It should be expected that those industries should also grow who have been able to lower costs or that those industries which have lowered their costs have been able to expand their market share. In the data given above, there appears to be no connection between costs and market performance. This means that in India, not the least cost firms and industries are doing well and in fact, industrial performance appears to be quite unconnected with achievements in cost reductions. This is to say that the issue of industrial competitiveness is unattached to market buoyancy. The reason for the above situation arises because of the nature of the Indian industry.
Indian industry is largely import-substituting.
This is why, it follows the path not of resource optimisation but of sales maximisation. It tries to follow the trail of imports and then enter into the niche market for imports. This means that the Indian firms have not concentrated on those commodities which it could produce at the least cost, but have concentrated on those commodities which have been imported. Such a strategy worked well and was in fact even encouraged when we had no industries and had to build our industrial base. Our industries were also largely protected from imports.