Skip to main content

Advertisement

Log in

Perspectives into the Industrialization Process of India Through the New Economic Geography Lens

  • Original Article
  • Published:
Journal of Quantitative Economics Aims and scope Submit manuscript

Abstract

The process of industrialization has been validated by economic theory and empirical investigation as one of the fundamental and long-run channel of altering the basic dynamics of the economies in favor of growth and development. Despite the proven positive spillovers accruing from the process, the nations across the world do not reflect an accelerating pace towards industrialization. The current research is an attempt to validate the industrial divide between the northern and southern India based on the fundamental axiom of the ‘New Economic Geography’ theory by Paul Krugman. The analysis is based on the Annual Surveys of Industry data for the year 2018. Stochastic frontier analysis is used to predict and compare the technical efficiencies of the firms located across the two regions. The enquiry confirms the industrial backwardness of the northern India states as compared to the southern ones. The factors causing technical efficiency in the firms across the two regions are empirically established. The study concludes by suggesting various policy recommendations in favor of a converging industrialization process across the whole nation in order to prevent a developmental divide within the country.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Fig. 1

Source: Table 1

Fig. 2

Source: Table 8

Similar content being viewed by others

References

  • Adewale, A.R. 2017. Import substitution industrialisation and economic growth–evidence from the group of BRICS countries. Future Business Journal 3 (2): 138–158.

    Article  Google Scholar 

  • Aggarwal, A., and N. Kumar. 2012. Structural change, industrialization, and poverty reduction: the case of India. In Structural Change and Industrial Development in the BRICS (Issue November). Oxford: Oxford University Press. https://doi.org/10.1093/acprof:oso/9780198725077.003.0008.

    Chapter  Google Scholar 

  • Aigner, D., C.K. Lovell, and P. Schmidt. 1977. Formulation and estimation of stochastic frontier. Journal of Econometrics 6: 21–37.

    Article  Google Scholar 

  • Arnold, D. 1980. Industrial violence in colonial India. Comparative Studies in Society and History 22 (2): 234–255. https://doi.org/10.1017/S0010417500009324.

    Article  Google Scholar 

  • Arrow, K.J. 1996. The economics of information: an exposition. Empirica 23 (2): 119–128.

    Article  Google Scholar 

  • Baldwin, R.E., P. Martin, and G.I.P. Ottaviano. 2001. Global income divergence, trade, and industrialization: the geography of growth take-offs. World Scientific Studies in International Economics 79 (March): 25–57. https://doi.org/10.2139/ssrn.92169.

    Article  Google Scholar 

  • Banerjee, P.K. 1994. Planned development in India and China. Foreign Trade Review 29 (2–3): 204–213.

    Article  Google Scholar 

  • Bas, M., and A. Berthou. 2012. The decision to import capital goods in India: Firms’ financial factors matter. The World Bank Economic Review 26 (3): 486–513.

    Article  Google Scholar 

  • Basant, R. 1997. Technology strategies of large enterprises in Indian industry: some explorations. World Development 25 (10): 1683–1700.

    Article  Google Scholar 

  • Battese, G., and T. Coelli. 1992. Frontier production functions, technical efficiency and panel data: with application to paddy farmers in India. Journal of Productivity Analysis 3 (1): 153–169.

    Article  Google Scholar 

  • Battese, G., and T. Coelli. 1995. A model for technical inefficiency effects in a stochastic frontier production function for panel data. Journal of Econometrics 20: 325–332.

    Google Scholar 

  • Belotti, F., S. Daidone, G. Ilardi, and V. Atella. 2012. Stochastic frontier analysis using Stata Stochastic frontier analysis using Stata. 10(12).

  • Bezat, A., and I.E. Relations. 2010. Estimation of technical efficiency by application of the SFA method for panel data. Problemy Rolnictwa Światowego 11: 5–13.

    Google Scholar 

  • Bhagavan, M.R. 1985. Capital goods sector in India: past and present trends and future prospects. Economic and Political Weekly 20: 404–421.

    Google Scholar 

  • Birla, G.D. 1944. Industrialization in India. The Annals of the American Academy of Political and Social Science 233 (May): 121–126.

    Article  Google Scholar 

  • Bole, D. 2021. ‘What is industrial culture anyway?’ Theoretical framing of the concept in economic geography. Geography Compass 15: e12595.

    Article  Google Scholar 

  • Brown, S.S., and M.G. Hermann. 2020. The new economic geography and the illicit economy. In Transnational crime and black spots, 33–45. London: Springer.

    Google Scholar 

  • Chen, C., and S. K. Peng. 2020. New economic geography.

  • Chenery, H.B. 1982. Industrialization and growth. World Bank Staff Working Paper No 539 29 (113): 223–223.

    Google Scholar 

  • Cobb, J.C. 2014. Industrialization and southern society, 1877–1984. University Press of Kentucky.

