IJE : Volume 6 Number 2 December 2012, pp.

321-331

Growth and Structural Changes in Indias Industrial Sector

Nagendra Kumar Maurya* & J. V. Vaishampayan**
Abstract: Structural economists like Colin Clark, Fisher, Kuznets, etc. have empirically demonstrated that growth is brought about by changes in structural composition. Indian economy is also experiencing major changes in its structure in recent decades. The theory of structural transformation has given prime position to the industrial sector and termed it as engine of growth because industrial sector has strongest forward and backward growth linkages, subject to increasing returns for longer duration and greater labour absorption capacity. This paper is an attempt to show structural changes in the industrial sector in recent years. JEL Classification: E00, E01, E25, O11. Keywords: Structural Transformation, Secondary Sector, Industry. 1. INTRODUCTION

It is now a well known phenomenon that as an economy moves ahead on the path of economic development, structural changes are inevitable. Developing countries like India are experiencing major structural changes in the recent decades. All developed countries have gone through a process of structural change which implied movement from agricultural sector to the industrial sector and then finally to the services. Given, Indias present stage of development, industrial growth would be considered to be the engine of growth. Structural transformation of an economy has been a subject of analysis right from pre-classicals like William Petty (1691) to modern economists like Holis Chenery (1975), Simon Kuznets (1966) etc. According to them, an underdeveloped economy is characterised by a pre-dominant role of agriculture and other allied activities. As economic development proceeds, the role of industry increases and that of agriculture declines and subsequently after reaching a reasonably high level of development, the services sector increases in importance, becoming a major component of economy. In this paper, we have made an attempt to assess growth and structural changes in Indias industrial sector in the last 5 decades. The plan of the paper is as follows. In Section II, theoretical background of structural transformation and its historical evidence is discussed. Section III presents empirical evidence on the extent of structural transformation in Indian economy. Growth of industrial sector and changes in the share of its various components in the Industrial sector is being present in section IV. At last conclusions are given.
*

**

Assistant Professor, Department of Banking, Economics and Finance, Bundelkhand University, Jhansi-284128, Uttar Pradesh, India, (E-mail: nagendrainsearch@gmail.com) Professor and Dean, Department of Applied Economics, University of Lucknow, Lucknow-226001, Uttar Pradesh, India, (E-mail: jvvaishampayan@gmail.com)

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THEORY OF STRUCTURAL TRANSFORMATION AND HISTORICAL EVIDENCE

This pattern has not only been observed historically, but also across the countries with different levels of development. Structural shifts and changing sectoral shares are found to hold good for both the national product and the work-force. Structural economists like Colin Clark, Fisher, Kuznets, etc. have empirically demonstrated that growth is brought about by changes in structural composition. The historical pattern of structural changes in todays developed countries has been very well documented by Kuznets and others, and is very well known to economists. Historical pattern of economic development of todays developed countries has, no doubt followed a common pattern. Share of agriculture has seen a steady decline in total output; that of Indus try registered an increase for a considerably long period, and then has shown a decline. The share of services has steadily increased all through, but the rate of increase seems to have accelerated in the later half of the twentieth century, the period during which industry had seen a decline in its share and therefore, is often described as a period of deindustrialisation in developed countries (Jain, 2009). The timing of the different phases of structural changes and the speed of changes has, of course, been different among different countries. In the pre-modern era, which according to Kuznets assessment ended at different points of time during the nineteenth century in different countries (e.g. before 1800 Great Britain, 1835 in France, 1870 in U.S.A., 1878 in Japan, etc.), agriculture accounted for a half to two-thirds of total output. It seems to have taken about 75 to 100 years for this share to decline to about one-fourth in the case of most European countries, though similar shift was achieved more swiftly in North America and Japan which were the relative latecomers in modern economic development. In spite of differences in the timing of entering the era of modern development and in the speed of transformation, the share of agriculture has declined to less than 50 per cent in most of these countries by middle of the twentieth country and has seen a further continuous decline since then, reducing to a level of 5 per cent in all of them, by the end of the twentieth century. Industry held a share of about 25 per cent at the beginning of the modern development in most of the developed countries of today. It grew steadily and reached the peak of about one-half by 1950s in all these countries, irrespective of the period when they entered the industrialisation phase. And all the developed countries have seen a decline in the share of industry in their output since the 1950s. By and large, the changes in the share of industry have been observed to be hump-shaped (Kuznets, 1966, World Bank, 1989 and Echevarria, 1997). It is interesting to note that in most of the countries industry has the same share in output in the beginning of the twenty-first century as it held in the beginning of the journey to modern economic growth. Thus in 2002, the share of industry in national output in the United Kingdom was 26 per cent comparable to 23 per cent in 1801; in France 25 per cent the same as in 1841; in Germany 23 per cent compared to 24 per cent in 1841, in Italy 29 per cent comparable to 22 per cent in 1901 and in USA, 23 per cent compared to 20 per cent in 1841. The services sector has experienced a secular increase in its share throughout the period of modern economic growth in all countries except for an initial decline in a few, namely Great Britain, France and Germany, the early industrialisers. The share crossed the 50 per cent mark

