Economy, Industry & Trade
The new Economic Order & Industrial growth, Globalising of Trade & Telecommunications

A NEW ERA

Though agriculture has been the main preoccupation of the bulk of the Indian population, the founding fathers saw India becoming a prosperous and Modern State with a good industrial base. Programs were formulated to build an adequate infrastructure for rapid industrialization.

Since independence, India has achieved a good measure of self-sufficiency in manufacturing a variety of basic and capital goods. The output of the major industries includes aircraft, ships, cars, locomotives, heavy electrical machinery, construction equipment, power generation and transmission equipment, chemicals, precision instruments, communication equipment and computers. Early planners in free India had to keep in mind two aims: all-round development and generation of large-scale job opportunities. Economic development strategies were evolved with an eye on these twin objectives.

New International Economic Order

As a responsible and progressive member of the international community, India is continuing her untiring efforts to bring about a constructive dialogue between the developed and developing countries in their quest for a cooperative approach towards a new International Economic Order. India is convinced that the establishment of an equitable International Economic Order involving structural and other, changes is the only answer to the various economic ills and problems of development confronting the world today.

Economic Restructuring

The international confidence in India's economy has been fully restored.

The reforms launched have made India an attractive place for investment. Duties have been lowered, repatriation of profit made liberal and levels of foreign equity raised considerably, 100% in case of export oriented industry.

While several multinational companies have entered the Indian market, some Indian companies have also begun to gain international recognition. In the field of computer software, India is among the major exporting nations with an overflow of scientists in the field.

With the conclusion of the Uruguay Round of Multilateral Trade Negotiations, India decided to join the new World Trade Organization, successor to GATT. India hopes that developing countries will not suffer on account of any protectionism.

On its part, India has opened several sectors hitherto restricted to the public sector. The rupee is convertible on the trade account. In 1994, exports grew by 17%. Figures for 1995-96 show that exports grew at a rate of 28.8%. About 90% of India's import are financed by export earnings. The Non-Resident Indian (NRI) enjoys special incentives to invest in India like tax exemption and higher interest rates on deposits.

NRIs

The government acknowledges the great role that the vast number of Indians living and working abroad, the Non-Resident Indians, can play in accelerating the pace of development in the country. In the 1980s, the NRIs contribution through their remittances was instrumental to a large extent in stabilizing the balance of payment situation. Several initiatives have been taken to attract NRI investments - in industry, shares and debentures. The NRIs are allowed 100% investment in 34 priority and infrastructure facilities on non-repatriation basis. Approval is given automatically on investment in certain technical collaborations. They can buy Indian Development Bonds and acquire or transfer any property in India without waiting for government approval. The Foreign Exchange Regulation Act has been amended to permit NRIs to deal in foreign currency and they can also bring in five kg of gold. There are programs to utilize the scientific and technical talents of the NRIs with the help of the Council of Scientific and Industrial Research.

Infrastructure

In view of their crucial importance, power, transport and other infrastructure industries are owned by the State. As a result of special attention given to the area in recent years, the infrastructure industries have been growing at the rate of 9 to 10 per cent annually.

Power: The generation of power has increased impressively in recent years. In 1990-51, India generated 6.6 billion-kilowatt hour of electricity, in 1995-96 the figure was 380.1 billion-kilowatt hour. The installed capacity, which was 1400 MW at Independence in 1947, has crossed 83,288 MW The policy of inviting private sector has been well received; about 140 offers that can generate over 60,000 MW of power have came in.
  Coal: Coal is the primary source for power generation in India. The country has huge reserves of coal approximately 197 billion tons. A sufficient amount of lignite (brown coal used in thermal power stations) is also available.

India produced about 270 million tons of coal in 1995-96. The government now welcomes private investment in the coal sector, allowing companies to operate captive mines.

Petroleum and Natural Gas: The recent exploration and production activities in the country have led to a dramatic increase in the output of oil. The country currently produces 35 million tons of crude oil, two thirds of which is from offshore areas, and imports another 27 million tons. Refinery production in terms of crude throughput of the existing refineries is about 54 million tons.

