Pattern Analysis of Heavy Industries

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Introduction

Heavy industries relates to a type of business that typically carries a high capital

cost (capital-intensive), high barriers to entry and low transportability. The

term "heavy" refers to the fact that the items produced by "heavy industry"used to be products such as iron, coal, oil, ships, etc.

Another trait of heavy industry is that it most often sells its goods to other

industrial customers, rather than to the end consumer. Heavy industries tend

to be a part of the supply chain of other products. As a result, their stocks will

often rally at the beginning of an economic upturn and are often the first to

benefit from an increase in demand.

Pattern analysis of heavy industries in India

In year 2001Capital Goods recorded a growth rate of 1.8 per cent as comparedto 7.5per cent recorded in the corresponding period of last year.

In year 2002 the overall Industrial growth, and by sectors and classes alsosuggest an all Around Slowdown in industrial activity. , registered a significantlylower growth rate of 5.0 per cent in 2000-01 compared to a growth rate of 6.7per cent in 1999-2000.The performance in capital goods in the current year

(April-December 2001-02) decelerated sharply, recording a decrease of4.8 percent compared with a growth rate of 3.0per cent recorded in thecorresponding period of last year

In year2003 growth in capital sector was in state of recovery there are 5constraints which enhance the overall industrial sector reservation of SSI, highcustoms tariffs, relaxation in labor laws, competion in market, distortions inindirect taxes laws etc.

In 2004 The significant growth acceleration in capital goods production to 13.3per cent in April-December from 10.1 per cent in the same period of theprevious year indicates a possible step-up in investment activity. Machinery andequipment, with a growth rate of 21.9 percent, remained the major contributorto the impressive growth in the capital goods sector


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In year 2005 The double-digit growth since 2003-04 in capital goods sectorindicates the capital formation taking place in the industrial sector, which canhelp in strengthening the upswing. Industrial buoyancy is expected to

continued using the remaining period of 2004-05 with the strong growth ofmachinery and equipment sub-sector (21.9 per cent during April-December)and the major components of nonoil imports like machinery and other inputsThe strength and robustness of industrial growth during the current financialyear are particularly striking in the light of the shocks like Tsunami, a deficientmonsoon and a third oil shock. Such resilience in the midst of resurgence is notjust a matter of good fortune; but also a response to the reforms andmanifestation of the sound fundamentals of the economy. The strong andpositive outlook of both foreign and domestic investors indicates that India is

ready for the big push as the growing interest of foreign investors is coincidingwith the rising confidence of domestic private investors. The increasingefficiency and competitiveness of domestic producers, liberalised trade, andderegulated interest rate regime are critical contributors to both growthacceleration and macro-economic stability.

In year 2006 high growth in the industrial sector continued for the third year insuccession. Capital goods maintained a steady increase in its rate of growthduring 2004-05.The sector is poised to increase its rate of growth further

during the current year.

In year 2007 The expected overall annual growth of industry in the Tenth Planperiod (2002-2007)at around 8.7 per cent is likely to be short of the targetedgrowth rate of 10 per cent for the Plan period Capacity additions throughinvestment is critical for accelerating growth in industry. The investmentscenario looks quite optimistic , particularly with rising domestic savings ratesand FDI inflows. Sustained economic growth, fiscal consolidation and anenabling policy environment will continue to provide incentive to capacity

addition in industry and sustain high growth. There are a number of positivedevelopments that brighten the industrial outlook in the medium term. First,there has been a commendable growth in the capital goods sector, especiallyin industrial machinery, which, along with strong imports of capital goods,augurs well for the much required industrial capacity addition. Secondly, theinherent strength of industrial corporates, manifested in the increase in profits


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and profitability and strong investment plans, Confirms the strength of thegrowth prospects in the medium term. Thirdly, the high investment plans madefor infrastructure during the Eleventh Five Year Plan are expected to graduallyalleviate the infrastructural constraints to industrial development. Moreover,

the bourgeoning direct investment in flows in the liberalized investmentregime supplements the domestic investment to a great extent

In year 2009the growth of the industrial sector started to slowdown in the firsthalf of2007-08, the overall growth during the year remained as high as 8.5 percent. The industrial sector witnessed a sharp slowdown during 2008-09 as aconsequence of successive shocks, the most important being the knock-oneffects of the global financial crisis. The pace of slowdown accelerated in thesecond half of 2008-09 with the sudden worsening of the international

financial situation and the global economic outlook. The year 2008-09 thusclosed with the industrial growth at only 2.4 percent as per the Index ofIndustrial Production (IIP).