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by 1901 in Great Britain, then it saw a decline till about mid - 1950s and crossed 50 per cent again by 1960, by which time most other countries, France, Germany, Italy and Japan had crossed this mark for the first time. The United States had hit a 50 per cent mark for services in its GDP earlier. There has been a continuous, and a relatively fast increase in the share of the services since the 1960s, and by now, it stands at 68 to 75 per cent in all the countries; the highest being 75 per cent in the case of United states, followed by United kingdom at 73 per cent, France at 72 per cent in 2002. It is somewhat lower at 68 per cent in Japan. The above description of changes in sectoral shares during the period of modern economic growth in todays developed countries tends to suggest a common or a normal pattern of development. Irrespective of the period when different phases of structural changes occurred, what is interesting to observe is that by the end of twentieth century most developed countries showed a remarkably similar structure of their economies. Thus, agriculture contributes less than 5 per cent of GDP, industry, 25 to 30 per cent, and services, around 70 per cent, in all of them. What is also equally interesting is that, in general, the structure of employment is found to be remarkably similar to that of the national product. Figures of share of different sectors in GDP and employment reveal a striking symmetry between the two variables. In developed countries in general, agriculture contributes less than 5 per cent of GDP as well as of employment; industry share in GDP is in the range of 22 and 30 per cent, and its share in employment varying between 21 and 33 per cent, which follows similar pattern as of GDP among the countries. The services account for 68 to 75 per cent of GDP and 63 to 74 per cent in employment. What is equally, if not more striking is that structural shifts in output have generally been faithfully accompanied by similar shifts in employment. So that when output share of agriculture in the United Kingdom declined from 32 per cent in 1801 to 22 per cent in 1841 and further to 6 per cent in 1901, its employment share also declined correspondingly to 35, 23 and 9 per cent respectively. When output share of industry rose from 23 per cent in 1801 to 40 per cent in 1901 and 56 per cent in 1955 and declined to 42 per cent by 1980, the corresponding change in its employment share were from 29 per cent to 54 per cent, and 38 per cent respectively. Product and employment shares of different sectors in other countries have not behaved as perfectly as their counterparts in the United Kingdom, but their long-term movements have also not shown a degree of asymmetry that could result in significant widening of inter-sectoral productivity and income differentials. To sum up, the main features of the historical pattern of changes in the economic structure that accompanied economic development of todays developed countries, over the past two centuries are:
Firstly, all countries, irrespective of the time they embarked upon the modern economic growth, had a similar sequence of changes in their economic structure starting with the predominance of agriculture. Secondly, while a decline in the share of agriculture and increase in the share of services took place continuously over a period of about two centuries, the share of industry changed in a hump-shape fashion, initially increasing continuously for a period of about one and half or one century, then experiencing a decline over the last fifty years. Irrespective of the

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time when industrialisation started, deindustrialisation in terms of a decline in a share of industry is observed to have started around the same period, that is, the middle of the twentieth century, in all countries. Thirdly, the structure of the economies of most of the developed countries looks like a replica of each other, each of them having a miniscule share of agriculture, industry claiming about one-fourth and services around 70 per cent of national product. Fourthly, changes in the structure of labour force generally accompanied those in product structure. Thus the share of each sector in employment moved in line with the output share of that sector. What is most interesting to note is the fact that today the employment structure of most developed countries is strikingly similar to their product structure.
3. STRUCTURAL TRANSFORMATION IN INDIA

