Pic - :: A Panoramic View Of Lopsided Industrialisation
How Lopsided Industrialisation has hurt India !!
Recent trends in the organisational form of units in the registered manufacturing sector suggest that India’s factory sector is not just abnormal but backward to boot
It is now widely
recognised that, despite a long history and much promise, the pace and level of
India’s industrial development has been well below even conservative
expectations and far short of potential. Conventionally, this has been captured
in the fact that the maximum recorded value of the share of manufacturing value
added in GDP has never exceeded 19 per cent in India.
In sharp contrast,
that figure peaked at above 34 per cent in Brazil, 40 per cent in China, 31 per
cent in Korea and 31 per cent in Malaysia.
The comparison in
terms of employment in industry relative to total employment was no better,
with India recording values below 25 per cent, whereas the figure peaked at 36
per cent in Korea, 34 per cent in Malaysia and 30 per cent in China.
Uneven shifts
Thus, seen in
terms of the diversification of economic activity, India has diverged from many
other erstwhile underdeveloped countries, inasmuch as the shift away from
agriculture in terms of shares of value added and employment in favour of
manufacturing has been limited.
Such
diversification was seen by pioneer analysts of economic development such as
Simon Kuznets as a characteristic feature of modern development.
But recent
evidence shows that India’s deviation from the norm does not stop here. In
Kuznets’ view, besides the diversification of economic activity away from
agriculture, modern economic growth would be accompanied by an increase in the
size of non-agricultural enterprises and a growing role for impersonal and more
formal types of organisation (such as the joint-stock company). It could be
expected that this would be even more true in periods of rapid economic growth,
such as the period since 2001 in India, when global trends and domestic
policies substantially increased the cross-border transfers of capital and
technology from the developed to the less developed countries.
However, India’s
Annual Survey of Industries (ASI), reputed for its comprehensive coverage of
the registered factory sector based on part census and part sample survey,
seems to suggest that even within the factory sector, the limited shift in
favour of more ‘modern’ and impersonal forms of organisation is being reversed.
(The ASI also covers khadi and village industry and handloom units, besides
some in the cooperative sector, but these account for a negligible share of the
total number of firms surveyed).
According to this
data for the period from 2000-01 to 2014-15, the share in the total number of
firms of those organised as “private limited companies” rose from 22.3 per cent
at the turn of the century to 28.1 per cent in 2014-15, whereas the share of
public limited companies and partnerships declined from 11.9 to 3.7 per cent
and 36 to 25.1 per cent respectively.
Given earlier
trends, the increase in the 2014-15 figure for private limited companies may
have been higher, since in that year the proportion of companies for which the
share in the number of factories was not reported was unusually high at 16.4
per cent.
In sum, a shift
away from partnership firms, on the one hand, and organisation as public
limited companies, on the other, to firms registered as private limited
companies has been occurring.
Falling in value
Pic :: The Crux, The Real Reason Of The Downfall Of The Industrialisation Of India
This shift is not
because even larger firms (for legal or accounting reasons) have been opting
for the private limited form. In fact, the average number of workers per
factory rose from 155.6 to 267.4 in the case of public limited companies and 45
to 83.9 in the case of private limited companies.
Factories falling
under proprietorship or HUF (Hindu undivided family) categories remain more or
less the same in terms of employment size, whereas public sector companies saw
their size shrink considerably (Chart 1).
What is telling,
however, is the contribution to net value added in the factory sector of
different kinds of firms. The share of public limited companies fell from 64.3
per cent in 2000-01 to 45.1 in 2014-15, whereas that of private limited
companies rose sharply from 13.5 per cent to 43.5 per cent (Chart 2). The share
of public sector corporations also fell, whereas other forms did not show much
shift.
These shifts were
not dominantly the result of absolute or relative changes in labour
productivity. In fact, net value added per worker in public limited companies
rose from 1.6 times the factory sector average to 2.1 times, whereas the
corresponding ratios for private limited companies were 0.63 and 0.86. Public
sector corporations too saw a rise in their relative productivity from 1.9
times the registered manufacturing sector average to 2.4 times.
The relative
shifts in net value-added shares were substantially the result of the decline
in the relative share of workers employed in public limited companies from 40
per cent in 2000-01 to 21 per cent in 2014-15. Over these two points in time,
the share of factory sector workers employed in private limited companies rose
from 21 to 51 per cent (Chart 3).
Going backward
Going by Kuznets’
understanding of the structural diversification that should accompany modern
development, these changes are an indication of retrogression in the Indian
industrialisation process. What is surprising is that this occurred in a period
(2004-2010) when manufacturing growth picked up and overall growth accelerated.
Combined with the stagnation in the share of manufacturing in GDP at a
relatively low level, this points to a setback in industrial development.
This picture of
‘backwardness’ is backed up by other evidence. The National Sample Survey
Organisation (NSSO), for example, adopts a definition of the “informal sector”
which identifies it as consisting of proprietary and partnership enterprises
(excluding those run by non-corporate entities such as cooperatives, trusts and
non-profit institutions), in the non-agricultural sector and in
agriculture-related activities excluding crop production (AGEGC).
Using this
definition of the informal sector, the EUS for 2011-12 estimated employment in
the informal component to be about 75 per cent of total usual status employment
(principal and subsidiary) in the rural areas and 69 per cent in urban areas.
The non-agriculture and AGEGC sectors themselves accounted for 41 per cent and
95 per cent of total employment.
The sub-sectors
that accounted for a dominant share of informal sector employment are
manufacturing, construction and trade (wholesale and retail).
They accounted for
76 per cent and 68 per cent respectively of all workers in the non-agriculture
informal sector, in the rural and urban areas, as compared with 71 per cent and
56 per cent respectively of all workers in the non-agriculture sector.
This
too points to the predominance of more primitive forms of organisation in the
manufacturing sector, corroborating the conclusion that more than 150 years
after the first successful factory was established in India, the industrial
sector remains stunted and backward in significant ways.
This defines, refines and analysis the downfall of the industrialisation in India .
Well , that is it and That sums it all.
Regards and Thanks
Pics
Shyamal Bhattacharjee
Mr Shyamal Bhattacharjee, the author was born at West Chirimiri Colliery at District Surguja, Chattisgarh on July 6th 1959 He received his early education at Carmel Convent School Bishrampur and later at Christ Church Boys' Higher Secondary School at Jabalpur. He later joined Hislop College at Nagpur and completed his graduation in Science and he also added a degree in B A thereafter. He joined the HITAVADA, a leading dailies of Central India at Nagpur as a Sub-Editor ( Sports ) but gave up to complete his MBA in 1984 He thereafter added a Diploma In Export Management. He has authored THREE books namely Notable Quotes and Noble Thought published by Pustak Mahal in 2001 Indian Cricket : Faces That Changed It published by Manas Publications in 2009 and Essential Of Office Management published by NBCA, Kolkatta in 2012. He has a experience of about 35 years in Marketing .
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