Regional Industrial Growth in India: UPSC Current Affairs

Description

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Picture Courtesy: THE HINDU

Context

The Standing Committee on Finance has recommended the Government to consider an action plan to evenly distribute industries across all States, for “more balanced and equitable economic development”.

Historical Evolution of Industrial Regions

British Colonial Impact on Regional Development: Bombay (Mumbai) became a cotton-textile hub when the first cotton mill opened in 1854.

Bengal’s jute industry started with a mill at Rishra (near Kolkata) in 1855.

Post-Independence Industrial Policy Framework: Early planning aimed at equity.

First Five-Year Plan (1951–56) chose projects (e.g. steel plants at Rourkela, Bhilai, Durgapur) to balance regional growth.
Industrial Policy Resolution of 1956 expanded public-sector enterprises and aimed to reduce regional disparities.

Liberalisation Era Changes (1991–Present): Market reforms (abolition of licensing, FERA relaxation) shifted industrial location to market forces.

Private and foreign capital surged into well-connected states. For example, FDI into manufacturing climbed 69% to $165.1 billion (2014–24).

Major Industrial Regions

Western Industrial Belt

Mumbai–Pune Region: India’s largest industrial agglomeration (textiles, automobiles, chemicals, engineering).

Ahmedabad–Vadodara: Gujarat’s core cluster produces chemicals, petrochemicals, textiles and pharmaceuticals.

Advantages: Excellent port access, robust finance and skilled labor base (built over decades).

Challenges: Acute land scarcity around Mumbai-Pune causes urban congestion. Pollution and infrastructure stress (traffic, water) are persistent issues.

Eastern Industrial Corridor

Kolkata–Hugli Region: Traditional industries (jute, textiles, shipbuilding, heavy engineering, chemicals) cluster. Kolkata’s port and river network spur industry.

Chotanagpur Region (Jharkhand–W.B.–Odisha): Known as the “Ruhr of India” (rich coal, iron). It hosts steel plants (Durgapur, Bokaro, Rourkela), Locomotives, cement, chemicals, and power plants predominate.

Advantages: Abundant minerals and low-cost labor have anchored heavy industry.

Challenges: Infrastructure (power/transport) lags – frequent outages and poor roads raise costs. Historic labor and political unrest (e.g. Naxalite-affected areas) discourage investment.

Southern Industrial Triangle

Bangalore–Chennai Corridor: High-tech and manufacturing hub. Bengaluru is India’s IT capital (IT parks, aerospace, biotechnology) while Chennai–Tiruchirappalli hosts automobiles, electronics, and engineering industries.

Coimbatore–Madurai Area: Textile and engineering (motors, auto parts) industries dominate.

Advantages: Rich human capital (premier technical schools, universities), well-developed ports (Chennai, Ennore, Tuticorin) and inter-state connectivity.

Challenges: Water scarcity is severe (Kaveri basin issues). Skill gaps persist: many manufacturing jobs require technical training scarce in rural TN/Kerala.

Northern Industrial Cluster

Delhi–Gurgaon–Noida (NCR): Centres for automobiles (Maruti, Escorts), consumer goods (electronics, apparel) and IT. Proximity to the national capital offers large markets and policy access.

Ludhiana–Jalandhar (Punjab): Dense SME belt – bicycles, hosiery, machine tools, sports goods.

Advantages: Close to North Indian markets and raw materials; extensive road/rail network; entrepreneurial culture (Punjab, Haryana, Delhi).

Challenges: Severe air pollution (from industry, vehicles) and urban sprawl. Infrastructure bottlenecks (gridlock on highways, overloaded power grids) hamper competitiveness.

Government Initiatives for Regional Industrial Balance

UNNATI Scheme (2024): Offers capital-interest subvention (5% annual rate for 7 years) and GST reimbursement for eligible units, focusing on North East and other lagging regions.

Production Linked Incentive (PLI) Scheme: Covers 14 key sectors with ₹1.97 lakh crore total outlay. Aimed at global competitiveness.

Make in India (2014): Promotes manufacturing in 25 priority sectors (e.g. electronics, auto, defense) via eased regulation, National Investment & Manufacturing Zones (NIMZs), and a single-window clearance portal.

