Industry sector (India and Bihar)

With Practice question

 Before independence – no sound industrial base due to
1. British wanted to reduce India as mere exporter of
important raw materials.
2. The other motive was to turn India into a market for
finished product of British industries.
 Second half of 19th century – growth of modern industry
started.
a) Jute industry in Bengal
b) Cotton textile mills in Maharashtra and Gujarat.
c) Iron and steel industry – TISCO (1907)
 Hardly any capital goods, low growth of industrial sector,
low public sector investment.
 At the time of independence, India adopted mixed economy.
 Problem faced by the industry –
1. Lack of capital.
2. Lack of market.
 Second five year plan focused on capital goods industry
with full government control on vital sectors of economy.
 Industrial policy resolution 1956 (industries into three
categories)
a) Exclusively owned by government.
b) Owned by private sector, supplementing the efforts of
public sector.
c) Owned by private sector. (controlled by state through
licenses )
 In 1955, Karve committee suggested small scale industries as
these were more labor intensive and were helpful in rural
development.
 Concession were given to SSI (small scale industries) in form
of lower excise duty and capital at low interest rate.
 Trade policy was also brought in which the focus was on
import substitution and protection of domestic industries
with tariff and quotas.
 Impact of first seven five years plans on industries can be
seen as in 1950-51, contribution of GDP = 13%
in 1990-91 , contribution of GDP = 24.6%
 6% annual growth rate.
 Well diversified industrial sector by 1990.
 Protection from foreign competition.
 Negative fall out:
a) Excessive state involvement.
b) Lack of competition.
c) Huge losses by many public firms.
d) Less efficient firms.
e) Objective of public sector was not profit earning.

 1991 reforms- 8 th five year plan

1. Deregulation of industries. (license raj gone)
2. Dereservation of industrial sector for allowing entry of
private sector except some sectors like atomic energy,
railway and defense.
3. Reduced compliance burden on industries.
 Trade policy reforms of 1991
a) Tariff liberalization.
b) Dismantling quantities restriction on import and export.
c) Removal of licensing procedure for imports.
d) Removal of export duties to boost competition.

 Privatization
a) Sell of government stake in public enterprises.
b) More autonomy to these enterprises.
c) Improve efficiency with increased private sector
participation
 Since 1991, India is successful exporter of auto parts, pharma,
engineering goods, IT and textiles.
 But it was considered as “an era of jobless growth” and
contribution of industrial sector in GDP has remained stagnant
since then.

 Challenges associated with industrial sector

1. Lack of efficient infrastructure. (power deficit, rail road
connectivity, logistic facilities)
2. Reliance on foreign import for intermediate goods.
3. Lopsided location base (more than 50% of the industries are
located in Maharashtra, Gujarat and Karnataka contributing
60% of total output)
4. Mismatch in labor skill and industrial requirement.
5. Complex labor laws and complex land acquisition process.
6. Presence of high labor of informal sector.
7. Lack of credit availability, new technology adoption and
innovation in MSME sectors.
 Overall industrial sector has filled to absorb labor force
from the agriculture sector.
 Contribution to GDP = 25.92% of GVA.
 Contribution in employment = 26.18%
 Manufacturing sector employment has reduced by 46% in
last five years.
 Government initiative
1. Make in India.
a) To transform india into global manufacturing hub.
b) Focus on 25 sectors.
c) Increasing contribution of manufacturing sectors to 25% of GDP
by 2022.
d) To create 100 Mn additional jobs by 2022.
2. Skill India mission
1. To skill at least 10 Mn individuals.(percentage of formally
skilled work force in India is only 2%)
3. Startup India
4. Digital India
5. Sagarmala – port led development.
6. Bharatmala
7. PM Gati Shakti Yojana – national master plan for multimodal
connectivity
 Development of industrial corridors and two defense
corridors under national industrial corridor program.
 Development of SEZ, NIMZ.
 Aatmanirbhar Bharat campaign to cut down import
dependence and achieve self reliance.
 Industry sector contribution in GDP
India Bihar

31.6 29.6
20.3 20.1

2015-16 2019-20
 Bihar’s contribution in fixed capital of Indian industry = 0.7%
 Bihar’s contribution in working capital of Indian industry = 0.4%
 Agri-based industry-
a) Sugar
 11 sugar mills (10 active in 2020-21)
 Ethanol production
 Electricity production
 In 2020-21, 395000 liter of ethanol and 88.5 MW of
electricity was generated.
 Ethanol production promotion policy 2021
 In line with national bio-fuel policy 2018.
 Financial support, favorable environment for it.
 Increasing farmers income and employment generation.

b. Dairy sector
 Artificial insemination
 Vaccination
 Deworming
 Seed distribution
 Feedstock distribution by COMFED
 Silk
a) Mulbari – Saharsha, Supaul, Madhepura, Purnia, Araria,
Kishanganj, Katihar.
b) Tusser – Banka, Munger, Nawada, Kaimur, Jamui
c) Andi – Muzaffarpur, Begusarai,
 Bihar industrial investment policy 2016.
 Main area of investment – ethanol, food processing and
renewable energy.
 57 % of total investment in Bihar is in field of ethanol
production.
 Bihar agricultural investment policy, 2020.
 Oxygen production promotion policy, 2021.
 Institutional support
 BIADA – est. in 1974 – participating in Amritsar Kolkata
industrial corridor linked with eastern dedicated freight
corridor.
 Udhyog Mitra – in 2020-21, 556 entrepreneur benefited from
it.
 Bihar startup policy 2017.
 Mukhyamantri Mahila Udhyami Yojana.
 Mukhyamantri yuva Udhyami Yojana.
 Mukhyamantri SC/ST/EBC Udhyami Yojana.
 Labor force participation rate (2019-20)
Male Female

81.2
75.1

32.3

9.7

Bihar India
 Dependent population (Bihar) – 62%
 Dependent population (India) – 46.4%
 Reason for it
a) High fertility rate
b) 46% of population in Bihar are children.
 Q – compared to national level, Bihar has low
level of industrial base. Discuss the reasons
for it and critically analyze the steps taken by
Bihar government to promote industries in
the state.