TERM PAPER

FDI AND GROWTH OF INDIAN MANUFACTURING DURING POST REFORMS:

A Brief Analysis of the Electronic and Automobile sector

Abstract: Foreign Direct Investment (FDI) and Multinational Enterprise (MNE) operation play quite an important role in developing economies as with FDI not only investment flows into the most country but access to a variety of other assets including world-class frontier technology becomes easier. The present study examines the production growth rate of two sectors namely electronic and automobile sector during post 2000s. This paper shows a decreasing trend of production growth in both sectors. However, the study suggests that with FDI and MNE operations, India is being used an export platform in the post liberalization era.

Keywords: Foreign Direct Investment, Multinational Enterprise, Production growth rate, Export.

1. Introduction:

Since independence, Indian economy has been an underdeveloped economy and predominantly

agricultural with very slow growth. The causes can be found in poor irrigation facilities,

destruction of cottage industries, discriminatory tariff policies and lack of manufacturing

production and protective trade policies. In the 1980s, the country faced severe financial crisis

with an acutely low foreign exchange reserves. Simultaneously, the collapse of Soviet Union

impacted the Indian economy adversely, Soviet Union being the main trading partner. In 1991,

the Indian economy took steps forward towards liberalization. Different reform packages in

terms of lowerd tariff policy, reformed exchanged rate policy, relaxed policies towards foreign

direct investment were taken. Hence Indian economy had a paradigm shift and got avenues to

integrate with the world. This opened the doors for Foreign Direct Investment (FDI) and hence

Multinational Enterprise (MNE) operations in India. FDI plays an important role in development

of a country. Through FDI, not only investment flows into the most economy, but FDI brings

with it professional skills, world class technology, marketing and distributing networks,

managerial know-how etc. In India inflow of capital increased from Rs.191.7 crores in 1990-91

to Rs157800 crores in 2010 and the number of countries investing in India increased from 29 in

1991 to 150 in 2010.

1

Literature focuses on the importance of manufacturing sector (Clark and Fisher, 1935; Rostow,

1955) on economic growth. As development takes place in countries, there is a shift from

primary sector (agriculture) to secondary sector (manufacturing). This growth of manufacturing

sector leads to growth of tertiary sector. Secondary sector play a very important role in creating

markets for commodity, and here labour market implication particularly in terms of employment.

FDI and MNE operation play quiet and an important role in developing manufacturing in the

most economy as with FDI, not only investment flows into the most country but also a variety of

other assets including technologies.

Technology play a vital role in determining the production of manufacturing sector and hence

the role of FDI seems to be quite important. This paper tries to look into the importance of FDI

inflow in increasing the production of two high technology sector namely automobile and

electronic sector.

The major objectives of the paper are:

1. To study the performance and production growth of two high technology sector, Automobile

sector and electronic sector in the post reforms period (2001-2012).

2. To compare the growth rate of industrial production in two sectors in the post liberalization

era.

The paper is organized as follows: Section 2 reviews the existing literature in brief. Section 3

explains the database and methodology used for the purpose of analysis. Section 4, analysis the

paper and section 5, concludes the paper.

2. A brief review of Literature:

Bhagwati and Srinivasan (1975) estimated that a number of Indian manufactures adopted some

new changes in their production in the 2nd half of the 1960’s from foreign such as, aluminum die-

cast bodies instead of cast iron bodies, which resulted in a reduction of weight. Nevertheless, in

1970 the Electrical Manufactures Association reported that of 32 manufactures in the organized

sector and 170 in the small scale sector only 12 produced motors. Indian industry has 3 types of

2

research and development i.e. Quality control, Technical services, Material adaptation. He also

focused on the export and government policies. Bhat. (2014) focused on structural changes

which is occurred in Indian industry in recent year. The study suggests manufacturing sector is

the major engine of economic growth, as an export driver and in creating employment and

business opportunity. Over the years since linearization manufacturing output has diversified to

basic, intermediate and consumer durable and non-durable industry though the deceleration has

been sharp since the second half of 2008. A majority of the studies, including Goldar (2000 &

