Madhya Pradesh’s Industrial Sector
Structure and Performance
T
120000 125000 130000 135000 140000 1996-1997-1998-1999-2000-2001-2002-2003-Number of FactoriesAll-India 97 98 99 00 01 02 03 04 Year
0 1000 2000 3000 4000 5000 Number of FactoriesMP 1996-1997-1998-1999-2000-2001-2002-200397 98 99 00 01 02 03 04
Year Year
0 10000000 20000000 30000000 40000000 50000000 Fixed Capital(in Rs lakh)All-India 
0 500000 1000000 1500000 2000000 2500000 3000000 Fixed Capital(in Rs lakh)MP 1996-1997-1998-1999-2000-2001-2002-200397 98 99 00 01 02 03 04 Year
No of WorkersNo of Workers
6000000
4000000
2000000
All-India 10000000
8000000
6000000
4000000
2000000
All-India Gross Fixed Capital
Gross Fixed Capital
Formation (in Rs lakh)
Formation (in Rs lakh)
0
1996-1997-1998-1999-2000-2001-2002-2003
1996-1997-1998-1999-2000-2001-2002-2003
97 98 99 00 01 02 03 04 9798990001020304 Year Year
y
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 100000
500000
400000
300000
200000
100000
0 MP
MP Year 1996-1997-1998-1999-2000-2001-2002-2003
0 5000000 10000000 15000000 20000000 25000000 Net Value Added(in Rs lakh)All-India 97 98 99 00 01 02 03 04 Year
1996-1997-1998-1999-2000-2001-2002-200397 98 99 00 01 02 03 04
Year
1996-1997-1998-1999-2000-2001-2002-200397 98 99 00 01 02 03 04 Year
0 200000 400000 600000 800000 1000000 1200000 Net Value Added(in Rs lakh)MP Value of Total Output (in Rs lakh)
50000000
All-India 30.000
25.000
20.000
15.000
10.000
5.000
All-India MP 1996-1997-1998-1999-2000-2001-2002-20030.000
Net Value Added per Output per WorkerWorker (in Rs lakh) (in Rs lakh)
97 98 99 00 01 02 03 04 1996-1997-1998-1999-2000-2001-2002-2003-Year
97 98 99 00 01 02 03 04 Year
5000000
4000000
3000000
2000000 1000000 0
MP 4.000
3.000
2.000
1.000
0.000
1996-1997-1998-1999-2000-2001-2002-2003-All-India MP 1996-1997-1998-1999-2000-2001-2002-2003
97 98 99 00 01 02 03 04
Year
97 98 99 00 01 02 03 04 Year
0.000 20.000 40.000 60.000 80.000 100.000 Workers per FactoryAll-India MP Year
0.000 100.000 200.000 300.000 400.000 500.000 600.000 700.000 Fixed Capital perFactory (in Rs lakh)All-India MP 1996-1997-1998-1999-2000-2001-2002-200397 98 99 00 01 02 03 04
Year
0.000 2.000 4.000 6.000 8.000 10.000 Fixed Capital perWorker (in Rs lakh)All-India MP 1996-1997-1998-1999-2000-2001-2002-200397989900 01020304
Year
0.000 0.050 0.100 0.150 0.200 0.250 0.300 Net Value Added perOutput (in Rs lakh)All-India MP 1996-1997-1998-1999-2000-2001-2002-200397 98 9900 0102 0304
Year
0.000 0.100 0.200 0.300 0.400 0.500 0.600 0.700 Fixed Capital perOutput (in Rs lakh)All-India MP 1996-1997-1998-1999-2000-2001-2002-200397 98 99 00 01 02 03 04
Year
Economic and Political WeeklyFebruary 3, 2007375attributedto the general improvement in the quality of invest-ment. The declining trend in the capital-output ratio can also beattributed to a shift in the composition of the manufacturing sectortowards less capital-intensive products or processes.VSmall-Scale Sector in Madhya PradeshSmall-scale industry occupies an enviable position in India’sindustrial scene, contributing around 40 per cent of manufac-turing sector output, 36 per cent of merchandise exports andproviding gainful employment to 18 million people [SIDBI2000], the second largest employer after agriculture.To address various issues, typical of small-scale business, suchas enabling small firms to upgrade their technology, modernise,compete, and meet the requirements of global standards, thedefinition of the small-scale sector in the country has evolvedover time. Today, this sector covers a wide range of categories,such as small-scale industries, ancillary industries, tiny enter-prises, women entrepreneurs’ enterprises, small-scale service andbusiness enterprises (SSSBE), and cottage industries, within itsdomain.Every state makes its own effort to develop its small-scalesector, comprising both modern and traditional industries, de-pending on how significant a role it plays in the state economy.Over a period of time, every state has developed its own tra-ditional strength in small-scale industries. The sources of thestrength and evolution of this sector have largely depended uponthe type of raw materials locally available, local entrepreneurialcapabilities, traditional skills and craftsmanship, the base of localinfrastructure, support facilities in the form of credit, marketing,etc, and finally the political will to implement the policy measuresinitiated at various levels from time to time.Table 2 shows the drastic difference in figures on the numberof small-scale units registered/established, capital