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Introduction
Importance of investments in sustaining and accelerating output growth needs no overstatement. Indeed, all versions of growth theory lay emphasis on the role of investments in enhancing the rate of growth of the economy. Thus, viewed, mobilizing and channelising investments, to either physical or human capital is central for growth process and identifying the sectors to absorb investments becomes crucial. Conventional routes for higher rates of growth assigned industrial sector the role of attracting investments. Even though recent growth experiences have shown that service sector could be an important destination of investments in human capital, bulk of the physical capital formation still takes place in the industrial sector, especially in developing economies[1] .
Analysing the role of industrial sector in enhancing the overall rates of growth of the economy by attracting investments has a long tradition starting from [7] Kaldor (1966). As noted by [2] Argyrous (1996):
Kaldor argued that industrialization is a cumulative process in which the development of industries producing consumer goods precedes the development of those producing capital goods, and where production for sale precedes production for export. Kaldor's theory has had an important influence on other writers in the Cambridge, England, and tradition.
Kaldor's model of cumulative causation emphasizes the role of manufacturing as the engine of growth:
It is the rate of growth of manufacturing production (together with the ancillary activities of public utilities and construction) which is likely to exert a dominating influence on the overall rate of economic growth: partly on account of its influence on the rate of growth of productivity in the individual sector itself, and partly also because it will tend, indirectly, to raise the rate of productivity growth in other sectors. And of course it is more generally true that industrialization accelerates the rate of technological change throughout the economy ([7] Kaldor, 1966, p. 112).
Mostly, consistent with the "Kaldorian" views on accelerating industrial development, India embarked on a process of increasing the pace of industrialization and thus accelerating the overall rate of growth since the launching of the planning process. It was also expected that a policy of "state-guided" industrialization would help in expanding the industrial base both at the spatial and sectoral levels, mobilize the necessary investments, enhance employment opportunities and...