The Hindu Business Line : `Remove impediments for 10 pc industrial growth'

THE Economic Survey 2003-04, while calling for a 10 per cent growth in industrial output, has cautioned that the target can be achieved only if impediments, such as reservations for the small-scale sector, rigid labour laws and difficulty in starting or closing businesses, are removed.

While the survey has lauded a "steadily deepening globalisation" of Indian firms, it has pointed out that industrial growth has been below 10 per cent for several years. It has called upon the Government to devise strategies to achieve industrial growth in excess of 10 per cent.

"Reservation for small-scale sector, high customs tariffs, rigidities in labour law acting as an impediment to building large firms and reaping the economies of scale and scope, frictions faced in the creation and closure of firms in response to normal competitive market dynamics and distortions in the structure of indirect taxes," the survey says are the five major constraints influencing industrial growth.

"The outlook for Indian industry appears bright if these impediments are removed," the survey points out.

The survey, however, has lauded the growth in the index of industrial production (IIP) during 2003-04. While the IIP grew 6.9 per cent in 2003-04, the growth was 5.7 per cent in the previous year and just 2.7 per cent in 2001-02.

During 2003-04, manufacturing, with a weight of 80 per cent in the IIP, grew 7.1 per cent while mining grew by 5.1 per cent and electricity by five per cent.

At a two-digit level classification, as many as 12 out of the 17 industry groups, have showed positive growth during 2003-04. In manufacturing, growth recovery has been sustained in the current year also, for a number of sub-sectors.

Transport equipment and parts grew at 17 per cent, followed by paper and paper products, printing publishing and allied industries at 15.9 per cent. Machinery and equipment, other than transport equipment, grew at 15.2 per cent; beverages, tobacco and related products grew 9.4 per cent, and basic metals and alloy industries grew at 9.1 per cent.

On industrial investment, the survey has said that, after peaking at Rs 1,28,892 crore in 1999, the proposed investment declined in the following years. However, investment intentions increased to Rs 57,806 crore during January-April 2004 compared to Rs 15,931 crore during the corresponding period in 2003.

The foreign direct investment (FDI) flows to India have increased over the years, peaking at $4.74 billion in 2000-01. But FDI flows declined to $3.73 billion in 2002-03 and to $3.57 billion in 2003-04.

On the small sector, the survey has stressed that SSI units continue to be an important segment of the Indian economy and this is despite listing reservation for the sector as one of the five major constraints that "appear to play a prominent role in influencing industrial growth".

The survey has estimated that during 2003-04, the number of SSI units increased to 115.22 lakh, up from 110.10 lakh during the previous year, registering a growth of 4.7 per cent. Similarly, the value of production by small units at current prices also increased by 11.6 per cent to Rs 3,48,059 crore, up from Rs 3,11,993 crore during 2002-03.

The sector is estimated to have grown at 7.5 per cent at constant prices over the previous year and is estimated to have provided employment to 273.97 lakh persons, up from 261.38 lakh persons during the previous year, the survey has said.

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