Industry On Buoyant Path with Sustained High Growth

By Ministry of Commerce & Industry   |   Wednesday, 31 December 2003, 08:00 Hrs
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Industrial growth in India has reached a stage in the year 2003 where all the
ingredients are in place to trigger an era of high growth. The combination of low
inflation, low interest rates, tax buoyancy, high import growth and a revival of
public spending on infrastructure together signal a likelihood of a significant
acceleration in overall growth and industrial growth in particular. The
configuration of monetary and fiscal parameters today provides an assurance
of stability. Investor sentiment is on upswing and equities have shown strong
rally with inflation continue to be subdued. The Business Confidence Index is
on high, a reflection of feel good factor in the economy. These are the
highlights of the industrial sector during the year 2003.

The industrial recovery witnessed during 2002 has continued during the current
year as well with overall industrial growth (measured in terms of the Index of
Industrial Production) growing at a rate of 5.8% during the first half of 2003
(April-September) compared with 5.4% achieved during the same period last
year. The manufacturing sector posted a growth of 6.3% followed by 4.2% by
mining & quarrying and 2.9% by electricity sector during April-September this

In a major initiative to enhance global competitiveness of domestic industries,
the government announced in December 2003, the Industrial Infrastructure
Upgradation Scheme (IIUS) by providing quality infrastructure in selected
functional clusters/locations. With a provision of 675 crore in the Tenth
Plan, the scheme will be taken up in 20-25 clusters for development. The
assistance will be by way of one time grant-in-aid to the Special Purpose
Vehicle (SPV) formed by the cluster association for development of the
infrastructure. It is expected that this initiative will pave the way for domestic
industries to become globally competitive.

Foreign Direct Investment into India is on rise. According to UNCTAD’s World
Investment Report 2003, FDI inflow to India has risen to US $ 3.45 billion in
2002 from US $ 3.40 billion in 2001, though there was a fall in the FDI inflows
across the world during the same time. India’s share in world FDI has been
steadily increasing from 0.17% in 2000 to 0.41% in 2001 and to 0.53% in 2002
(latest available data). Progressive liberalisation of FDI policy has strengthened
investor confidence with opening up of new sectors like integrated townships,
defence industry, tea plantations etc; and sectoral reforms/deregulation in
telecom sector etc. From this year, the government started complying with the
international norms of measuring FDI, according to which, FDI into India
touched US $ 4.66 billion (revised figure) as against US $ 2.57 billion in

Investments by Foreign Institutional Investors (FIIs) have shown a significant
increase on account of economic recovery. According to latest Reserve Bank
of India data, FII inflow during April-September 2003-04 was to the tune of US $
3.44 billion against an outflow of US $ 379 million during the same period of
the previous year.

In order to simplify and rationalise the procedure governing grant of patents,
the government has introduced the Patents (Amendment) Bill 2003 in
December 2003 in the Parliament to further amend the Patents Act, 1970 so
as to make the system more user-friendly. Moreover, the Patents Rules 2003
has come into force with effect from 20.5.2003. The Geographical Indications
of Goods (Registration and Protection) Act, 1999 and the Trade Marks Act
1999 also came into force on 15.9.2003 along with setting up of the Intellectual
Property Appellate Board in Chennai. This Act makes the Indian Patent Law
not only TRIPs-compliant but also incorporates safeguards for protection of
public interest and public health as provided in the Doha Declaration. It also
incorporates provisions for protection of bio-diversity and traditional knowledge.

Apart from legislative changes in relevant IP laws, the Government’s initiatives
throughout the year have included major upgradation and modernisation of the
administrative framework covering Patents, Designs, Trade Marks and
Geographical Indications. Projects to modernise the Patent Office, the Design
Offices, the Trade Marks Registries and the establishment of a new
Geographical Indications Registry have been taken up. Comprehensive
computerisation has been undertaken in order to improve the functioning of
Patent Offices.

The year 2003 also saw the finalisation of the report of the Govindarajan
Committee, which was set up to suggest simplification in procedures for
investment approval and implementation of projects. In its two-part reports, the
committee recommended reengineering of regulatory projects, setting up of
Industrial Investment Facilitation Board (IIFB) to help resolve difficulties faced
during implementation, ways to dismantle ‘Inspector-Raj’ and action plan for
greater use of information technology to usher in transparency.

Another highlight of the year was the feel good factor in the economy, which
has pushed the Business Confidence Index (BCI) to a new high. According to
National Council of Applied Economic Research (NCAER) latest quarterly
survey the BCI has jumped to 129.4 in October 2003 as compared to 82.5 in
October 2001 and 102.4 in October 2002. Similarly, Federation of Indian
Chambers of Commerce & Industry’s (FICCI) Business Confidence Index too
has increased to 76.2 in the second quarter of the current financial year from
69.4 in the same period of the previous year.

Thus, the overall investment climate as seen in the year 2003 is propitious to
promote growth and investment in industry as reflected in buoyant investment

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