The Evolution of India Industrial Agglomeration

Industrial agglomeration results from the free movement and free configuration of productive factors. Under market economy, it is a natural phenomenon for industries to be concentrated in one area. Agglomeration can boost economic development and increase regional competitiveness. It is important to understand the evolution laws of industrial agglomeration in order to develop appropriate regional strategies. The fluidity of product factors was enforced in the transition from planned economy to market economy. Many industries' locations are now guided by economic rules instead of government-planned policy. Industrial layout has dramatically changed.

New Economic Geography theory proposes that industrial agglomeration is reversed under the interaction of scale of economy with transportation costs. That is, inter-regional costs for transport continue to fall as market economy develops, and that geographic layout of industries will disperse after gathering.

This paper analyzes the geography of various industries and their location selection over the past 15 years. It uses the theory to calculate the EG index of 18 Chinese industries and the CR3 for the remaining industries. The results show a fairly complete and detailed trend in the industrial agglomeration. The agglomerator machine results revealed that many manufacturing industries saw their EG indexes rise, consistent with their CR3s. These included chemical fiber manufacturing, electronics and telecommunications equipment manufacturers, instrumentation and cultural office machinery manufacturing, textiles and electrical machinery and equipment manufacturing industries, food processing, manufacturing and paper and products industries, chemical fuels and chemical products industries, which are both technology-intensive and labor-intensive.

There are also industries whose EGindices have remained the same, including beverage manufacturing, coking, pharmaceutical manufacturing and instrumentation and Cultural office machinery manufacturing. These industries are resource-intensive and primarily comprise of: beverage manufacturing, petroleum processing and coking, pharmaceutical manufacturing and fabricated metal products, ferrous and rolling metal smelting, rolling processing industries, and non-ferrous metal smelting.

Surprisingly the EG indexes for machinery and equipment manufacturing and transportation industry, which clearly have economies of scale, were not increased. This may be due to limited rationality in the market-oriented reforms in our country. The eastern areas became the largest, while the concentrations in other areas decreased. The North-eastern region of India saw the largest drop in industrial concentration. Many industries that dominated this region have been replaced with eastern ones. The industrial concentration in the central regions was also slightly lower. No matter what past or present, the northwest and southwest regions of India had the lowest industrial agglomeration levels. This level will continue to drop as time passes.

The paper examined the factors that led to different trends in evolution based on the calculation of agglomeration rate for 18 industries. The paper's main findings include: First, industrial location is affected by endowment benefits. This includes natural and acquired advantages. Second, overall, there is an increase in the integration of the domestic market, which has reduced inter-regional transport costs and encouraged industrial agglomeration. The third factor is that international market integration levels are higher than those of domestic markets. Because of strong external demand, foreign direct investment and market accesses, many industries have shifted to Eastern India.

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