Industrial Policies in India: Did They Work?

Raavi Aggarwal, Mercator Research Institute on Global Commons and Climate Change, Berlin Schöneberg, Germany



This article analyses relationships between the implementation of state-level industrial policies in India and manufacturing sector economic performance (employment and gross value added), utilising data from the Annual Survey of Industries conducted by the Government of India. I employ panel data fixed-effects regression models to evaluate the associations between the industrial policy and state-industry specific performance over the 2007-08 to 2014-15 period, incorporating potential effects of the state government’s political alignment, infrastructure provision and educational expenditure in the state. The results provide evidence of a positive
correlation between industrial policy implementation and firm output and employment, by around 12.6 – 14 per cent. However, subsequent introductions of an industrial policy are negatively associated with employment and are uncorrelated with industrial GVA. This analysis has implications for economic policy in light of the Central Government’s plans to implement a revised industrial policy at the national scale.

Suggested Citation:

Aggarwal, Raavi. 2019. “Industrial Policies in India: Did They Work?”, Centre for Sustainable Employment Working Paper #24, Azim Premji University, Bangalore.