Natural gas production has also increased substantially in recent years, with the country producing over 22,000 million cubic meters. Natural gas is rapidly becoming an important source of energy and feedstock for major industries. By the end of the Eighth Five-Year Plan, production was likely to reach 30 billion cubic meters.

Railways: With a total route length of 63,000 Kin and a fleet of 7000 passenger and 4000 goods trains, the Indian Railways is the second largest network in the world. It carries more than 4000 million passengers per year and transports over 382 million tons of freight every year. It is well equipped to meet its demands for locomotives, coaches and other components.

Lately, the Railways have launched a massive gauge conversion drive as about a third of the track is meter or narrow gauge. With improvement in tracks, plans are afoot to introduce faster trains. Very soon, certain prestigious long distance trains will be running at 160 Kin per hour.

The Railways have also started a scheme to privatize several services that will include maintenance of railway stations, meals, drinking water and cleaning of trains.

Road Transport: The roadways have grown rapidly in independent India. Ranging from the cross-country link of the national highways to the roads in the deepest interiors, the country has a road network of
  2.1 million-km. India also manufactures most of its motorized vehicles -cars, jeeps, trucks, vans, buses and a wide range of two-wheelers of various capacities. While Indian scooters have established a good foreign market, the car industry is also looking up with several foreign companies setting up plants in India.

Shipping: The natural advantage of a vast coastline requires India to use sea transport for the bulk of cargo transport. Following the policy of liberalization, the Indian shipping industry, major ports, as also national highways and water transport have been throw open to the private sector.

Shipping activity is buoyant and the number of ships registered under the Indian flag has reached 471. The average age of the shipping fleet in India is 13 years, compared to 17 years of the international shipping fleet. India is also among the few countries that offer fair and free competition to all shipping companies for obtaining cargo. There is no cargo reservation policy in India.

Aviation: India has an aviation infrastructure, which caters to every aspect of this industry. Hindustan Aeronautics Limited (HAL) is India's gigantic aeronautical organization and one of the major aerospace complexes in the world.

India's international carrier, Air India, is well known for its quality service spanning the world. Within the country, five international airports and more than 88 other airports are linked by Indian Airlines. Vayudoot, an intermediate feeder airline, already links more than 80 stations with its fleet of turboprop aircraft and it plans to build and expand its network to over 140 airports in the far-flung and remote areas of the country. Pawan Hans, a helicopter service, provides services in difficult terrain.

The Government has adopted a liberal civil aviation policy with a view to improving domestic services. Many private airlines are already operating in the country.

Pipelines: Oil and natural gas pipelines form an important transportation network in the country. The country completed recently, on schedule, one of its most ambitious projects, the 1700 km Hazira-Bijaipu Jagdishpur pipeline. Costing nearly Rs. 17 billion, the pipeline transports liquid gas from the South Bassein offshore field off Mumbai to Jagdishpur and Aonla, deep in the mainland in Uttar Pradesh. Besides, India has nearly 7,000 km of pipeline mainly for the transportation of crude oil and its products.

Telecommunications: With rapid advances in technology, India now uses digital technology in telecommunications, which derives advantage from its ability to interface with computers. The present strategy focuses on a balanced growth of the network rapid modernization, a quantum jump in key technologies, increased productivity, and innovation in organization and management. Moving towards self-reliance, besides establishing indigenous R&D in digital technology, India has established manufacturing capabilities in both the Government and private sectors.

The private sector is expected to play a major role in the future growth of telephone services in India after the opening of the economy. The recent growth in telecommunications has also been impressive. Till September 1996, the number of telephone connections had reached 126.1 lakh (12.6 million). Soon every village panchayat will have a telephone. By 1997, cellular services in most major urban areas were functional, and telephone connections were available on demand. India is linked to most parts of the world by E-mail and the Internet.

