Has Cement Manufacturing Across States in India Become More Equitable after Decontrol?

Abstract

The cement industry is important for research due to several reasons: Firstly, the Indian cement industry is the second largest in the world, even larger than the USA. Secondly, cement industry has very strong linkages to the infrastructure sector. There have been few detailed studies of this industry. In this paper, we study how the distribution of cement industry has changed across states due to the decontrol of industry. This is analysed in terms of the changing patterns of inequality as well as concentration. To this end, we use Gini Coefficient to study the regional inequality and Herfindahl Index to study concentration. The Cusum Test is carried out to examine structural breaks. In the paper, we also attempt to identify the significant explanatory variables, which can explain the growth of cement sales in different states. We also provide an economic rationale behind such growth patterns. Some policy implications which follow: construction codes of the government agencies may be modified to encourage the use of blended cement and tax breaks may be given to split plants to make the growth more equitable.