While the Indian industry sector grew by 3.3 per cent, with in industry sector segments like construction showed a lower growth in 2000-01, there was marked improvement in the growth rates of manufacturing (from 4.2 per cent in 1999-00 to 6.7 per cent in 2000-01) and mining and quarrying (from 2 per cent to 3.3 per cent during the same period). The growth rate of electricity, gas and water supply remained almost invariant at around 6.2 per cent for both 1999-2000 and 2000-01.
During 1993-94 to 1999-2000 the service sector had achieved consistently high growth rates in the range of 7.1 per cent to 10.5 per cent. But for the first time in 2000-01, the growth rate of the service sector declined to 4.8 per cent due to poor performance by financial sector, trade hotels and restaurants, and community and social services.
Agriculture
The agriculture sector, for so long the mainstay of the Indian Economy, now accounts for only about 20 per cent of GDP, yet employs over 50 per cent of the population. For some years after independence, India depended on foreign aid to meet its food needs, but in the last 35 years, food production has risen steadily, mainly due to the increase in irrigated areas and widespread use of high-yield seeds, fertilizers, and pesticides. The Country has large grain stockpiles (around 45 million tons) and is a net exporter of food grains.
With a view to strengthening the sector, building infrastructure for handling, transportation, and storage of food grains has been granted "infrastructure status" and will be eligible for a tax holiday. Further, processors of food and vegetables are exempt from excise duty.
Manufacturing Sector
After a decade of reforms, the manufacturing sector is now gearing up to meet challenges for the new millennium. Investment in Indian companies reached record levels by 1994 and many multinationals decided to set up shop in India to take advantage of the improved financial climate. In an effort to provide a further boost to the industrial manufacturing sector, Foreign Direct Investment (FDI) has been permitted through the automatic route for almost all the industries with certain restrictions. Structural reforms have been undertaken in the excise duty regime with a view to introduce a single rate and simplify the procedures and rules. Indian subsidiaries of multinationals have been permitted to pay royalty to the parent company for license of international brands, etc. Over the period 1992-93 to 1999-2000, the manufacturing sector has recorded an average annual growth rate of 6.3 per cent and in 2001-02; it recorded a growth of 2.8 per cent.
Companies in the manufacturing sector have consolidated around their area of core competence by tying up with foreign companies to acquire new technologies, management expertise, and access to foreign markets. The cost benefits associated with manufacturing in India, has positioned India as a preferred destination for manufacturing and sourcing for global markets.
Financial Sector
An extensive financial and banking sector supports the rapidly expanding Indian Economy. India boasts of a wide and sophisticated banking network. The sector also has a number of national and state level financial institutions. These include foreign and institutional investors, investment funds, equipment leasing companies, venture capital funds, etc. Further, the Country has a well-established stock market, comprising 23 stock exchanges, with over 9,000 listed companies. Total market capitalization, on the two dominant stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), stood at Rs. 6,926 billion and Rs. 7,604 billion respectively, at the end of December 2000. The Indian capital markets are rapidly moving towards a market that is modern in terms of infrastructure as well as international best practices such as derivative trading with stock index futures, addition to the list of compulsory Demat trading and rolling settlement in certain specified shares, commencement of internet based trading, etc.
The last year witnessed several Indian companies, mobilizing resources by tapping the world market through the ADR/GDR route. So as to improve the liquidity in the ADR/GDR market and to give opportunity to Indian shareholders to divest their shareholding in the ADR/GDR market abroad, measures such as two-way fungibility in ADR/GDR issues of Indian companies has been introduced and sponsorship of ADR/ GDR offerings against existing shareholding. In addition to the above, 26 per cent foreign equity has been allowed in the insurance sector and investment and divestment by venture capital funds and companies registered with SEBI has been simplified.
FII inflows were USD 2.34 billion (January 2001 to June 2001) compared to USD 1.5 billion for 2000, showing an upward trend despite depressed stock market indices. Net cumulative FII inflows crossed USD 14 billion (June 2001).
