Industrial Development

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This book is an invaluable introduction to the study of industrial development in India, its problems and progress, and the unfolding of the prospects in the emerging free-market economy. In the fifth revised edition, three new chapters have been added which provide the readers updated account of developments in related fields. The book will be of enduring interest to the lay reader as well as to the student of economics.

MR Kulkarni, associated with the Planning Commission for over three decades till 1990, has been intimately involved with industrial planning and industrial policy formulation both at micro and macro levels. He taught economics in the Deccan Education Society, Pune for about five years before joining the Planning Commission in 1958. He studied the application of investment criteria in the selection of projects in erstwhile Yugoslavia, now Croatia (1965-66), and the economic forecasting models at the Cambridge University and the London Business School (1976). He represented the Indian delegation at the first meeting of planning experts in Berlin in April 1982. He has contributed articles to the Indian Economic Journal, Economic Times, Economic and Political Weekly and Yojana.

The Industrial economy, as in fact the national economy, has undergone profound change since 1991, when the economic reforms were initiated. The pace of change was accelerated after 1995. A fresh revision of the study was thus overdue.

The economic transformation during the last decade and a half is remarkable both for its sweep and direction. The services sector has emerged dominant accounting for half of the country's GDP. This has significant implications for the rate and pattern of economic growth. Services, the fastest growing sector, have accounted for two thirds of growth in GDP in recent years which itself has been a healthy 8-9 per cent. As capital investment required per unit of additional output in services is much lower than in commodity producing industries, the capital output ratio has turned much more favourable than in the past.

Another phenomenon, though short lived, is the excess of savings over investment. In three years 2001-04, there was a net capital outflow, the estimate for 2003-04 being of Rs 45,000 crore. In a strange paradox, the savings of the country did not have enough avenues for local investment and had to seek opportunities abroad. The trend was reversed in 2004-05 and 2005-06.

Export of capital is a characteristic of a rich country, as is the preponderance of services in the national economy. The export of capital in a resources starved polity must be a matter of concern. There are enormous infrastructural inadequacies on the one hand and lack of investment in the social sectors on the other.