The Pattern of Industrial Location in India under Liberalization: An Analysis of the Organized Manufacturing Industries

Abstract

The economic liberalization policy initiated since the early 1991 has made large-scale delicensing of industry and changes in the industrial location policies, and thus, curtailed the role of the state as industrial owner and location regulator. With the increasing dominance of private sector in industrialization under liberalization it is expected that industries will be more spatially concentrated in the leading industrial regions. However, the neoclassical principle suggests that in the long run "divergence is followed by convergence". This is in contrast with the theory that raises the question about the regional industrial development in India under the two policy regimes. The main objective of the paper is to examine what happened to the location concentration of industries across the states in the post-liberalization period in India, and thus, understands the influence of economic liberalization on industrial location. This has been examined with the employment data of organized manufacturing sector for the pre- and post-reform periods by: first, looking at the trend of regional concentration of industries over the years, and second, looking at the regional industrial structure and the industrial diversification of regions during the pre- and post reforms periods. The findings suggest that concentration of industries has increased in the post liberalization period in India and the tendency to catch up the industrially developed states is hardly seen among the backward states.

Keywords: Industry, Location, Liberalisation, India