Special Package Schemes: Implemented in states like Himachal Pradesh, Uttarakhand, Jammu & Kashmir, and Ladakh to encourage industrial growth through subsidies and incentives.

National Industrial Corridor Programme: Developing industrial corridors with sustainable infrastructure and “plug-and-play” facilities across various states to attract manufacturing and investment.

National Logistics Policy (NLP) & PM Gati Shakti: Improve infrastructure, enhance logistics efficiency, reduce costs, and integrate different transport modes, benefiting various regions by improving connectivity to economic hubs.

Bharatmala Pariyojana: Developing a network of roads, including economic corridors and ring roads, to improve connectivity, reduce travel time, and enhance logistics efficiency.

Pradhan Mantri Gram Sadak Yojana (PMGSY): Provide all-weather road connectivity to rural habitations, improving accessibility and boosting economic activities in those areas.

UDAN (Ude Desh Ka Aam Naagrik): Regional connectivity scheme to revive existing airstrips and airports, expanding air travel access to previously unserved and underserved regions, and promoting regional economic development.

Prime Minister's Employment Generation Programme (PMEGP): Encourages new entrepreneurs to set up micro-enterprises, including those in backward areas, through credit-linked subsidies.

Credit Guarantee Scheme for Micro & Small Enterprises (CGTMSE): Provides credit guarantee cover for collateral-free loans to new and existing Micro and Small Enterprises, with enhanced coverage for those in the North East Region.

Scheme of Fund for Regeneration of Traditional Industries (SFURTI): Organizes traditional industry artisans into clusters, providing technology support, marketing support, and skill development to promote sustainable employment in traditional sectors.

Ease of Doing Business Reforms: Simplifying procedures, rationalizing legal provisions, and digitizing government processes to promote a more business-friendly environment and attract investment across regions.

Challenges in Regional Industrial Development

Infrastructure Deficits: Many underdeveloped regions lack reliable power and transport. Industries face power outages, raising costs and deterring investors.

Poor roads and congested rail links inflate logistics costs (India’s logistics can run 14–18% of GDP vs 8–10% in developed countries). Landlocked areas suffer extra freight delays.
Digital infrastructure also lags; broadband penetration is lower in rural districts, hindering modern business processes.

Human Resource Constraints: A severe skill gap persists. As per the Periodic Labour Force Survey (PLFS) Annual Report 2021-22 of National Sample Survey Office (NSSO), in the age group 15-59 years only 3.4% has received formal vocational/technical training.

High-tech industries cluster in metros (Bangalore, Delhi, Mumbai) attract educated workers/labour, while backward regions lose out.
Many local youths migrate to cities (“brain drain”), leaving rural clusters starved of talent.
Educational and healthcare facilities are also uneven, reducing workforce quality in less-developed states.

Financial and Market Access Issues: Small industries face credit scarcity. High borrowing costs and a shortage of rural banking/financing facilities make capital hard to get.

Market linkages remain weak: interior manufacturers lack strong distribution networks, so they sell mostly locally at lower margins.
Limited R&D and tech-availability also hinder upgrading; many firms still use outdated machinery.
Raw materials come from far away, so transport adds significantly to costs in remote areas.

Institutional and Governance Factors: Red tape and policy uncertainty trouble entrepreneurs outside major states.

Complex clearance processes (environment, land) cause delays and inflate project timelines.
Corruption tends to be higher in weaker states, deterring outside investors.
Land acquisition remains legally cumbersome in many areas.

International Best Practices

China’s Coastal Development (Special Economic Zones): Shenzhen’s SEZ (1980s) saw export-oriented industry booms, attracting foreign tech and creating regional wealth. Such coastal policy parallels India’s NIMZ/National Manufacturing Zone ideas.
Germany’s Industrial Cluster Approach: Germany’s focus on regional clusters (e.g. automotive in Stuttgart/Lower Saxony, machinery in Baden-Württemberg) combines vocational training, and local coordination.
South Korea’s Saemangeum Project: A huge land-reclamation project turned coastal reclamation into industrial-tourism zone, aiming to attract heavy industry and R&D (automobiles, shipbuilding). This represents targeted regional development via infrastructure investment.
Japan’s Technopolis Concept: In the 1980s, Japan designated cities like Kitakyushu and Tsukuba as “technopolis,” linking universities with industrial parks to foster hi-tech growth. It shows how government-led planning can seed new clusters.

