Reforms in Industry

Industry is another sector where the reforms are judged to have produced disappointing results, and the assessment points to a clear slowdown rather than the acceleration that had been hoped for.

The basic problem — an industrial slowdown:

Industrial growth has recorded a slowdown during the reform period. The main reason is a decreasing demand for industrial products, which in turn arises from several causes, chiefly cheaper imports and inadequate investment in infrastructure.

The role of cheaper imports:

In a globalised world, developing countries are compelled to open up their economies to a greater flow of goods and capital from developed countries. This openness renders their industries vulnerable to imported goods. Cheaper imports have, as a result, replaced the demand for domestically produced goods. Domestic manufacturers now face stiff competition from imports, and when consumers buy the cheaper foreign product instead of the local one, demand for home-made goods falls and industrial growth suffers.

Inadequate infrastructure:

The problem is made worse by the state of infrastructure. Facilities such as power supply have remained inadequate because of a lack of investment. Without reliable and sufficient infrastructure, especially electricity, industry cannot expand smoothly or compete effectively.

The wider criticism of globalisation for industry:

For these reasons, globalisation is often seen as creating conditions for the free movement of goods and services from foreign countries in a way that adversely affects local industries and employment opportunities in developing countries. The very openness that was meant to make Indian industry efficient is blamed for exposing it to competition it was not ready to meet.

Unequal access to developed-country markets: …