32004), Trivedi (2000), Goldar and Kumari (2003), and Das (2003), have found a fall in

productivity growth in the post-reforms period. They used some index such as Solow index to

study the growth rate. However it cannot be denied that since liberalization there has been a

quantities inflow of FDI across sector. With economic reforms there has been a splendid

production of manufacturing goods and a positive impact on labour productivity and capital per

worker (Hulten, 1999). Further Kiran and Kaur (2008) highlighted the change in growth

performance of registered manufacturing sector in India by analyzing value added, capital,

labour, partial productivity and total productivity of all Indian manufacturing. This paper

considers two high technology sector namely automobile and electronic as there has been

considerable inflow of FDI in these sector and electronic has been considered to be one of the

strategic sector to strengthen natural capabilities (Bhat, 2014).

3. Database and methodology:

This paper is descriptive in nature. We show the growth of manufacturing sectors and the paper

depends on secondary data. The data are collected from secondary online database of the

Government of India and different volumes of Economic survey. For the purpose of analysis we

have used tables to represent the data and simple diagrams (line and bar diagram) are used for

analyzing the data.

4. Analysis:

In this study we consider the electronic and automobile sector. We examine growth rate of both

the sectors during post 2000s (2001-2012). Automobile industry plays a very vital role in the

3

Indian Economy. Its connections with various other sectors of the economy make it an important

component of the economy. Electronic also considered in this paper as a major export component

in the Indian export basket.

4.1 Automobile Sector

The production of automobiles started in India since the 1940s and grew considerably since the

1970s. Joint ventures with foreign collaboration started in this industry in the mid-1980s and

accelerated after the initiation of economic reforms. The core group of Automobile Research and

Development (CAR) was set up in the year 2003 to identify priority areas in automobile industry

for Research and Development (R&D) in India.

The tables (1.1 to 1.3), there are 17 types of automobile goods. We show that total production of

those goods in different years. In 2001, the production of two wheelers (segment-Motorcycles)

was high and the production of two wheelers (Segment-Electric Two Wheelers) was nil. In this

year grant total of automobile production was 5316302 unit. . In 2002, the production of two

wheelers (segment-Motorcycles) was high and the production of two wheelers (Electric Two

Wheelers) was nil. In this year grant total of automobile production was 6279967 unit. . In 2003,

the production of two wheelers (segment-Motorcycles) was high and the production of two

wheelers (Electric Two Wheelers) was nil. In this year grant total of automobile production was

7243564 unit. In 2004, 2005 the production level was at similar to 2003. Total production of

these 2 years were 8467853 unit, 9743503 unit.

Table-1.1 PRODUCTION (UNIT) OF AUTOMOBILE SECTOR (2001-2005)

Category Segment 2001 2002 2003 2004 2005

Passenger

Vehicles (PVs) Passenger Cars 500301 557410 782562 960487 1046133

Passenger

Vehicles (PVs)

Multi-Utility

Vehicles 169418 165920 206998 249389 263167

Passenger

Vehicles (PVs)

Total Passenger

Vehicles (PVs) 669719 723330 989560 1209876 1309300

Commercial

Vehicles (CVs)

Passenger Carriers 20283 21156 27628 30419 28982

4

M & HCVs

Commercial

Vehicles (CVs)

M & HCVs Goods Carriers 76469 99346 138495 184388 190313

Commercial

Vehicles (CVs)

M & HCVs Total M & HCVs 96752 120502 166123 214807 219295

LCVs Passenger Carriers 14977 19821 20962 22619 25395

LCVs Goods Carriers 50779 63374 87955 116277 146393

LCVs Total LCVs 65756 83195 108917 138896 171788

Total

Commercial

Vehicles (CVs)