Services Sector
The main thrust to industrial growth has come from the services sector. Services contribute to 41 per cent of the GDP. Rapidly, the quality and complexity of the type of services being marketed is on the rise to match worldwide standards. Whether it is financial services, software services or accounting services, this sector is highly professional and provides a major impetus to the Economy . Interestingly, this sector is populated with a range of players who cater to a niche market.
India is fast becoming a major force in the Information Technology sector. According to the National Association of Software and Service Companies (NASSCOM), over 185 Fortune 500 companies use Indian software services. The world's software giants such as Microsoft, Hughes and Computer Associates who have made substantial investments in India are increasingly tapping this potential. A number of multi-nationals have leveraged the relative cost advantage and highly skilled manpower base available in India, and have established shared services and call centers in India to cater to their worldwide needs.
The software industry was one of the fastest growing sectors in the last decade with a compound annual growth rate exceeding 50 per cent. Software service exports increased from US$ 4.02 billion in 1999-2000 to US$ 6.3 billion in 2000-01, thereby registering a growth of 57 per cent. India's success in the software sector can be largely attributed to the industry's ability to cultivate superior knowledge through intensive R&D efforts and the expertise in applying the knowledge in commercially viable technologies.
Indian Industrial Sector
Industrial Growth Rates: Use Based
Infrastructure
The road transport sector has been declared a priority and will have access to loans at favorable conditions. The Monopoly and Restrictive Trade Practices Act (MRTP Act) was passed in order to encourage large industry to enter the road sector.
The National Highways Act has been modified to help the reduction of tolls on national motorways, bridges and tunnels. Calcutta's Howrah Bridge is the world's busiest with a daily flow of 57,000 vehicles and innumerable pedestrians. Private participation in the energy sector has been encouraged with the reduction of import duties, a five-year tax exemption for new energy projects and a 16% return on equity.
The government is also following a new telecommunications policy that aims for the improvement of quality to a worldwide standard and, as a result, India could emerge as a major producer and exporter of telecommunication systems. Advantageous policies in this sector are encouraging private and foreign participation. Given below is a profile of the present Indian Union Infrastructure:
Companies in the manufacturing sector have consolidated around their area of core competence by tying up with foreign companies to acquire new technologies, management expertise, and access to foreign markets. The cost benefits associated with manufacturing in India, has positioned India as a preferred destination for manufacturing and sourcing for global markets.
Financial Sector
An extensive financial and banking sector supports the rapidly expanding Indian Economy. India boasts of a wide and sophisticated banking network. The sector also has a number of national and state level financial institutions. These include foreign and institutional investors, investment funds, equipment leasing companies, venture capital funds, etc. Further, the Country has a well-established stock market, comprising 23 stock exchanges, with over 9,000 listed companies. Total market capitalization, on the two dominant stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), stood at Rs. 6,926 billion and Rs. 7,604 billion respectively, at the end of December 2000. The Indian capital markets are rapidly moving towards a market that is modern in terms of infrastructure as well as international best practices such as derivative trading with stock index futures, addition to the list of compulsory Demat trading and rolling settlement in certain specified shares, commencement of internet based trading, etc.
The last year witnessed several Indian companies, mobilizing resources by tapping the world market through the ADR/GDR route. So as to improve the liquidity in the ADR/GDR market and to give opportunity to Indian shareholders to divest their shareholding in the ADR/GDR market abroad, measures such as two-way fungibility in ADR/GDR issues of Indian companies has been introduced and sponsorship of ADR/ GDR offerings against existing shareholding. In addition to the above, 26 per cent foreign equity has been allowed in the insurance sector and investment and divestment by venture capital funds and companies registered with SEBI has been simplified.
FII inflows were USD 2.34 billion (January 2001 to June 2001) compared to USD 1.5 billion for 2000, showing an upward trend despite depressed stock market indices. Net cumulative FII inflows crossed USD 14 billion (June 2001).
