Latest Working Papers
WP221: Special Economic Zones: Location and Land Utilisation, Surya Tewari, March 2020
Abstract:?The study examines the issue of utilization of land in Special Economic Zones (SEZs) in the light of the fact that land utilization of existing SEZs is about 37 per cent at the national level. Low proportion of functional SEZs, de-notification of notified SEZs, notification of new SEZs coexist. Since India is a land-starved country, any underutilization of land public or private waste of the scarce resource. The study, therefore, focuses on understanding the use of land in SEZs across the states, sectors and type of promoters (private and government). Much of the analysis is based on cross tabulation and GIS mapping technique.
WP220: Import Intensity of India’s Manufactured Exports – An Industry Level Analysis, Mahua Paul & Ramaa Arun Kumar, February? 2020
Abstract: India opened up her domestic market to global competition in early 1990s, however, it was in the early 2000s that the trade dynamics gained momentum with India actively entering into free trade agreements, both regionally and bilaterally. The period between 2000-01 and 2017-18 witnessed a surge in imports from $ 50 billion to $ 384 billion, respectively.?One of the fallouts of?import liberalisation policy was internationalisation of the production process. Import intensity of exports based on input-output tables for various years till 2013-14 reveals that rise in imported inputs in the export sector did not have a positive impact on exports. Secondly, the impact of these imported inputs led to a rise in the demand for skilled labour than the abundant less skilled labour that India possesses. In future trade negotiations, the heterogeneity of Indian industry?should be an important consideration while negotiating trade deals to enable greater imports of intermediate inputs necessary to boost the productivity of exporting firms. The Industrial Policy needs to ensure that value addition from labour-intensive technology in the export sector gets a boost in order to absorb the vast labour force in India.
WP219: Industrial Structure, Financial Liberalisation and Industrial Finance in India, Santosh Kumar Das, January 2020
Abstract: The critical role of finance in industrial development is well established. Given its importance, historically financial policy as an instrument of industrialization has been designed and adopted as per the needs by countries all over the world to achieve faster rates of industrialization. In India, inadequate finance in terms of availability and access has been identified as one of the key impediments to industrial development. It was perceived that the underdeveloped financial sector due to state control was the primary reason behind unavailability of adequate financial resources for industrial sector. Financial liberalisation was argued to be the appropriate policy measure as it will transform the financial sector with expanded market, players and instruments that will fulfil the financial needs of the industrial sector. In this context, the study has attempted to explore the impact of financial liberalization on industrial development in India by analysing, first, whether financial liberalization has succeeded in removing credit constraint on the Indian industry and second, how relevant the Development Finance Institutions (DFIs) are for industrial development in post reform period? We found that not only financial liberalization has not succeeded in removing financial constraints for industrial development in India, but also it underlines growing asymmetries between the financial and industrial structures. The financial structure that emerged in the post reform period is not aligned as per the needs of the industrial sector, which is diverse in terms of its financial requirements. We also found that there has been a failure to create a market based approach to the long term financial needs of the industry. In the absence of a robust corporate debt market, it is prudent to allow DFIs play a greater role rather letting banks being burdened up with long term lending which is not their mandate.
WP218: India and Indusrty 4.0, T.P. Bhat, January 2020
Abstract: The term “industry 4.0” refers to the Fourth Industrial Revolution. It is the age where “smart devices” will assume major control over manufacturing and distribution machinery. In industry 4.0, physical objects are being seamlessly integrated into the information network. Enterprises are applying innovative solutions through new technologies such as internet of things (loT), miniaturisation, cloud computing, artificial intelligence (AI), 3D printing, robotics, autonomous vehicles, nanotechnology, biotechnology, material science, energy storage, and quantum computing. These technology applications would enhance total factor productivity and improve competitiveness.