Total Commercial

Vehicles (CVs) 162508 203697 275040 353703 391083

Three Wheelers Passenger Carriers 170013 210454 245084 237413 286987

Three Wheelers Goods Carriers 42735 66265 111139 137032 147436

Three Wheelers

Total Three

Wheelers 212748 276719 356223 374445 434423

Two wheelers Scooter 937506 848434 935279 987498 1021013

Two wheelers Motorcycles 2906323 3876175 4355168 5193894 6207690

Two wheelers Mopeds 427498 351612 332294 348437 379994

Two wheelers

Electric Two

Wheelers NA NA NA NA NA

Two wheelers Total Two wheelers 4271327 5076221 5622741 6529829 7608697

Grand Total Grand Total 5316302 6279967 7243564 8467853 9743503

Source: www.data.govt.in


Category Segment 2006 2007 2008

Passenger Vehicles (PVs) Passenger Cars 1238032 1426212 1516967

Passenger Vehicles (PVs) Multi-Utility Vehicles 307202 351371 321626

Passenger Vehicles (PVs) Total Passenger 1545234 1777583 1838593

5

Vehicles (PVs)

Commercial Vehicles (CVs)

M & HCVs Passenger Carriers 32828 46542 40995


M & HCVs Goods Carriers 261438 248415 151288


M & HCVs Total M & HCVs 294258 294957 192283

LCVs Passenger Carriers 29443 33882 28635

LCVs Goods Carriers 196291 220167 195952

LCVs Total LCVs 225734 254049 224587

Total Commercial Vehicles

(CVs)

Total Commercial

Vehicles (CVs) 519982 549006 416870

Three Wheelers Passenger Carriers 385443 371060 417434

Three Wheelers Goods Carriers 170681 129600 79586

Three Wheelers Total Three Wheelers 556126 500660 497020

Two wheelers Scooter 943974 1074933 1161276

Two wheelers Motorcycles 7112225 6503532 6798118

Two wheelers Mopeds 379987 430827 436219

Two wheelers Electric Two Wheelers 30454 17389 24179

Two wheelers Total Two wheelers 8466640 8026681 8419792

Grand Total Grand Total 11087992 10853930 11172275



Category Segment 2009 2010 2011 2012

Passenger Vehicles

(PVs) Passenger Cars 1932620 2453113 2775124 2668633

Passenger Vehicles

(PVs) Multi-Utility Vehicles 424791 534183 370945 564928

Passenger Vehicles

(PVs)

Total Passenger Vehicles

(PVs) 2357411 2987296 3146069 3233561

6

Commercial Vehicles

(CVs) M & HCVs Passenger Carriers 46026 NA NA NA

Commercial Vehicles

(CVs) M & HCVs Goods Carriers 204145 NA NA NA

Commercial Vehicles

(CVs) M & HCVs Total M & HCVs 250133 344542 384801 278560

LCVs Passenger Carriers 34751 NA NA NA

LCVs Goods Carriers 281686 NA NA NA

LCVs Total LCVs 317423 408193 544335 553184

Total Commercial

Vehicles (CVs)


(CVs) 567556 752735 929136 831744

Three Wheelers Passenger Carriers 530203 NA NA NA

Three Wheelers Goods Carriers 88890 NA NA NA

Three Wheelers Total Three Wheelers 619194 799553 879289 839742

Two wheelers Scooter 1494409 2144765 2659340 3025014

Two wheelers Motorcycles 8444857 10527111 11982669 11904212

Two wheelers Mopeds 571070 704575 785523 791954

Two wheelers Electric Two Wheelers 2567 NA NA NA

Two wheelers Total Two wheelers 10512903 13376451 15427532 15721180

Grand Total Grand Total 14057064 17916035 20382026 20626227


Hence we see that production of two wheelers (segment-Motorcycles) was high from 2006 to

2012. In 2005, the production of LCVs (segment-Passenger Carriers) was at a low level and the

production of two wheelers (Electric Two Wheelers) was nil. In 2006, the production of LCVs