Services Sector
The main thrust to industrial growth has come from the services sector. Services contribute to 41 per cent of the GDP. Rapidly, the quality and complexity of the type of services being marketed is on the rise to match worldwide standards. Whether it is financial services, software services or accounting services, this sector is highly professional and provides a major impetus to the Economy . Interestingly, this sector is populated with a range of players who cater to a niche market.
India is fast becoming a major force in the Information Technology sector. According to the National Association of Software and Service Companies (NASSCOM), over 185 Fortune 500 companies use Indian software services. The world's software giants such as Microsoft, Hughes and Computer Associates who have made substantial investments in India are increasingly tapping this potential. A number of multi-nationals have leveraged the relative cost advantage and highly skilled manpower base available in India, and have established shared services and call centers in India to cater to their worldwide needs.
The software industry was one of the fastest growing sectors in the last decade with a compound annual growth rate exceeding 50 per cent. Software service exports increased from US$ 4.02 billion in 1999-2000 to US$ 6.3 billion in 2000-01, thereby registering a growth of 57 per cent. India's success in the software sector can be largely attributed to the industry's ability to cultivate superior knowledge through intensive R&D efforts and the expertise in applying the knowledge in commercially viable technologies.
Indian Industrial Sector
| SECTORS | Weight | 1995-96 | 1996-97 | 1997-98 | 1999-00 | 2000-01 | 2001-02 | Apr-June 2002* |
| All Industries | 100 | 13 | 6.1 | 6.7 | 6.7 | 5 | 2.8 | 4 |
| Basic Goods | 35.57 | 10.8 | 3 | 6.9 | 5.5 | 3.9 | 2.8 | 5.1 |
| Capital Goods | 9.26 | 5.3 | 11.5 | 5.9 | 6.9 | 1.8 | -3.9 | 1.6 |
| Intermediates | 26.51 | 19.4 | 8.1 | 8 | 8.8 | 4.7 | 1.6 | 1.1 |
| Consumer Goods | 28.66 | 12.8 | 6.2 | 5.5 | 5.7 | 8 | 6 | 6.5 |
| a) Durables | 5.36 | 25.8 | 4.6 | 7.8 | 14.1 | 14.5 | 11.5 | 0.5 |
| b) Non-Durables | 23.3 | 9.8 | 6.6 | 4.8 | 3.2 | 5.8 | 4 | 8.7 |
Infrastructure
The road transport sector has been declared a priority and will have access to loans at favorable conditions. The Monopoly and Restrictive Trade Practices Act (MRTP Act) was passed in order to encourage large industry to enter the road sector.
The National Highways Act has been modified to help the reduction of tolls on national motorways, bridges and tunnels. Calcutta's Howrah Bridge is the world's busiest with a daily flow of 57,000 vehicles and innumerable pedestrians. Private participation in the energy sector has been encouraged with the reduction of import duties, a five-year tax exemption for new energy projects and a 16% return on equity.
The government is also following a new telecommunications policy that aims for the improvement of quality to a worldwide standard and, as a result, India could emerge as a major producer and exporter of telecommunication systems. Advantageous policies in this sector are encouraging private and foreign participation. Given below is a profile of the present Indian Union Infrastructure:
| Motorway network | 3.3 m km- 1,448,629 Km |
| No. Goods transport vehicles | 1,600,000 |
| Railways | 62,486 Km |
| No. Railway stations | 7,000 |
| Produce transported by rail (1992-93) | 350,000,000 tons |
| No. International airports | 5 |
| No. National airports | 90 |
| No. large ports | 11 |
| No. small and medium ports | 139 |
| Goods traveling through ports | 166,610,000 tons |
| Merchant fleet | 443 ships |
| No. Post offices (2001) | 155,000 |
| nergy production capacity (91-92) | 78,000 Mw |
| nergy generated (2000) | 547.12 billion kWh |