invested, andnumber of persons employed in the small-scale sector in twoblocks of years: before and after the bifurcation of MadhyaPradesh.We did not attempt to make time-period-wise absolute com-parison of patterns in these variables because of the obviousreason of geographical change in the state due to bifurcation.However, on a relative basis, certain facts are shocking. In theyear 1998-99, just before the bifurcation of the state, MadhyaTable 2: Small-Scale Sector in Madhya PradeshReportingNumberInvestmentEmploymentEmploymentYearof Units(Rs Lakh)(Nos)Per Unit**1994-95194732462460572.361995-96194518796452302.331996-972086711021508242.441997-982338716693570942.441998-991943814659462322.381999-00NANANANA2000-01NANANANA2001-02633810697173712.742002-0342975718121102.822003-04153589453330002.152004-051587313400477323.012005-06*74776400165152.21Notes:*Data up to only December 2005 is available; NA: not available;**Calculated.Source:Statistical Compendium and Economic Survey, 2005-06.Pradesh had around 2,86,000 small-scale units, with a fixedinvestment of Rs 13,509 million [SIDBI 2000]. Among 32 statesand union territories, Madhya Pradesh had the lowest investmentper unit. When union territories like Chandigarh and states likeMaharashtra had an investment per unit of Rs 27,86,000 andRs9,62,000 respectively, Madhya Pradesh had invested justRs47,000 per unit, which reflects a poor record of capacitybuilding in the small-scale sector. Besides this, on the employ-ment front too, performance of MP’s small-scale sector appearsto be quite dismal. According to the same report, in 1998-99,employment per unit at 2.4 was one of the lowest among all thestates and union territories, barring of course, Bihar, whereemployment per unit was just 1.6. Post-bifurcation also, theemployment scenario has been equally bleak. If we look at thescenario in the last five years,9 we observe an abysmally lowaverage of 2.58 persons per unit in MP’s small-scale sector.VIConcluding RemarksThe regional development literature is replete with theories andstudies that a state or region, blessed with nature’s bounty in termsof availability of or proximity to resources, is expected to blazethe trail so far as industrial development is concerned. At thesame time, it is also argued that the states of a smaller size tendto grow faster because they receive undivided attention as faras investment is concerned and are easier to administer. Preciselyfor these reasons, a few years back, some new states were carvedout from the existing ones. Though the state of Madhya Pradeshwas bifurcated and its geographical size is now reduced, theearlysigns of subsequent industrial development are not veryencouraging.As the scope of our study is limited, in terms of the time periodcovered, and given that it is of an exploratory nature, it wouldbe improper to make any definite conclusive remarks of anexplanatory nature. However, the time frame is just long enoughto make a comparison about developments before and after thebifurcation, on the basis of the patterns and empirical obser-vations. It is discernible that on all the key indicators, such asfixed capital investment, employment, net value added, or evencapital formation, the state has displayed a declining performancein absolute terms. To a great extent this may be attributed to thebifurcation of the state, but maybe we will have to wait a bitlonger to arrive at some meaningful conclusions. Comparisonon a relative basis elicits a mixed scenario. In most of the keyaspects, such as employability, capital intensity, labour producti-vity, and capacity building, the state’s performance has beenmarginally better than the national average, but within the state,except for labour productivity, all the other key performanceparameters showed a declining trend. It seems MP as an indus-trially backward state may take more time to shed the stigmaof a BIMARU state. Similarly, if we go by the avowed objectiveof creating more employment at the local level through small-scale industrialisation, then on that front too, MP has failedmiserably. Madhya Pradesh Laghu Udyog Nigam, the promoterof small-scale industry in the state, says that with its vast re-sources, ample facilities, modern infrastructure, and skilledworkforce, “today’s Madhya Pradesh is a land of industrialopportunities”. But if one goes by the reality, this is really a tallclaim. Hence, if the patterns of industrial development wehavediscerned have anything to say, the industrial sector (both
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