(segment-V Passenger Carriers) was at low level .i.e. its production was 29443 unit. In this year

total production was 11087992 unit. On the other hand, in 2007, 2008, the production of two

wheelers (segment-Electric Two Wheelers) was at a low level. In 2007, it was 17389 unit and

24179 unit at 2008. The total production of automobile was 80853930 unit on 2007 and

11172275 unit on 2008. In 2009, the production of two wheelers (segment-Motorcycles) was

high and the production of two wheelers (segment-Electric Two Wheelers) was at a low level. In

this year total production was 14057064 unit. The production of two wheelers (segment-

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Motorcycles) remained at a high level at 2010, 2011, 2012. During 2010 to 2012, we see that

there was no production of 7 types of automobile goods, they are Commercial Vehicles (CVs) M

& HCVs(segment-Passenger Carriers and Goods Carriers), LCVs (segment-Passenger Carriers

and Goods Carriers), Three Wheelers (segment-Passenger Carriers and goods carriers), Two

wheelers(segment-Electric Two Wheelers) respectively. And the grant total of these production

was 17916035 unit (2010), 20382026 unit (2011) and 20626227 unit (2012) respectively.

In table, 1.4, we show the percentage growth rate of automobile production. In 2010, the growth

rate was at a higher level compare to the others year .i.e. 27.45. On the other hand, in 2007, it

was -2.11, represent a deceleration of automobile production. The downward sloping curve

shows trend line. Hence we draw a bar diagram to understand these trend.

Table-1.4 GROWTH RATE OF AUTOMOBILE PRODUCTION

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Growth

rate (%) 18.13 15.34 16.9 15.06 13.79 -2.11 2.93 25.82 27.45 13.76 1.2

Source: Author’s calculation based on www.data.govt.in.

Figure-1.1: GROWTH RATE (%) OF AUTOMOBILE PRODUCTION

8

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-5

0

5

10

15

20

25

30

GROWTH RATE (%) OF AUTOMOBILE PRODUCTION

We find that automobile sector enjoyed the high growth rate till the mid-2006. But at the end of

the year, industry had to face the hard truth and witnesses the fall in sales and revenue. In

December 2007, overall growth in production fell into -2.11%. During this period, Global

recession has hit the Indian auto industry. India is a strong and growing industry but the impact

of recession is evident on industry as sales & growth of automobile companies have declined.

We find a downward trend line in the growth rate of production of automobile sector in spite of

many joint venture in this sector post 2010. However there might be nuances in this analysis is

conducted across sector.

There was also an inflationary pressure. A moderate amount of inflation is important for the

proper growth of an economy like India because it attracts more private investment. The increase

in the price of fuel and the steel due to inflation has led to as lower growth rate of these sector in

India. The effect of inflation has taken the rise in the price rate of the cars by 3-4% which in turn

increased the price of the raw materials to build those vehicles. Due to these causes, there was a

decreasing trend in automobile production.

From the table, 1.4 we find a downward trend in the production growth rate. India in this sector

has become is basically an assembler of path and not producing the final commodity. But with

FDI and the joint venture, India is being used an export platform, that is the reason why we find

an upward trend in export sector in spite of downward trend in growth sector which is shown in

table 1.5.

Table 1.5. EXPORT OF AUTOMOBILES IN INDIA (NO. OF VEHICLES)

Type of vehicles 2010 2011 2012 2013 2014Passenger Vehicles (PVs) 446145 444326 507318 554686 593507 Commercial Vehicles (CVs) 75009 74043 92663 79944 77056Three Wheelers 173214 269968 362876 303088 353392Two wheelers 1140058 1531619 1947198 1960941 2083938

9

Total 1804426 2319956 2910055 2898653 3107893Source: www.ijcrar.com.