Key Industries

Steel: The iron and steel industry in India is over 122 years old. However, a concerted effort to increase the steel output was made only in the early years of planning. Three integrated steel plants were set up at Bhilai, Durgapur and Rourkela. Later two more steel plants, at Bokaro and Vishakhapatanam, were set up. Private sector plants, of which the Tata Iron and Steel Company (TISCO) is the biggest, have been allowed to raise their capacity. The Steel Authority of India (SAIL), which manages the public sector plants, has undertaken a Rs. 40,500 crore program to modernize them. During 1995,96, production of salable steel in the country was about 21.4 million tons. The five SAIL plants accounted for over half of this: The export of iron and steel jumped from 9.10 lakh tons in 1992-93 (valued at Rs.'708 crore) to over 20 lakh tons (Rs. 1940 crore).

TISCO and a large number of mini steel plants in the country contribute about 40% of the steel production in the country. The Government has given a push to sponge iron plants to meet the secondary sector's requirement of steel scrap.

Engineering and Machine Tools: Among the Third World countries, India is a major exporter of heavy and light engineering goods, producing a wide range of items. The bulk of capital goods required for power projects, fertilizer, cement, steel and petrochemical plants and mining equipment are made in India. The country also makes construction machinery, equipment for irrigation projects, diesel engines, tractors, transport vehicles, cotton textile and sugar mill machinery. The engineering industry has shown its capacity to manufacture large-size plants and equipment for various sectors like power, fertilizer and cement. Lately, air pollution control equipment is also being made in the country. The heavy electrical industry meets the entire domestic demand.

Electronics: The electronics industry in India has made rapid strides in recent years. The country produces electronics items worth over Rs. 200 billion annually. Exports are also rising; in 1995-96 they reached Rs. 4.5 billion. The software export during the same year reached Rs 2.5 billion. Compared to 1994-95, the software export growth in 1995-96 rose by an impressive 70%. The Software Technology Park scheme for attracting investments has proved successful. The relative low cost of production in India makes items made in India competitive in the world market.

Some of the major items manufactured in India are computers, communication equipment, broadcasting and strategic electronics, television sets, microwave ovens and washing machines.

The compound growth of the computer industry has been 50% during the last five years. Almost the entire demand for floppy disk drives, dot matrix printers, CRT terminals, keyboards, line printers and plotters is met from indigenous production. With the availability of trained technical manpower, computers have been identified as a major thrust area. Special emphasis has been given to software export.

The Indian software industry has developed skill and expertise in areas like design and implementation of management information and decision support systems, banking, insurance and financial applications, artificial intelligence and fifth generation systems.

Recognition for the Indian computer software industry has been global. Indian software enterprises have completed projects for reputed international organizations in 43 countries.

Textiles: Textiles, the largest industry in the country employing about 20 million people, account for one third of India's total exports. During 1995-96, textile exports were estimated at Rs. 35,504.6 crore which was 13.3% more than the 1994-95 figure. In recent years, several controls have been removed and in October 1996, a new long-term Quota policy was announced to boost exports over the next three years, till 1999.

Public Sector: The public sector contributed to the initial development of infrastructure and diversification of industrial base. It is now being exposed to competition. Part equity of some units is being disinvested. But many core and strategic areas, important for economy and self-reliance, will remain in the public sector.

Research and Development

Research and Development activities are supported by the governments at the Center and the states as well as by public and private sector undertakings. The Department of Scientific and Industrial Research recognizes over 1200 in-house R & D units. About 200 research laboratories exist in government departments and agencies. The benefits of the R & D works are reaching various fields like industry, agriculture and commerce.

Planning for Development

The Planning Commission headed by the Prime Minister, draws up five-year plans under the guidance of the National Development Council to ensure growth, self-reliance, modernization and social justice. Its role has been redefined in the eighth plan document: from a centralized planning system, India is moving towards indicative planning which will outline the priorities and encourage a higher growth rate. The Rs. 4,000 billion eighth plan envisaged a growth rate of 5.6%.

Traditional Industry

Indian handicrafts have withstood competition from machines over the years. The skills are passed on from one generation to the next. The handicraft and handloom sector is a major source of rural employment and earns substantial foreign exchange. Traditional textiles are as popular abroad as they are within the country. The major export items include hand-knotted carpets, art metalware, hand-printed textiles and leather, wood and cane wares.