ABSTRACT
The trajectory of manufacturing growth in India has been a subject of scrutiny and intense debate.1 Equally important has been the attempts to locate the proximate and ultimate sources of its growth. Changes in policy environment, ability to attract factor inputs and its efficient utilization have been central to such analysis. However, majority of such studies has examined economy wide trends or industry wide patterns.2 As manufacturing activity in India has region specific characteristics and is subjected to a number of state level legislations, regional analysis assumes importance. However, only limited attempts exist on regional industrial growth in India, especially in the wake of changes in economic policies since 1991.3
The 1990s represent a paradigm shift in India’s economic policy making. The period witnessed significant changes in trade and industrial policies opening more avenues for private initiatives in the economy signaling a departure from the state-directed planned industrialization. The policy changes involved a concerted effort to integrate India with the rest of the world, by liberalizing trade, which could be classified into two broad groups: i) those which were intended to reduce domestic distortions and ii) those intended to ease trade with the rest of the world. The rationale for import liberalization by way of reduction in tariff rates and a movement away from the quantitative restrictions was to bring cost reduction via lowering the prices of intermediate inputs and to enhance competitiveness of the final products. Controls via quantitative restrictions which accounted for 90 per cent of items in the pre-1991 era, decreased dramatically to 51 per cent even as early as in 1994-95 (Joshi and Little, 1996). Along with this movement away
from quantitative restrictions there were also substantial reductions in the tariff rate, from 77 per cent in 1989-90 to 29 per cent in 2005-06 (Kathuria et al. 2011).