Figure 1.2: EXPORT OF AUTOMOBILES IN INDIA (NO. OF VEHICLES)

2010 2011 2012 2013 20140

500000

1000000

1500000

2000000

2500000

Export of automobiles in India

Passenger Vehicles (PVs) Commercial Vehicles (CVs)Three Wheelers Two wheelers

Automobile industry plays a significant role in export in India. Table 1.5 displays the export

performance of the industry during 2010-2014.The export in this sector has grown mainly to the

export of cars, two/three wheelers. Export performance of the Indian Automobile Industry has

also exhibited steady growth for the period 2004-2005 to 2011-2012. We see that export of two

wheelers has an increasing trend compare to other vehicle. Exports of commercial vehicles and

three wheelers have declined the exports during the period 2012-2013. The Government has

decided to implement the National Automobile Testing and Research and Development

infrastructure project to improve the export.

Across sector growth in automobile:

Now we examine which production gave the highest production during this period among the all

automobile production. For simplicity we divide the whole period into two subdivision.

From the figures 1.3 and 1.4 we see that production of these goods sometimes remain same and

sometimes vary. In 2002, there was slow growth of passenger vehicle (PVS) than other sector of

automobile and in 2003 it was two wheeler. We can see that in 2008, the great depreciation

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occurred in the production of commercial vehicles (CVs) M & HCVs. This figure show their

exits downward trend in this sector.

Figure1.3: ACROSS SECTOR GROWTH IN AUTOMOBILE (2002-06).

2002 2003 2004 2005 20060

5

10

15

20

25

30

35

40

ACROSS SECTOR GROWTH IN AUTO-MOBILE (2002-2006)

Passenger Vehicles (PVs) Growth rate(%)

Commercial Vehicles (CVs) M & HCVs Growth rate(%)

LCVs Growth rate(%)

Total Commercial Vehicles (CVs) Growth rate(%)

Three Wheelers Growth rate(%)

Two wheelers Growth rate(%)

Figure1.4: ACROSS SECTOR GROWTH IN AUTOMOBILE (2006-12).

2007 2008 2009 2010 2011 2012

-40

-20

0

20

40

60

ACROSS SECTOR GROWTH IN AUTO-MOBILE (2007-2012)

Passenger Vehicles (PVs) Growth rate(%)Commercial Vehicles (CVs) M & HCVs Growth rate(%)LCVs Growth rate(%)Total Commercial Vehicles (CVs) Growth rate(%)Three Wheelers Growth rate(%)Two wheelers Growth rate(%)

11

That growth rate is negative which is greater than as experienced in 2012 in India. According to

the estimated data, the highest production growth was in LCVs in 2009 as shown in appendix

table 1.11 and 1.12. Hence we can conclude that Passenger vehicle and LCV had remained

continued its average growth during these year. The cause of these trend in these sector is

already mentioned above.

4.2 Electronic Sector:

Now we can focus on electronic production.

The Indian Electronics and IT Hardware sector has 6 key segments, namely Consumer

Electronics, Industrial Electronics, computer Hardware, Telecommunication Equipment,

Electronic Components, and Strategic Electronics. Electronic sector now has become a major

export component in the Indian export basket. There are various segments. They are as follows:-

Table 1.6: SEGMENT OF INDIAN ELECTRONIC SECTOR

Consumer

electronics

Industrial

electronics

Computer Communication

Strategic

Strategic

Electronics

Electronic

Component

Mobile

phone

UPS system Notebook Direct-to-

home(DTH)

Radars Semi-

Conductor

Device

TV SCADA Desktops Set Top

Box(STB)

Satellite based

Communicatio

n

Cathode Ray

Tube

Music

system

PLC Servers Internal

Security

System

Capacitor

AC Drive

systems

Disaster

Management

System

Picture

Tubes

Source: Export import bank of India, occasional paper no. 147.

12

India is also well known for software. But on the hardware front, the process is rather slow.

