Industrial Development during Five Year Plans in India


Consequent upon the massive investments made during the planning period, industrial devel­opment made great strides after independence. The index number of industrial production (base year 1970 as 100) went up from 54.8 in 1951 to 150.1 in 1978-79. Production of finished steel increased nearly 6 times and that of nitrogenous fertilizers by about 240 times during the period.

An important feature of industrial growth in the country after Independence has been observed in the sporadic expansion of the public sector under­takings. While in 1951 there were only 5 public sector undertakings with an investment of Rs. 29 crores, by 1992 their number increased to 246 with an investment of Rs. 135,871 crores.

A large number of diverse products such as steel, coal, aluminum, copper, heavy and light engineering products, ferti­lisers, basic chemicals, drugs, minerals, petroleum products, locomotives, aircrafts, and ships are char­acteristic features of this sector.


The role of public sector comprised 96.15 per cent, 90.09 per cent. 71.97 per cent, 55.97 per cent and 25 per cent share of the total investment in communication, electricity generation, mining and quarrying, transport and manufacturing industries in 1992-93.

The share of manufacturing sector in gross domestic product has increased from 1 1.88 per cent in 1951-56 to 16.95 per cent in 1966-71 and 21.50 per cent in 1991-92. After Fifth Five Year Plan the strategy was adopted to lift the economy slowly from agriculture based to modern manufacturing and advance services.

As a result, the manufacturing sector grew with its share being above 20 per cent in GDP while agricultural sector’s share declined from 54.91 percent in 1951- 56 to 32.82 per cent in 1985-90 and 27.70 per cent in 1991-92.

The Industrial growth has not been uniform since 1951. After a steady growth of about 8 percent during the initial period of 14 years (195 1 to 1965), there was fluctuating trend since then-near stag­nancy during 1966-68, a high level of 9.5 per cent during 1976-77, a minus 1.4 per cent in 1979-80.


In the sixties (1961-70) the average growth rate of industrial output was put at 5.5 per cent and in the seventies (1971-80) the average growth rate has been about 4 per cent per annum. The growth rate was 5.5 per cent per annum during 1980-85.

It picked up to 8.48 per cent between 1985-90 but slowed down to 5.3 per cent per annum between 1990-95. The lowest growth rate during the last decade of the century was recorded in 1991 -92 (0.6 percent) which led to severe economic crisis. It was realised that the development strategy followed till then needed large-scale changes.

As a result wide-ranging reform measures leading to liberalisa­tion, privatisation, globalisation were taken which gave boost up to the industrial production. Conse­quently, the highest growth rate of 12.1 per cent was recorded in 1995-96. Since then it has again slowed down between 2.7 (2001-02) and 8.4 (2004-05) per cent.

The overall growth of industrial production, as measured by the index of industrial production (IIP), is 8.4 percent for April-December2004. The higher growth in the current year has been largely contrib­uted by the 9 per cent growth in manufacturing and the 6.4 per cent growth in electricity. The slowing down of the industrial growth rate is a matter of serious concern.


Among the factors which have contributed to the slowdown in industrial growth in the recent years mention may be made of the excess capacity build up in some sectors in earlier years, monetary/credit tightening of 1995-96 and associated high real inter­est rates, the continuing slump in capital markets, infrastructural constraints, poor business sentiment, marked decline in the growth of exports since 1996- 97, and high levels of uncertainty prevailing in international and domestic arenas.

The government is taking a number of reme­dial steps to accelerate the rate of industrial growth.

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