In year 2008 cyclical slowdown in the industrial sector that began in 2007-08got compounded by the twin global shocks in 2008-09. The effects lingered onbriefly in the current fiscal; but growth rebound is amply evident. Given the sizeof the Indian market and the unmet demand for industrial products, coupledwith the fact that the overall GDP has started to exhibit growth momentum,

there is reasonable hope that demand would not by itself be a constrainingfactor. Besides, despite the significant step-up in the Government borrowingprogramme, domestic financial market and external resource flows have giventhe impression that raising investible resources would not be a major problem.All these factors, combined with the inherent strength of industrial corporatesexemplified by the resilience shown by them against adversities in the recentpast brighten the industrial outlook in the medium term.9.101 The emerginginvestment picture is yet to become clear. Growth in the production of capitalgoods is improving, but different components of the capital goods group

have shown a mixed picture during the current year so far. In any case, growthin the indigenous production of capital goods cannot by itself be used tocomment on investment and capacity expansion, because, there has, of late,been significant growth in imported capacity addition.


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In year 2009the growth of the industrial sector started to slowdown in the firsthalf of2007-08, the overall growth during the year remained as high as 8.5 percent. The industrial sector witnessed a sharp slowdown during 2008-09 as aconsequence of successive shocks, the most important being the knock-on

effects of the global financial crisis. The pace of slowdown accelerated in thesecond half of 2008-09 with the sudden worsening of the internationalfinancial situation and the global economic outlook. The year 2008-09 thusclosed with the industrial growth at only 2.4 percent as per the Index ofIndustrial Production (IIP).

In year 2010 continued buoyancy in corporate sales, comparatively highercredit flow to industry, larger number of investment intentions across all major

industries and States, accelerated growth in some sectors, and robustmerchandise exports so far are likely to sustain industrial activities in theremaining months of the financial year. Over the medium to long term, tosustain double-digit output growth and reduce the vulnerabilities of the sector,there is need to put in place a policy framework for embarking on anotherround of multifaceted reforms.


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Trend of IIP

Year Growth y-o-y(capital intensiveindustries )

2001 1.82002 -3.42003 10.5

2004 13.62005 13.9

2006 15.82007 18.2

2008 7.02009 7.7

2010 13.95SOURCE: ECONOMIC SURVEY

INTERPETATION

In year 2001 Growth of capital intensive industries has gone down significantly

due to industrial slow down; however it has recovered in consecutive years due

to planned policy changes i.e. relaxation. Again in 2008 IIP witnessed a slow

down due to the global economic crises however it has been recovering

gradually.

-5

0

5

10

15

20

2001 2002 2003 2004 2005 2006 2007 2008 2009

IIP GROWTH(Capital intensiveindustries)

IIP GROWTH(CAPITAL

GOODS)


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REFERENCES

WWW.INDIABUDGET.NIC.IN

WWW.INVESTOPEDIA.COM
http://www.indiabudget.nic.in/http://www.investopedia.com/http://www.investopedia.com/http://www.indiabudget.nic.in/


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TERM PAPER

(ACM-955)

ON

PATTERN ANALYSIS OF HEAVY INDUSTIAL

SECTOR

SUBMITTED TO:

DR. saurabmani

SUBMITTED BY:

Ishan shanker

M.phil 1st sem

DAYAL BAGH EDUCATIONAL INSTITUTE, AGRA

(DEEMED UNIVERSITY)

APRIL-2013

Pattern Analysis of Heavy Industries

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