Already, 50 electronic manufacturing service providers are operating in India. It is said that, the

period from 1984 to 1990 was the golden period for electronic. India is a labour intensive

country. Due to this reason, labour cost is less in India then in United States or Western Europe

or any other capital intensive country.

From the two table (1.7 and 1.8), we can observe the different production level at different year.

In 2001, the production of Software for Exports was very high, .i.e. 28,350 unit and the

production of electronics component was at a low level i.e. 500 unit. The total electronic

production of these

Table- 1.7 PRODUCTION (UNIT) OF ELECTRONIC SECTOR (2001-2006)

Item 2001 2002 2003 2004 2005 2006

Consumer Electronics 11,950 12,700 13,800 15,200 16,800 18,000

Industrial Electronics 4,000 4,500 5,550 6,100 8,300 8,800

Computer Hardware 3,400 3,550 4,250 6,800 8,800 10,800

Communication & Broadcast

equipment 4,500 4,500 4,800 5,350 4,800 7,000

Strategic Electronics 1,750 1,800 2,500 2,750 3,000 3,200

Electronics Components 500 5,700 6,600 7,600 8,800 8,800

Software for Exports 28,350 36,500 46,100 58,240 80,180 1,04,100

Domestic Software 9,400 10,874 13,400 16,250 21,740 29,600

Total Production 68,850 80,124 97,000 1,18,290 1,52,420 1,90,300


Table-1.8 PRODUCTION (UNIT) OF ELECTRONIC SECTOR (2007-2012)

Item 2007 2008 2009 2010 2011 2012

Consumer Electronics 20,000 22,600 25,550 29,000 32,000 34,300

Industrial Electronics 10,400 11,910 12,740 15,160 17,000 18,700

Computer Hardware 12,800 15,870 13,490 14,970 14,970 16,500

Communication & Broadcast

equipment 9,500 18,700 26,600 31,000 35,400 40,500

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Strategic Electronics 4,500 5,700 6,800 6,980 7,700 8,500

Electronics Components 8,800 9,630 12,040 13,610 21,800 24,800

Software for Exports 1,41,000 1,64,400 2,16,190 2,37,000 2,68,610 3,32,445

Domestic Software 37,000 47,010 59,000 67,800 78,700 91,765

Total Production 2,44,000 2,95,820 3,72,450 4,15,520 4,76,180 5,67,510


year was 68850 unit. On the other hand, the production of Software for Exports remained at a

higher level and in these year the production of Strategic Electronics became fall. From this table

we can examine that the production of Software was at higher level at each individual year and

the production of Strategic Electronics also fell. The highest production was 567510 unit in

2012. From the table we find that consumer electronics, computer hardware, and software had

got a significant importance over these year.

In table, 1.9, we show the percentage growth rate of electronics production. In 2004, the growth

rate was at a higher level compare to the others year .i.e. 29%. On the other hand, in 2009, it was

12%, represent a sharp fall in electronics production.

Table-1.9 GROWTH RATE OF ELETRONICS PRODUCTION (2001-2011)

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Growth

rate

(%) 16 21 22 29 25 28 21 26 12 15 19

Source: Author’s calculation based on www.data.govt.in.

Hence we draw a bar diagram to understand these trend and there is also a downward trend.

There exists an increasing trend during 2001 to 2004. The share of electronics production in

India’s GDP has been growing over the years, with increasing importance of this sector. From a

share of 1.6% in India’s GDP in 2001-02, the share has increased to 1.95% in 2009-10. Global

recession was another cause of such deceleration on production of some sector that India had to

cover.

14

Figure-1.5: GROWTH RATE (%) OF ELETRONICS PRODUCTION

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

5

10

15

20

25

30

35

GROWTH RATE(%) OF ELETRONICS PRODUCTION

We find a downward trend line in the growth rate of production of electronic sector in spite of

many joint venture in this sector post 2010.

India basically collaborate with technically advanced countries such as USA, UK etc. Most of

electronics and automobile goods are supplied from those countries. That’s why sometimes our

demand increases but not the supply.

