09. The GSDP of Industry sector in 2010-11 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 2007-08

from where it again started declining and reached 28 per cent in 2010-11. The growth in

Industry sector at constant prices is more than 8 per cent except in 2008-09, where it

decelerated to 4.4 per cent and now again has moderated at 7.2 per cent in 2010-11.



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 Number of

Proposals

Percentage of

Number of

Proposals

Investment

Amount (Rs.

Crore)

Percentage of

Investment

Amount

IT Industry 762 18.1 12,765 15

Financial Services 667 15.8 11,858 14

Hotel & Tourism Industry 95 2.3 6,326 7.5

Business Management &

Consultancy 369 8.7 4,962 5.8

Transportation 108 2.6 4,124 4.9

Cements & Ceramics 58 1.4 3,727 4.4

Power & Fuel 39 0.9 2,841 3.3

Chemicals & Fertilizers 197 4.7 2,666 3.1

Electrical & Electronics 212 5 1,467 1.7

Paper & Paper Pulp 31 0.7 1,323 1.6



Industry Group Number of

Proposals

Percentage of

Number of

Proposals

Investment

Amount (Rs.

Crore)

Percentage of

Investment

Amount

Textiles 122 2.9 1,051 1.2

Food Processing 173 4.1 1,039 1.2

Drugs & Pharmaceuticals 121 2.9 1,012 1.2

Automobile 112 2.7 895 1.1

Industrial Machinery 261 6.2 771 0.9

Plastic & Rubber Goods 27 0.6 767 0.9

Machine Tools/ Industrial

Instruments 89 2.1 717 0.8

Others 778 18.4 26,647 31.4

Total 4,221 100 84,958 100

Source: Directorate of Industries, GoM



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



Award’ and organizing exhibition of products in foreign countries. During the year 2009-10,

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

2005-06 1,13,700 4,54,800 25

2006-07 1,42,945 5,71,779 25

2007-08 1,72,846 6,40,172 27

2008-09 2,26,794 8,39,978 27

2009-10 2,28,184 8,45,125 27

Average 176893.8 670370.8 26.2

Standard Deviation 50702.75 170593.6 1.095445

Coefficient of Variance 28.66282 25.44765 4.181088

Compound Annual

Growth Rate 19.02% 16.75% 1.94%


It is clear from the CAGR that industrial export from Maharashtra is grown by 16.75 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.



Table 1.7 Details of MSMEs & Large Enterprises as on 31 December 2011

Region MSME

Employment in

Lakh

Large

Enterprises

Employment in

Lakh

Mumbai 17235 2.49 311 0.47

(10.6) (17.8) (6.3) (4.2)

Kokan 21387 2.03 1222 2.45

(13.1) (14.5) (24.9) (21.8)

Nashik 25194 2.07 665 1.52

(15.5) (14.8) (13.5) (13.5)

Pune 66588 4.38 1490 4.07

(40.9) (31.3) (30.3) (36.2)

Aurangabad 12271 1.17 538 1.11

(7.5) (8.4) (10.9) (9.9)

Amravati 4689 0.34 148 0.32

(2.9) (2.4) (3.0) (2.8)

Nagpur 5609 1.54 541 1.31

(3.4) (11.0) (11.0) (11.6)

Maharashtra 162973 13.99 4915 11.25

(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



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

Region

No. of Units Investment in (Rs. Crore)

Employment (in Lakh)

2010 2011 2010 2011 2010 2011

Mumbai 305 305 1,400 3,715 1.2 0.72

Kokan 10,821 11,125 16,529 17,849 2.55 2.69

Nashik 6,057 6,135 2,151 12,730 0.55 0.66

Pune 7,603 9,273 20,032 24,641 3.07 3.5

Aurangabad 4,479 4,577 4,303 5,573 0.53 0.54

Amravati 1,441 1,589 768 795 0.19 0.19

Nagpur 2,649 2,687 8,609 8,628 0.71 0.71

Total

Maharashtra

33355 35691 53792 73931 8.80 9.01


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,



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 2011-12

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, 2006.

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

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