Impact of Colonial Liberalization on the Indian Steel Industry
After Indian independence, the domestic industries enjoyed considerable protection. But at the end of 80’s, severe economic crisis created in India. At that juncture New Economic Policies popularly known as Economic Liberalization / Globalization adopted to get rid of that situation. But a lot of confusion created regarding the effect of globalisation on India. The objective of this study is to assess the impact of globalisation on India mainly on steel industry with empirical, statistical, & analytical approaches and a comparative study between pre-liberalisation regime and global scenario. “Steel” is chosen as it is considered to be the backbone & crucial to the development of modern economy.
The New Economic Policies (abolition of licensing, decontrol of price, disinvestment of public share, reduction in custom duty, liberalise Ex-im policy etc.) brought a radical transformation in the Indian steel industry. A remarkable positive growth rate is observed in production of finished–steel in the post-liberalisation regime, which is much higher than global growth rate and pre-liberalization regime. Same thing is reflected in consumption pattern. More Indian steel producers becomes more competitive in terms of productivity and techno-economic parameters in globalize era. India becomes net exporter from a net importer country. Acceleration in Indian steel production in the post-liberalisation era was mainly due to entry of the new green field units from private sector, whose share is now 58% of total production. That has been possible only due to abolition of licensing.
Not only empirical findings but also econometric estimation and analysis have been done to assess the impact related to changes in factor productivity, pattern of inputs substitution, technical progress, and efficiency of factors. The result of partial factor productivity with the help of Spline-function analysis shows that labour productivity has grown in a higher rate in the post-liberalisation period that might be the result of the process capital deepening, the increasing use of capital per unit labour etc. But for the same span of time growth rate of capital-productivity followed a downtrend.
The result of the total factor productivity analysis considering Translog, Solow and Kendrick Index shows that in the post liberalisation period T.F.P. indicate a significant higher growth rate. Consumption of steel has grown remarkably with Cumulative Average Growth Rate of 8.45%, where the CAGR for Japan, USA, Germany and China was 0.02, 0,01, 0.02. 10.90% respectively.
Before liberalisation India was net-importer country, but now becomes net-exporter. In 1991-92 total import & export of steel was 1.49mt & 0.373mt, which has increased to 1.58mt & 5.92 mt in 2003-04.
Not only that’ in the post liberalisation phase India is enjoying comparative steel scenario in certain factor like employment cost, raw material cost even some operating cost.
Though the growth of steel sector was remarkable but total employment generation in this sector was not satisfactory. In 91-92 total employment was 398434 and production was 14.33 mt but in 2003-04, 364801 employees produced 36.1 mt steel. So it clearly reflects the improvement in labour productivity.
Considering all these factors, undoubtedly it can be concluded that the over all impact of liberalisation on Indian Steel Industry is positive. Today Indian economy is growing at a rate of 7.8% of GDP; definitely it becomes possible with the positive and high growth rate of core sector like Steel.
-DEBDAS KARMAKAR
University of Burdwan, India.