Majority of the electronics production in India is intended for the domestic market. Export

intensity of sales in electronics industry has grown in 2000s. However, there has been a marked

decline in the export intensity in the post-2008-09 to 2010 period and the growth in India’s

exports and imports of electronic goods had peaked in 2010-11. India is an exporter of a vast

range of electronic component and product for telecom product, electronic manufacturing

service, transmission and signaling equipment, entertainment electronics etc. Table 1.10 shows

the export projection of India.

Table 1.10: ELECTRONIC GOODS EXPORT PROJECTION (USD MILLION)

Sub sector

201

0 2011 2012 2013 2014

Consumer electronic 632 800 950 1150 1350

Telecom Equipments 164 2710 3500 4550 5800

15

4

Electronics Instruments 738 900 1050 1300 1600

Electronics

Components

204

5 2670 3300 4100 5050

Computer Hardware 401 600 700 900 1200

Total

546

0 7680 9500 12000 15000

Source: Report of the Working Group on ‘Boosting India’s Manufacturing Exports’

Figure 1.6: ELECTRONIC GOODS EXPORT PROJECTION

2010 2011 2012 2013 20140

1000

2000

3000

4000

5000

6000

7000

ELECTRONIC GOODS EXPORT PRO-JECTION

Consumer electronic Telecom Equipments Electronics Instruments Electronics Components Computer Hardware

From the figure 1.6, we see that the export remain high for Telecom Equipment and Electronic

component whereas export of Computer Hardware is quite less. India has a share of 1.44 per cent

in the world Electronics market estimated at US$ 1.8 Trillion. The growth of the electronics

manufacturing has sorely lagged behind Consumption. Important features of the strategy for

bolstering growth in electronics manufacturing include –

(a) change in strategy from ‘Design led Manufacturing’ to ‘Demand led Manufacturing.

(b) Promotion of export incentives to create an environment for electronic export.

(c) Policy to attract investment in setting up of ecosystem companies.

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Across sector growth in electronic:

Now we examine the across growth in electronics sector. The Indian electronics market is one of

the largest market in the world. According to current scenario, the market is projected to grow at

a compound growth rate (CAGR) of 24.4 per cent during 2012-2020. For simplicity we also

divide the whole period into two subdivision.

Figure- 1.7: ACROSS SECTOR GROWTH IN ELECTRONIC (2002-07)

-202060

100

ACROSS SECTOR GROWTH IN ELECTRONIC(2002-07)

2002 2003 2004 2005 2006 2007

Figure- 1.8: ACROSS SECTOR GROWTH IN ELECTRONIC (2008-12)

17

-400

4080

120

ACROSS SECTOR GROWTH IN ELECTRONIC

(2008-12)

2008 2009 2010 2011 2012

From the figure 1.7 and 1.8, we see that, in 2006, the growth of Communication & Broadcast

equipment was higher than other components of electronics. Whereas there was a negative

growth rate in 2009 in Computer Hardware. In particular, consumer electronics had emerged in

the 20th century and has now become a global industry worth billions of dollars in India. There

exists some problems which hampers the growth of Indian electronic industry. They are:

1. Lack of world class infrastructure.

2. Lack of clean-cut government policy for the industry.

3. Very little expenditure in Research and Development.

5. CONCLUSION:

Liberalizing FDI was one of the important policies taken up by the Indian Government for the

manufacturing sector. Since liberalization, there has been huge inflow of foreign direct

investment (FDI) across sectors in Indian manufacturing. The increased investment access to

frontier technology, it is expected that the high technology industries would benefit in terms of

production as well as exports. This paper focuses on two high technology sectors namely

automobile and electronics. This study reveals that basically, India has emerged as Asia’s fourth

largest exporter of automobiles, behind Japan, South Korea and Thailand. Starting from the two

wheelers, trucks, and tractors to the multi utility vehicles, commercial vehicles and the luxury

18

vehicles, the Indian automobile industry has achieved a wonderful achievement in the recent

years. On the other hand, all electronic items are freely importable in India. For more

development in electronic sector, several steps have been adopted by the government. India has

been experiencing a strong growth in the demand of consumer products and durables in recent

years, driven by consumer demographic trends. This has also facilitated growth in the electronics

sector both directly and indirectly.