    Google Scholar 

  • Cross, J. 2010. Neoliberalism as unexceptional: Economic zones and the everyday precariousness of working life in South India. Critique of Anthropology 30 (4): 355–373. https://doi.org/10.1177/0308275X10372467.

    Article  Google Scholar 

  • Cross, J. 2015. The economy of anticipation: Hope, infrastructure, and economic zones in South India. Comparative Studies of South Asia, Africa and the Middle East 35 (3): 424–437. https://doi.org/10.1215/1089201X-3426277.

    Article  Google Scholar 

  • Daniele, V., P. Malanima, and N. Ostuni. 2018. Geography, market potential and industrialization in Italy 1871–2001. Papers in Regional Science 97 (3): 639–662.

    Article  Google Scholar 

  • Ding, J., M. Baumers, E.A. Clark, and R.D. Wildman. 2021. The economics of additive manufacturing: towards a general cost model including process failure. International Journal of Production Economics 237: 108087.

    Article  Google Scholar 

  • Dlamini, S.I., M.B. Masuku, and J.I. Rugambisa. 2012. Technical efficiency of maize production in Swaziland: a stochastic frontier approach. African Journal of Agricultural Research 7 (42): 5628–5636.

    Article  Google Scholar 

  • Elashmawi, F. 2012. Competing globally. Routledge.

    Book  Google Scholar 

  • Elia, S., S. Munjal, and V.G. Scalera. 2020. Sourcing technological knowledge through foreign inward licensing to boost the performance of Indian Firms: the contingent effects of internal r&d and business group affiliation. Management International Review 60 (5): 695–721.

    Article  Google Scholar 

  • Fu, D., F. Pammolli, S.V. Buldyrev, M. Riccaboni, K. Matia, K. Yamasaki, and H.E. Stanley. 2005. The growth of business firms: theoretical framework and empirical evidence. Proceedings of the National Academy of Sciences 102 (52): 18801–18806.

    Article  Google Scholar 

  • Gaspar, J.M. 2018. A prospective review on new economic geography. The Annals of Regional Science 61 (2): 237–272.

    Article  Google Scholar 

  • Gerring, J., H. Gjerløw, and C. H. Knutsen. 2020. Regimes and Industrialization. V-Dem Working Paper, 99.

  • Grubler, A. 1995. Industrialization as a historical phenomenon. Cambridge: Cambridge University Press.

    Google Scholar 

  • Habib, I. 1985. Studying a colonial economy—without perceiving colonialism. Modern Asian Studies 19 (3): 355–381.

    Article  Google Scholar 

  • Hillemane, B. S. M. 2014. Small scale industrialization under globalization: is the tide turning around? In: U. Kapila (Ed.), Indian Economyc Since Independence (Issue January 2014, pp. 545–570). https://www.researchgate.net/publication/292931473_Small_Scale_Industrialization_under_Globalization_Is_the_Tide_Turning_Around.

  • Khan, J.I., M. Majeed, and S.O. Mushtaq. 2021. An efficiency analysis of micro units in a fragile zone: a panel study of the firms. Review of Market Integration. https://doi.org/10.1177/09749292211044847.

    Article  Google Scholar 

  • Kim, L. 1980. Stages of development of industrial technology in a developing country: a model. Research Policy 9 (3): 254–277.

    Article  Google Scholar 

  • Krugman, P. 1991. Increasing returns and economic geography. Journal of political economy 99 (3): 483–499.

    Article  Google Scholar 

  • Krugman, P. 1998. What’s new about the new economic geography? Oxford Review of Economic Policy 14 (2): 7–17. https://doi.org/10.1093/oxrep/14.2.7.

    Article  Google Scholar 

  • Krugman, P. 2011. The new economic geography. Now Middle-Aged. Regional Studies 45 (1): 1–7. https://doi.org/10.1080/00343404.2011.537127.

    Article  Google Scholar 

  • Kumar, S. 2021. Technical efficiency and its determinants in the Indian textile garments industry. Research Journal of Textile and Apparel.

  • Kumbhakar, S.C., and H. Wang. 2010. Estimation of technical inefficiency in production frontier models using cross-sectional data. Indian Economic Review 45 (2): 7–77.

    Google Scholar 

  • Lal, D. 1992. Industrialization strategies and long term resource allocation. Department of Economics, University of California.

    Google Scholar 

  • Lambarra, F., and K. Zein. 2009. Subsidies and technical efficiency : An application of stochastic frontier and Random-effect Tobit models to LFA Spanish olive farms. A Resilient European Food Industry and Food Chain in a Challenging World.

  • Lang, L., E. Ofek, and R. Stulz. 1996. Leverage, investment, and firm growth. Journal of Financial Economics 40 (1): 3–29.

    Article  Google Scholar 

  • Li, L., and G. Vinten. 1997. An overview of the experiences of Chinese industrialization strategies and development. Managerial Auditing Journal 12: 183–191.

    Article  Google Scholar 

  • Lucas, R.E., Jr. 1978. On the size distribution of business firms. The Bell Journal of Economics 9: 508–523.

