Regional Concentration of Industries in India: What Does the Recent Data Say and How to Understand the Implications? A Perspective

This paper presents an analysis of changes in regionalRegional concentrationConcentration of manufacturingManufacturing industries and the factors driving the change in recent years. Two key questions have been addressed. First, why the regional distribution of Indian industry continues to be dominated by MaharashtraMaharashtra, GujaratGujarat and Tamil NaduTamil Nadu? Second, what are the sources of this uneven spread of industries? Past industrial policiesIndustrial policy (historyHistory) and contemporary factors are found to reinforce the regional concentrationConcentration of industries. It makes a contribution to the literature by providing evidence on the net entry of new factoriesFactories by state, the spatialSpatial distribution of large factoriesFactories and the observed tendency of co-locationLocation of relatively larger plants in industrially advanced states in the post-reformReforms period. It finds that top three industrializedIndustrialized states of MaharashtraMaharashtra, GujaratGujarat and Tamil NaduTamil Nadu have attracted larger share of the new factories. Nearly 44% of the cohort of large factoriesFactories with more than 100 workersWorkers which began operation in the years 1995–2014 was found to be in the top three states. The key driver of regionalRegional concentrationConcentration is argued to be the agglomeration economiesAgglomeration economies sought by firms to offset other cost disadvantages.