“Industrial growth rate has lagged-behind in the overall growth of Gross-Domestic-Product (GDP) in the post-reform period.” Give reasons. How far the recent changes in Industrial-Policy are capable of increasing the industrial growth rate ?
Approach · directive: “give reasons / how far”
What it asks · Give reasons why industry has grown more slowly than the economy after 1991, and judge how far recent industrial policy changes can lift it.
The question has 2 parts — answer each
- Give reasons why industrial growth lagged behind overall GDP growth in the post-reform period
- Assess how far the recent changes in industrial policy can raise the industrial growth rate
Open with · After 1991 services led India's growth while industry, especially manufacturing, stayed at roughly the same share of GDP, unlike in East Asian economies.
Cover
- Reasons: infrastructure gaps in power, transport and logistics raise costs and delay projects.
- Reasons: rigid labour laws, land acquisition difficulty and long clearances discourage large, labour-intensive plants.
- Reasons: import competition after tariff cuts, weak R&D and technology, and high cost of credit and stressed bank balance sheets.
- Reasons: the small-scale sector, fragmented and informal, struggles to scale up; global slowdown after 2008 hit exports and demand.
- Recent changes: Make in India (2014), FDI opening in defence and railways, easier licensing, ease-of-doing-business reforms, Start-up India and skill development.
- Recent changes: GST (2017) for a common national market, the Insolvency and Bankruptcy Code (2016), industrial corridors and the National Manufacturing Policy target.
- Assessment: these lower costs and uncertainty, but results depend on land, labour and power reform, credit revival and export competitiveness; impact will take time.
Close with · Policy changes are moving in the right direction; a stable regime, labour and land reform and better infrastructure will decide whether industry gains a larger share of growth.
Question: UPSC's CS (Main) 2017, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 30 Sept 2026 (how we verify) — UPSC publishes no model answers. ·
Model answer · 347 words (UPSC limit 250) · Minimalist IAS
After 1991 services became the engine of India's growth, while industry, and manufacturing in particular, kept roughly the same share of GDP, unlike the manufacturing-led take-off of East Asia.
Why industry lagged
- Infrastructure deficit: unreliable power, congested ports and costly logistics raised costs and delayed projects, a burden that software and finance could sidestep.
- Factor markets: rigid labour laws pushed firms to stay small or capital-intensive; land acquisition was slow and contested; multiple clearances stretched gestation periods.
- Competition and finance: tariff cuts exposed firms to imports before they reached scale; weak R&D kept technology borrowed; high real interest rates and, after 2011, stressed bank and corporate balance sheets choked credit.
- Structure: a fragmented, informal small-scale sector could not scale up, while services grew on skilled labour and needed far less physical capital.
- Demand shocks: the global slowdown after 2008 hit exports, and private investment stayed weak thereafter.
Recent policy changes
- Make in India (2014): FDI opened in defence, railways and insurance; ease-of-doing-business reforms, online clearances and self-certification; Start-up India and Skill India.
- National Manufacturing Policy (2011): a target of a 25 per cent manufacturing share of GDP by 2022 through National Investment and Manufacturing Zones and corridors such as Delhi-Mumbai.
- GST (July 2017) created one national market and removed cascading taxes; the Insolvency and Bankruptcy Code (2016) allows quick exit and resolution of stressed assets; Sagarmala targets logistics costs.
How far they can help
- Strengths: lower transaction costs, better allocation of capital, foreign technology, scale economies from a common market and formalisation of supply chains.
- Limits: land, labour and power reforms lie largely with the States; bank credit to industry stayed sluggish; skill gaps persist; exports need trade access and a competitive exchange rate; the GST transition and demonetisation disrupted output in the short run.
- Verdict: the changes remove real constraints but are necessary rather than sufficient, and their effect will show only over several years.
Industrial policy now points the right way; a stable tax and regulatory regime, factor-market reform and a credit revival must follow if industry is to lead growth rather than trail it.
Written by Minimalist IAS from facts checked at source (how we verify) — a little fuller than exam length, so every part of the question is covered; in the hall, keep the structure and trim the detail. UPSC publishes no model answers: compare your structure and coverage with this, then write your own.