Indian economy is also experiencing major changes in its structure in recent decades. The pattern of structural transformation in India is evident from the Table 1. Table 1 represents sectoral distribution of GDP and their respective share from 1950-51 to 2007-08, the compound annual growth rate (CAGR) is given in parenthesis.
Table 1 Share of GDP by Industry of Origin at Factor Cost at 1999-00 prices and CAGR (%) (Per cent) Years 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07R 2007-08Q Source: Note: Primary 56.70 52.48 (3.10) 46.00 (2.37) 39.93 (1.64) 34.05 (3.71) 26.18 (2.84) 26.19 (5.86) 23.73 (-5.89) 23.90 (9.29) 22.40 (0.70) 21.67 (5.83) 20.60 (4.42) 19.78 (4.69) Secondary 13.66 17.09 (6.25) 20.41 (5.58) 22.03 (3.88) 23.24 (5.94) 23.51 (5.70) 22.85 (2.82) 23.52 (6.89) 23.36 (7.80) 24.04 (10.54) 24.31 (10.65) 24.60 (11.18) 24.49 (8.50) Tertiary 29.64 30.43 (4.18) 33.59 (4.75) 38.04 (4.38) 42.71 (6.60) 50.31 (7.32) 50.96 (7.18) 52.75 (7.47) 52.73 (8.49) 53.56 (9.14) 54.02 (10.57) 54.80 (11.23) 55.73 (10.85) GDP Growth (CAGR) 3.91 3.70 3.08 5.38 5.58 5.81 3.84 8.52 7.47 9.52 9.75 9.01

Computed from Economic Survey-2008-09 data. R- Revised Estimates. Q- Quick estimates. Primary Sector includes agriculture and allied activities, and mining and quarrying. Secondary sector incorporates manufacturing, construction and electricity, gas and water supply. Rests of the activities are classified as services sector.

As it is evident from the table that at the onset of planned economic development in India primary sector was contributing 56.70 per cent of the GDP of the country, which continuously declined over the period to 26.19 per cent in 2001-02 and to 19.78 per cent in 2007-08. During the same period the share of industry, increased from a low level of 13.66 per cent in 1950-51 to 22.85 per cent in 2000-01 and further to 24.49 per cent in 2007-08. On the other hand, services sector has been continuously growing since 1951. Its share in GDP

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went up from 29.64 per cent in 1950-51 to 50.31 per cent in 2000-01 and further to 55.73 per cent in 2007-08. As far as the GDP distribution of Indian economy is concerned it is similar to many developed countries, and it gives a feeling as if India reached has the stage of deindustrialisation. But there is one difference; Indian economy has reached this stage without going through the process of high industrial growth. In Table 1 CAGR values are given in parenthesis. While no country had experienced a smooth and steady growth rate, Indias GDP has had a larger annual fluctuation in growth rates because of the dominance of agriculture (in first three decades), which itself dependent on monsoon. In the first three decades after 1950-51, GDP increased by 3.91, 3.70 and 3.08 per cent respectively, which is termed as Hindu Rate of Growth by Prof. Raj Krishna (3 per cent). It is only after 1980-81, the Indian economy was able to break this barrier. The GDP grew up by over 5 per cent annually thereafter. However, in recent years Indian economy has shown up its resilience to internal and external shocks and has expanded with a healthy growth. GDP has recorded a growth rate of 9.52, 9.75, 9.01 per cent in the years 2005-06, 2006-07, and 2007-08 respectively. In the Table 2 sectoral share movements are given. From this table it is evident that share of primary sector is continuously declining. Highest decline was recorded in last decade of twentieth century by 7.87 percentage points. In the first two decades after 1950-51, secondary sector experienced large sectoral movements. However, after that the share of secondary sector is increasing relatively slowly.
Table 2 Sectoral Share Movements (% age) Years 1950-51 to 1960-61 1960-61 to 1970-71 1970-71 to 1980-81 1980-81 to 1990-91 1990-91 to 2000-01 2000-01 to 2001-02 2001-02 to 2002-03 2002-03 to 2003-04 2003-04 to 2004-05 2004-05 to 2005-06 2005-06 to 2006-07 2006-07 to 2007-08 Primary -4.22 -6.48 -6.07 -5.89 -7.87 0.01 -2.45 0.17 -1.50 -0.73 -1.07 -0.82 Secondary 3.42 3.32 1.62 1.21 0.27 -0.66 0.67 -0.16 0.67 0.27 0.29 -0.11 Tertiary 0.79 3.16 4.44 4.67 7.60 0.65 1.78 -0.01 0.83 0.46 0.78 0.93

Source: Computed from Economic Survey-2008-09 data.