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www.data.gov.in accessed on 25th Dec, 2015, at 12:15:23 p.m.

www.elibrary.worldbank.org accessed on 27th Dec, 2015, at 5:10:12 p.m.

www.mostlyeconomics.wordpress.com accessed on 31st Jan, 2016, at10:15:23 a.m.

www.eximbankindia.in accessed on 2nd Feb, 2016, at 12:15:24 p.m.

www.planningcommission.gov.in accessed on 11nd Feb, 2016, at 04:10:20 p.m.

APPENDIX

Table- 1.11 Growth in individual Automobile sector (2002-2007)

Category Segment 2002 2003 2004 2005 2006 2007

Passenger Vehicles (PVs)Growth

rate (%) 8 36.8 22.26 8.22 18.0215.04

Commercial Vehicles (CVs) M &

HCVs

Growth

rate (%)24.55 37.86 29.3 2.09 34.18 0.24

LCVsGrowth

rate (%)26.52 30.92 27.52 23.68 31.4 12.54


(CVs)

Growth

rate (%)25.34 34.98 28.6 10.56 32.95 5.58

Three WheelersGrowth

rate (%)30.07 28.73 5.11 16.01 28.01 -9.97

Two wheelersGrowth

rate (%)18.84 10.77 16.13 16.52 11.27 -5.19

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http://www.eximbankindia.in/

Table 1.12: Growth in individual Automobile sector (2008-2012)

Category Segment 2008 2009 2010 2011 2012

Passenger Vehicles (PVs)Growth

rate (%)3.43 28.22 26.72 5.31 2.78

Commercial Vehicles (CVs) M &

HCVs

Growth

rate (%)-34.8 30 37.74 11.68 -27.6

LCVsGrowth

rate (%)-11.59 41.33 28.59 33.35 1.62

Total Commercial Vehicles (CVs)Growth

rate (%)-24.06 36.14 32.26 23.43 -10

Three WheelersGrowth

rate (%)-0.72 24.58 29.13 9.97 -4.49

Two WheelersGrowth

rate (%)4.89 24.86 27.23 15.33 1.9

Table 1.13: Growth in individual electronic sector (2002-2007)

Item 2002 2003 2004 2005 2006 2007

Consumer

Electronics 6.27 8.66 10.14 10.52 7.14 11.1

Industrial

Electronics 12.5 23.33 9.9 36.06 6.02 18.18

Computer

Hardware 4.36 19.71 60 29.41 22.72 18.51

Communicatio

n & Broadcast

equipment 0 6.66 11.46 -10.28 45.83 35.71

Strategic

Electronics 2.86 38.89 10 90.91 6.67 40.62

Electronics 15.79 15.15 15.78 0 0

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Components

Software for

Exports 28.75 26.3 26.33 37.67 29.83 35.44

Domestic

Software 15.68 23.23 21.27 33.78 36.15 25

Table 1.14: Growth in individual electronic sector (2008-2012)

Item 2008 2009 2010 2011 2012

Consumer

Electronics 13 13.05 13.5 10.34 7.18

Industrial

Electronics 14.52 6.97 11.14 12.13 10

Computer Hardware 24 -14.99 10.97 0 10.22

Communication &

Broadcast equipment 97

42.24 16.54 14.19 14.4

Strategic Electronics 27 19.29 2.64 10.31 10.38

Electronics

Components 9

25.02 13.03 60.17 13.76

Software for Exports 17 31.5 9.62 13.33 23.76

Domestic Software 27 25.5 14.91 16.07 16.6

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