MSME Sector and Regional Development

Role in Balanced Growth: The MSME sector employs over 11 crore people (2nd largest employer after agriculture) and contributes about 30% of India’s GDP, account for 45% of exports.

MSMEs are spread more evenly: states like Uttar Pradesh, Bihar, and the North East have significant small-unit clusters in handicrafts, food processing and textiles. This widespread presence helps mitigate regional disparities when nurtured.

Challenges Faced by MSMEs: High financing costs cripple many. Collateral demands and interest rates remain steep, despite schemes like CGTMSE. Many small units run obsolete equipment, hurting quality and output.

Limited market access – rural SMEs lack marketing networks or export linkages.
Skilled labor shortage also affects MSMEs; even short-term technical training is scarce in villages, forcing firms to hire untrained workers or shut down.

Government Support Schemes:

MUDRA Yojana: Provides collateral-free loans (up to ₹20 lakh) for micro-entrepreneurs.

CGTMSE (Credit Guarantee for MSMEs): Offers lenders partial collateral guarantees for loans, easing finance access.

Technology Upgradation: Schemes (e.g. Technology Upgradation Fund, Digital MSME Scheme) subsidize modern machinery purchases and digital tools.

Market Development Assistance: Programs help MSMEs participate in trade fairs and e-markets. Export promotion councils give fiscal support for overseas marketing.

Skill and Training: The government’s skill programs (National Skill Development Mission) target small enterprises to train workers in trades (welding, machine operation) relevant to local industries.

Way Forward for Balanced Regional Industrial Growth

Regionalized Multi-Sector Planning: Develop comprehensive regional plans that integrate industrial growth with infrastructure like roads, schools, and healthcare facilities, to ensures development is holistic and relevant to local conditions.

Prioritize Infrastructure in Lagging Areas: Invest in foundational infrastructure—reliable power, all-weather roads, and logistics networks—in industrially underdeveloped regions, it lowers operational costs and makes these areas attractive for investment.

Align Skill Development with Local Industry Needs: Implement skill-development programs based on the specific requirements of regional industries. For example, establishing textile training centers in traditional weaving clusters creates a skilled, ready-to-deploy workforce.

Enhance Tech Transfer and Innovation: Establish regional innovation hubs and technology business incubators to facilitate technology transfer and support startups.

Empower Local Governance: Strengthening Panchayati Raj Institutions (PRIs) and state agencies by improving their capacity to coordinate and manage regional industrial projects.

Kerala's People's Plan Campaign is a powerful case study where empowered local governments successfully implemented over 100,000 local development projects.

Improve Centre-State Coordination: Establishing joint task forces for industrial corridors and regional initiatives to ensure seamless planning and execution.

PM GatiShakti National Master Plan exemplifies this model by providing a digital platform for integrated planning across 16 central ministries and state governments,.

Boost Public-Private Partnerships (PPPs): Encourage private sector investment in building and managing infrastructure like Special Economic Zones (SEZs), industrial parks, and logistics hubs.

Successful PPPs, such as the development and modernization of major airports in Delhi and Mumbai, demonstrate how private efficiency can accelerate world-class infrastructure projects.

Streamline Clearances: Implement a single-window, time-bound clearance system across India to simplify regulatory hurdles.

Independent Monitoring and Evaluation: Create independent mechanisms to monitor regional development schemes, using data dashboards for real-time tracking and timely course correction.

NITI Aayog's SDG India Index uses data to rank states, promoting competitive federalism and providing policymakers with actionable insights for targeted interventions.

Engage Community Stakeholders: Involve local communities in the planning and execution of regional projects, ensures investments align with local priorities and encourages greater ownership and sustainability.

Source: THE HINDU

PRACTICE QUESTION

Q. Despite decades of planning, regional disparities in industrial development persist in India. Critically analyze. 250 words