The steady decline in the share of primary sector was offset by gain in the share of services sector. As the share of secondary sector was growing slowly, share of services sector has shown high growth over the period. Its share increases on an average of 5 percentage points in each decade since 1970-71. The most striking feature of the structural change in the Indian economy till the last decade has been the pre-eminence of services sector as the major contributor to growth, raising its

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share rather sharply in the national output. Industry, particularly manufacturing, which has been observed historically to be the main contributor to growth at least in the initial phase of economic development, has played only minor role in Indias economic growth till last decade. India was facing what was termed as Industry-less Growth1. Instead of being the locomotive of growth as in most developing countries, in India, it has become a passenger that has to be pulled forward by the services sector. While this has been the pattern of growth in most of the developed countries since the middle of the twentieth century questions have been raised whether India is already at a level of development to sustain such a changes in the sources and pattern of economic growth. Is India on the way to becoming a post-industrial service economy without first industrialising? This atypical trend of Indian economy has drawn the attention of many structural transformation economists (Chenery 1960, Dutta 2001, Reddy 2003, Papola 2006 etc.) who tried to give their interpretations. The classical model of structural changes with economic development was based on the experience of nations with more or less autarkic regimes with little international trade, a situation in which domestic product structure of each country had to reflect its demand pattern. With increasing openness of economies and trade playing a significant role in them, changes in demand pattern can be met through trade and countries can have product pattern, very different from the pattern of consumption demand, largely based on comparative advantage. Hence, in the modern age it is not essential that a developing country has to follow the same pattern of sectoral transformation, step by step as experienced by the developed countries of the world. To quote Chenery (1960) in this regard:
An increase in per capital income in a country is normally accompanied by a rise in the share of industrial output. The accepted explanation for this relationship is the change in the composition of demand, of which the decline in the share of food (Engels Law) is the most notable feature. However, this overall relationship does not necessarily apply on every individual country, within limits; the changing composition of domestic demand can be offset through foreign trade. A country having a continuing comparative advantage in primary production may therefore, reach a high level of income without an increase in the share of industry in total output. Because of the diversity of natural resources, we should not expect to find universal patterns of growth in all countries.

Though, a forceful case is often put forward that services can become the major driving forces of economic growth, in case of India the sustainability of a service-led growth has been questioned by many. It has been argued that income from the services sector is growing much in excess of the demand generated for services by the commodity sector and since income might grow faster than employment in the organized services, service-led growth can have serious implications for inflation, income distribution, and balance of payments. Shankar Acharya (2002a, 2002b, 2002c) has been skeptical of the idea of services led growth. In his words Indias service sector cant enjoy fast and sustained growth. It can, but only in tandem with a fast growing industrial sector. Services cannot by themselves, assure rapid and sustained growth of the Indian economy.

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Dutta (2001) argues that it is difficult to sustain services sector growth in the absence of similar growth of industry since a major part of the demand for services is linked with the expansion of the industry. C. Ram Manohar Reddy (2003) says that, The highly amorphous nature, the divergent driving forces and the very different level of productivity in Indias services indicate that this sector cannot drive economic growth. That function has to be performed by agriculture and industry, which are yet in danger of languishing for want of attention, as policy makers pursue the chimera of the services solution to more rapid economic growth. Papola concludes .. from every viewpoint, the argument that manufacturing matters applies with a strong force in the case of Indias future economic growth. Forever the revolutionary changes in the technologies and larger trade possibilities in the globalised world, it is not realistic to expect that India will become a post industrial society without ever industrialising.
4. SECTORAL CHANGES AND THE INDUSTRIAL SECTOR IN INDIA