    Article  Google Scholar 

  • Majeed, M., J.I. Khan, and S.O. Mushtaq. 2021a. An analysis of MSME’s efficiency : a study of two comparable northern Indian regions. SEDME (small Enterprises Development, Management & Extension Journal) 1: 1–11. https://doi.org/10.1177/09708464211038717.

    Article  Google Scholar 

  • Majeed, M., J.I. Khan, S.O. Mushtaq, and Z.G. Rather. 2021b. The industrial research and development profile of the MSME s sector in India. SEDME (small Enterprises Development, Management & Extension Journal) 1: 1–12. https://doi.org/10.1177/09708464211043391.

    Article  Google Scholar 

  • Meeusen, W., and J. van Den Broeck. 1977. Efficiency estimation from Cobb–Douglas production functions with composed error. International Economic Review 18 (2): 435–444.

    Article  Google Scholar 

  • Mehrotra, V., and A.K. Malhotra. 2019. Extent and gaps in intellectual capital disclosure in the Indian industry. International Journal of Learning and Intellectual Capital 16 (1): 1–20.

    Article  Google Scholar 

  • Murphy, K. M., A. Shleifer, and R. Vishny. 1988. Industrialization and the Big Push (No. 2708; Issue September).

  • Nica, M., M. Grayson, and G.T. Gray. 2015. Taxonomy of the determinants of entrepreneurial activity. Journal of Economics and Economic Education Research 16 (3): 119–144.

    Google Scholar 

  • Olley, G., and A. P. Steven. 1992. The dynamics productivity in the telecommunications equipment industry. NBER Working Paper Series, 3977.

  • Pack, H. 1981. Fostering the capital-goods sector in LDCs. World Development 9 (3): 227–250.

    Article  Google Scholar 

  • Perlin, F. 1983. Proto-industrialization and pre-colonial south Asia. Past and Present 98: 30–95.

    Article  Google Scholar 

  • Perrigot, R., and C.P. Barros. 2008. Technical efficiency of French retailers. Journal of Retailing and Consumer Services 15 (4): 296–305.

    Article  Google Scholar 

  • Ray, S., and S. Miglani. 2018. Global value chains and the missing links: cases from Indian industry. Routledge.

    Book  Google Scholar 

  • Rodnik, D. 1992. Conceptual issues in the design of trade policy for industrialization. World Development 20 (3): 309–320.

    Article  Google Scholar 

  • Sashi, C.M., and L.W. Stern. 1995. Product differentiation and market performance in producer goods industries. Journal of Business Research 33 (2): 115–127.

    Article  Google Scholar 

  • Schmutzler, A. 1999. The new economic geography. Journal of Economic Surveys 13 (5): 355–379. https://doi.org/10.1016/s0895-4356(05)00103-4.

    Article  Google Scholar 

  • Simmons, C. 1985. “De-Industrialzation”, Industrialization and the Indian Economy, c 1850–1947. Modern Asian Studies 19 (3): 593–622.

    Article  Google Scholar 

  • Simon, H.A., and C.P. Bonini. 1958. The size distribution of business firms. The American Economic Review 48 (4): 607–617.

    Google Scholar 

  • Sinha, A. 2019. A theory of reform consolidation in India: from crisis-induced reforms to strategic internationalization. India Review 18 (1): 54–87.

    Article  Google Scholar 

  • Smith, H. L., and S. Bagchi-Sen. 2021. Economic geography Past, present and future.

  • Treiman, D.J. 1970. Industrialzation and social stratification. Sociological Enquiry 40 (40): 207–234.

    Article  Google Scholar 

  • Varshney, A. 1984. Political economy of slow industrial growth in India. Economic and Political Weekly 19: 1511–1517.

    Google Scholar 

  • Wang, H., and C. Ho. 2010. Estimating fixed-effect panel stochastic frontier models by. Journal of Econometrics 157 (2): 286–296. https://doi.org/10.1016/j.jeconom.2009.12.006.

    Article  Google Scholar 

  • Wanjule, P.B., S.B. Chandanshiv, and S. Aswale. 2015. Brick making in india–history. International Journal of Marketing, Financial Services & Management Research 4 (11): 11–16.

    Google Scholar 

  • Wyatt, A. 2009. Party system change in South India: political entrepreneurs, patterns and processes. Routledge.

    Book  Google Scholar 

Download references

Funding

We also declare that we have not received any funding from any agency for the conduction of current research.

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Mehak Majeed.

Ethics declarations

Conflict of interest

We hereby declare that there is no conflict of interest between the authors or otherwise.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Majeed, M., Mushtaq, S.O. & Khan, J.I. Perspectives into the Industrialization Process of India Through the New Economic Geography Lens. J. Quant. Econ. 20, 437–458 (2022). https://doi.org/10.1007/s40953-022-00293-z

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s40953-022-00293-z

Keywords

JEL Classification

Navigation