India did not perform well during the first two industrial revolutions. However, India befitted to some extent during the Third Industrial Revolution due to access to technology, rise in connectivity, and spread of computer power. It is essential that India equips itself to avail the benefits of the ongoing Fourth Industrial Revolution. Despite the IT sector’s progress and advancement in space technology, India remains a base of unskilled and semi-skilled labour. The Make in India programme aims to induct new technologies and convert the country into a new manufacturing hub.
India has made some progress towards inducting new technologies in various sectors. Digitalisation is taking place in a number of industries; however, the penetration level varies according to sector requirements. Some sectors have started experimenting with the idea of connected factory at shop floors and assembly lines. The capital-intensive industries require high-skilled labourers such as the automotive industry. This industry is at the forefront of adoption of key elements of Industry 4.0. Many automotive industries adopted key components of Industry 4.0 such as robotics. The robot density of the Indian automotive industry is 58 per 10,000 employees. Additionally, some of the automotive original equipment manufacturers (OEM) and auto component manufactures are using additive manufacturing/3D printing in their R&D centres to develop prototypes. Besides, a few textile and packaging industries have adopted Industry 4.0 technologies. Many firms are warming up to the idea of connected machines. Industry 4.0 concentrates on end-to-end digitisation of all physical assets and their integration into the digital ecosystem with value chain partners. In essence, the paradigm is about integration.
The mega trends of technology will transform the Indian job market landscape. The process of globalisation, adoption of exponential technologies, and demographic changes are making an impact on the job market. Some experts are of the view that the use of industry 4.0 technologies, particularly automation, will result in job loss. Others observe that it will not result in job loss but may also not increase employment. It is apparent that in India’s case there will be job loss because of the newly emerging occupations which will require higher levels of skill. But, in the short term, jobs will be lost. This assumption is based on the study of five sectors, namely IT-BPM (Business Process Management), Automation, Textiles and apparel, BFIS (Banking, Finance, Insurance and Securities), and Retail.
There will be a change in the job profile of the country. A change in the job market will give rise to a new model of employment, which will be termed as “employee entrepreneur.” It will include: 1) freelance workers – online platform models, 2) “Uber” workers, 3) small and medium enterprise and artisan entrepreneurs on e-commerce platforms, 4) delivery workers and service providers in the e-commerce ecosystem, and 5) employees in tech start-ups.
There are a few industrial sectors in India which have high potential for creating new jobs by deploying Industry 4.0 technologies. These are healthcare, education, construction, transportation and logistics, and tourism and hospitality.
In order to make progress under Industry 4.0, collaboration between stakeholders—specifically industry, government, and academic institutions—is crucial. Massive effort is needed to educate and train workers.
WP217: Review of Industrial and Development Corridors in India, Hariharan Ramachandran, December 2019
Abstract: India, five planned corridors have been proposed. All though each of these passes through several states, the capacity of different states to take advantage of opportunities offered by the corridor varies substantially. The corridors are: Delhi-Mumbai Industrial Corridor (DMIC); Bengaluru-Mumbai Economic Corridor (BMEC); Chennai-Bengaluru Industrial Corridor (CBIC); Visakhapatnam-Chennai Industrial Corridor (VCIC); and Amritsar-Kolkata Industrial Corridor (AKIC).?The corridors are at different stages of implementation; of the proposed five corridors, some such as the DMIC and CBIC corridor are in the early phase of implementation, whereas others are at or just out of the concept stage. Although the corridor development may be perceived as a single initiative, it is not a single project. It is a complex combination of many projects that are initiated at various points of time with different durations in the influence area of the corridors. Economic hubs planned on the corridors are important drivers of regional development. It is not clear what specific advantages accrue by vesting the responsibility of developing both corridors and economic hubs in a Corridor Authority. The issues discussed in this paper draw largely from the DMIC, and include the following: (a) corridors as instruments of aiding the suction process and as instruments of regional development; (b) land acquisition and direct purchase of land by the investor; and (c) combining development of industrial hubs with urban development.