In the whole process of structural transformation, movement from primary to secondary sector has special significance. It is admitted by every economist that while the agricultural sector is prone to diminishing returns the industrial or the secondary sector is subject to the increasing returns. Thus, the supply side forces favour the growth of output in the secondary sector. However, it is not merely the supply side forces but demand side forces also favour the growth of secondary sector. The Engels law clarifies that the income elasticity of food items is low hence the income growth does not increase the demand of agricultural products whereas the industrial goods have a high level of income elasticity. Thus, growth of income gives an immediate push to the growth of output in the industrial sector from the demand side. The theory of structural transformation has given prime position to the industrial sector and termed it as engine of growth because industrial sector has strongest forward and backward growth linkages, subject to increasing returns for longer duration and greater labour absorption capacity. Emphasising primarily the supply side, Kaldor (1966) considered manufacturing as engine of growth. He said, agriculture being subject to diminishing returns, is not able to sustain an increasing level of production and income. From his work, he concluded that in the developed economies the explanatory variable for the growth of GDP was the growth of manufacturing. He attributed it to what he called Vardoons law (Vardoon, 1949), that is, economies of scale are enjoyed by the manufacturing sector. He said that because of economies of scale, there was a tendency for output to grow cumulatively, simultaneously resulting in a rapid growth of productivity. In India also industrial sector has played significant role in development of the country since pre-independence era. India had an independent economy before the advent of the British rule. Though agriculture was the main source of livelihood for most people, yet, the countrys economy was characterized by various kinds of manufacturing activities. India was particularly well known of its handicraft industries in the fields of cotton and silk, textiles, metal and precious stone works etc. These products enjoyed world-wide market based on the reputation of the fine quality of material used and the high standard of craftsmanship seen in all imports from India. During the second half of the nineteenth century modern industry began to take root in India but its progress remained very slow.

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Since, India got independence the responsibility of planned development rested in the hands of planning commission. Indian planners went a step ahead by emphasising heavy industry policy in the second five year plan and have achieved considerable development in all sectors. After independence industrial sector has witnessed many up and downs. Let us have a detailed analysis of changes in the composition of industrial sector in last fifty years or so.
Table 3 Components of Secondary Sector and CAGR (%) At Factor Cost (in Crore) (Base 1999-2000= 100) Year 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09 Note: Source: Manufacturing 19996 35961 (6.04) 59852 (5.23) 88740 (4.02) 161979 (6.20) 284571 (5.80) 361115 (6.13) 393842 (9.06) 440193 (11.77) 476303 (8.20) 487739 (2.40) Construction 9931 18324 (6.32) 31426 (5.54) 42339 (3.03) 66330 (4.59) 108362 (5.03) 158212 (9.92) 183868 (16.22) 205543 (11.79) 226325 (10.11) 242577 (7.18) Electricity, Gas and Water Supply 691 1857 (10.39) 5364 (11.19) 10340 (6.78) 23559 (8.58) 45439 (6.79) 54745 (4.77) 57513 (5.06) 60544 (5.27) 63730 (5.26) 65899 (3.40) Secondary Sector 30618 56142 (6.25) 96642(5.58) 141419(3.88) 251868(5.94) 438372(5.70) 574072(6.97) 635223(10.65) 706280(11.19) 766358(8.51) 796215(3.90)

CAGR is given in parenthesis. CSO. CAGR computed from CSO data.

In the Table 3, secondary sector is presented at disaggregated level on constant prices (1999-2000), CAGR is given in parenthesis. Manufacturing sector grew from 19996 crores to 84571 crores in 2000-01 and was 487739 in 2008-09. Construction and electricity, gas and water supply started with low base of 9931 and 631 crores in 1950-51and rose to 242577 and 65899 crores respectively in 2008-09. Overall secondary sector increased from 30618 in 1950-51 to 438372 crores in 2000-01 and further went up to 796215 crores. While absolute values give an idea of quantum, CAGR provides the pace of growth attained. Manufacturing sector grew by 6.04 per cent per annum in the first decade after independence and then slowed down to 4.02 per cent per annum in 1970-71 to 1980-81. In 2000-01 it recorded a growth rate of 5.80 per cent. In recent years, manufacturing sector has shown its emergence as a leading sector which grew up by 9.06, 11.77 and 8.20 per cent per annum in 2005-06, 2006-07 and 2007-08 respectively. Seeing these numbers, Swaminathan S. Anklesaria Aiyer in an article in Economic Times titled Return of Manufacturing in December 2004 said If this is a new trend a big if then manufacturing will once again overtake services as Indias growth locomotive.. Many Indian companies have become lean and mean thanks to the pressure of competition, and have benefited from a big fall in interest rates, better telecom, and some improvements in roads and ports. Yet I suspect that brain power played a critical role in making them competitive. So, India may

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have just become a manufacturing led economy again. But this does not mean a return to past patterns: manufacturing is now brainpower intensive. Data cannot capture this dimension but it mean that Indian manufacturing is for the first time becoming world class. For years, I have said that, I see no sign of India breaking out of the Neo-Hindu growth rate of 6 per cent. Not now I see signs that India may be breaking through to higher levels. Same trend was evident in the case of construction also. It grew up by 6.32 per cent per annum in fifties and then slowed down to 3.03 per cent in eighties. It again rebounded to 5.70 per cent in 2000-01. However, after 2004-05 construction is one of the fastest growing sectors of Indian economy. It recorded 16.22, 11.79 and 10.40 per cent per annum growth rate in 200506, 2006-07 and 2007-08 respectively. However, the story is little bit different in the case of Electricity, Gas and Water Supply. It recorded a good growth rate of 10.39, 11.19 per cent per annum in 1960-61, and 1970-71 respectively with low base. From then onwards its performance fluctuated between 5-6 per cent per annum. However, the recent global economic crisis (2007-08 onwards) has led to decrease in global demand for goods and services across the world which is evident from the sudden fall in growth rates i.e. from 8.20 to 2.40 per cent in manufacturing, from 10.11 to 7.18 per cent in construction and from 5.26 to 3.40 per cent in electricity, gas and water supply during 2007-08 and 2008-09. In the Table 4, share of components of secondary sector in total secondary sector is given. In the parenthesis the share in GDP is given.
Table 4 Share of Various Components of Secondary Sector (in per cent) Year 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09 Note: Source: Manufacturing 65 (8.92) 64 (10.95) 62 (12.64) 63 (13.82) 64 (14.95) 65 (15.26) 63 (15.12) 62 (15.05) 62 (15.33) 62 (15.22) 61 (14.61) Share in total GDP is given in the parenthesis. Calculated from CSO data. Electricity, Gas and Water Supply 02 (4.43) 03 (5.58) 06 (6.64) 07 (6.60) 09 (6.12) 10 (5.81) 10 (6.63) 09 (7.03) 09 (7.16) 08 (7.23) 08 (7.26) Construction 32 (0.31) 33 (0.57) 33 (1.13) 28 (1.61) 26 (2.17) 25 (2.44) 28 (2.29) 29 (2.20) 29 (2.11) 30 (2.04) 31 (1.97)

It is evident from the Table 4 that share of manufacturing in the total industrial sector has almost remained unchanged in the last 5 decades. It slightly decreases from 65 per cent to 61 per cent during 1950-51 to 2008-09. However, share of electricity, gas and water supply quadrupled from 2 per cent in 1950-51 to 8 per cent in 2008-09. Second major contributor, in

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the industrial sector, is construction activities which comprised 32, 25 and 31 per cent in 195051, 2000-01 and 2008-09 respectively. Taking a larger view, we analyse the share of various components of industrial sector in the GDP, the share of manufacturing has increased from 8.92 per cent in 1950-51 to 15.26 per cent in 2000-01. However it slightly declined to 14.61 per cent in 2008-09. On the other hand, share of construction and electricity, gas and water supply in GDP has increased throughout the period i.e. of construction sector from 0.31 to 2.04 and of electricity, gas and water supply from 4.43 to 7.23 per cent during the entire period 1950-51 to 2007-08. Though, the share of various components in secondary sector is almost unchanged but their share in the total GDP has increased. Manufacturing and electricity, gas and water supply have just doubled their share in GDP, on the other hand share of construction sector has increased more than six times. This increase in share of industrial sector in total GDP is evidence of growing importance of industrial sector in the economy of the country.
5. CONCLUSIONS

During the last few years the manufacturing sector has witnessed impressive growth, which has helped the GDP to post historically high growth rates. Currently, manufacturing sector is witnessing its longest period of upswing since the 1980s but there is a clear divergence between the performances of different sectors. Sustaining a rapid growth of manufacturing and achieving the transition to mass-manufacturing requires another major push to the reform agenda. In the absence of these reforms, the manufacturing sector will continue to retain its dualistic structure and be unable to address the apparent trade-off between growth and equity that can be best addressed by massive expansion in manufacturing sector employment. Note
1. S. Anklesariya Iyer (2002a, 2002b) is a series of articles in The Economic Times has welcomed the rapid growth of services in the 1990s. In his view, as the industry less growth is here to stay, our ability to compensate for industrial failure with services success is strength, not a weakness?

References
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