WP216: Economic Reforms and Market Competition in India: An Assessment, Beena Saraswathy, December 2019
Abstract: The announcement of New Industrial Policy in July 1991 marked a paradigm shift in the overall macroeconomic policies followed in India from greater control and regulations to the free play of market forces. Subsequently, there has been a paradigm shift in the competition regulation in India, with the establishment of Competition Commission of India (CCI). The underlying motive behind the regulatory changes has been to increase competition in all spheres of economic activities. Given this background, the present study intends to assess whether the changes in policy regimes could bring out the desired output in terms of increased competition in various spheres of the manufacturing sector. Specifically, our interest is to assess market competition across various sub-sectors in the manufacturing sector, which are important from the consumers’ point of view and to identify the areas of concern for vigilant policy implementation. Using multiple indicators of concentration, the study found that despite the increase in competition across various sub-sectors, concentration levels remain high for many sub-sectors. High levels of concentration noticed in seven out of 29 sub-sectors studied and in another three high-moderate concentration level noticed.
WP215: Financial Risk Protection from Government-Funded Health Insurance Schemes in India, Shailender Kumar, November 2019
WP214: Outward FDI from India: Review of Policy and Emerging Trends, Reji K. Joseph, November 2019
Abstract: The policy regime governing India’s outward FDI (OFDI) has undergone major changes in the last one and a half decades period. This paper aims to map the changing policies on OFDI since 1960s. It also aims to capture major trends in India’s OFDI in the last one decade. It is found that liberalisation of OFDI by doing away with blanket ceiling and linking outward investment to net worth of the investors have majorly boosted OFDI from India.? Rising OFDI from India is characterised by growing significance of services in OFDI – it has overtaken manufacturing sector as major OFDI originating sector. Developing countries are the leading destination for services OFDI. In services of various levels of knowledge intensity – knowledge intensive services and less knowledge intensive services – developing countries outpace developed countries as destination countries. But in the manufacturing sector OFDI, a clear distinction can be drawn on destination, depending on whether the investors belong to high-tech or medium-tech manufacturing sectors. Much of the OFDI originating from high-tech manufacturing sectors is destined to advanced countries whereas OFDI from medium tech industries is focused largely on developing countries.
WP213: Structural Asymmetry in Global Production Network: An Empirical Exploration, Satyaki Roy, October 2019
Abstract: The spatial and functional unbundling of production has been facilitated by removal of trade barriers, reduction of transaction costs effected through communication technology, creating opportunities for developing countries to specialize in tasks required for final products. This has increased participation of developing countries such as India in the global production process. However increased participation has been accompanied by declining share of domestic value added in gross exports and rise in foreign contribution to exports. This paper empirically explores the net gain of various advanced and developing countries including India and argues that unit price of inputs and intermediate goods supplied by the developing countries tend to decline over time. The share of manufacturing and standard services has been the lowest in global value added that explains the sad spots in the smile curve. The paper finally argues that global production network is embedded in an asymmetric architecture of institutions that support an asymmetric distribution of rents.
WP212: Assessing Factor Proportions in Tradable Sectors of the Indian Economy, Anjali Tandon, October 2019
Abstract: The basic motivation of this work is to find how the sector-wise factor proportions are placed in an open and market driven economy. Literature emphasises a greater relevance of factor proportions in resource allocations for economic activity as compared to intersectoral linkages. However, the measurement of factor requirements is, prima facie, based on direct factor proportions, and can be misleading due to the its partial nature of assessment. Working with the Semi-Input-Output Model provides an advantage to distinguish between tradable and non-tradable sectors while also including the indirect factor use. The analysis confirms an underestimation of factor proportions, if only the direct factor usage is taken into consideration. It also provides a benchmark for comparison of the sector-wise factor proportions. It is insightful to note that most tradable sectors have higher capital coefficients than the corresponding labour coefficients, underscoring stronger than expected capital requirements.