Meaning of Industrialisation
Industrialisation is a process which involves the substitution of machine power with manpower. It refers to the growing mechanisation in the production process in the industrial sector. In the industrial sector, if more capital is used per unit of the output in the growing mechanisation of the production process, then it is known as the process of capital deepening. On the other hand, if there is growth in the stock of physical capital such as an increase in the stock of machinery and factory buildings with an expansion of the industrial sector over a period of time, then it is known as capital widening.
Importance of Industrialisation in India
The industrialisation has a major role to play in the economic development of India with large manpower and resources. The importance of industries in India can be discussed on the following grounds:
Increase in national income: Rapid industrialisation contributes to a substantial increase in the national and per capita output of India. As the value of industrial goods is relatively more than agricultural goods, rapid growth in Industrial output would also mean fast growth in the national and per capita income. This growth is regarded as an indicator of the economic growth of India.
Proper exploitation of natural resources: The proper use of natural resources is possible through rapid
industrialisation. Hence, minerals, water and forest resources could be properly used through the expansion of industries which use these natural resources as their input.
Improvement of factor productivity: Rapid industrialisation is required to improve the productivity of factors such as land, labour, capital and entrepreneurs. Labour productivity can be increased by the introduction of new implements with which workers can produce more within a given period of time.
Reduction in regional imbalances: When more industries can be established in industrially backward regions, the regional imbalances in industrial growth can be reduced to a great extent. Hence, the establishment of industries in backward regions stimulates the growth of ancillaries and activates the development process in the surrounding areas.
Interdependence of Agriculture and Industry
Contribution of Agriculture to Industry
Improvement in agricultural productivity is a pre-condition for promoting rapid industrialisation in our economy. Agriculture complements the process of industrialisation in the following ways:
Supply of wage goods to the industrial sector: Industrial sectors consume various wage goods for the production of industrial goods from the agricultural sector. This helps in production activities in industries. Professor Simon Kuznets called this aspect the product contribution of agriculture.
Supply of raw materials to agro-based industries: Indian agriculture also supplies necessary raw materials to many of the agro-based industries. An insufficient supply of raw materials would mean stunted growth of these industries. Professor Simon Kuznets has called this aspect the factor contribution of agriculture.
Supply of labour force to the industrial sector: To a great extent, industrial workers hail from the agricultural sector as there remains an excess supply of labour. It is also a source of cheap labour for the industrial sector.
Creation of a market for industrial goods: Indian agriculture provides a large market for a variety of industrial goods. Professor Kuznets has called this aspect the market contribution of agriculture.
Source of domestic capital for industrial development: The income of the rural people is very low. However, if their savings are mobilised properly, they can be a source of capital for industrial development.
Contribution of Industry to Agriculture
Agricultural development cannot move very far unless industrial development provides the agricultural sector with modernised equipment and technical services. The process of industrialisation complements agricultural development in the following ways:
Supply of inputs for the advancement of cultivation techniques: Advancement in cultivation techniques and the productivity of land and agricultural labour depend to a large extent on the adoption of pump sets, power-tillers, tractors and chemical fertilisers which are supplied by the industrial sector.
To provide employment opportunities to the rural people: Expansion of various small-, medium- and large-scale industries and village and cottage industries create sufficient employment and income opportunities among the rural people.
Features of Present Industrial Structure in India
Coexistence of large and small industries: In India, there are huge industries in the organised sector such as iron and steel, sugar, cement and heavy chemicals. On the other hand, there are innumerable small-scale and cottage industries.
Regional disparities: Industries are concentrated in a few regions of India. Cotton textile industries are located in Mumbai, Ahmedabad and Sholapur. Hence, the government has taken certain measures to reduce regional disparities.
Diversification of industries: The Indian industrial structure is diversified. India is not confined to consumer goods industries such as cotton, sugar and cement. There are other basic and heavy
industries such as iron and steel, heavy chemicals and electronics.
Coexistence of private, public and joint sectors: Before Independence, India’s industrial structure consisted mainly of the private sector. After Independence, there are many industries under the
ownership and control of the government.
Limitations of Industrial Development in India
The disparity between targets and achievements: Over the planning periods, the achievements of the entire industrial growth were much below the targets, except in the 1980s.
The underperformance of the public sector: During the first four decades of the planning period, the growth of the public sector was very high as the government emphasised more on its development. Even though the public sector incurred huge losses, the aim was to maximise the social welfare of the nation.
Regional imbalances: Industrial growth in India is not even in nature. Industries are concentrated in only a few states and the remaining states are lagging in their performance.
Development Strategy since 1991
Liberalisation implies a liberal attitude of the government with respect to its industrial policy, industrial licensing policy and trade policy. It aims at minimising state intervention in economic activities.
Globalisation is the integration of the domestic economy with the global economy. It refers to the interaction of the economy relating to production and trading with other countries. It includes not only the movement of capital but also the movement of labourers from one country to another country.
Privatisation of public sector undertakings by selling off part of their equity to the public is known as
Need for industrialisation in the present situation in India
Requirement of changing needs of both local and global markets: In the prevailing market condition, the industries must choose a correct product mix to satisfy the preference patterns of both local and global markets.
More investment for the upgradation of production technology: Indian industries need to produce quality products at a lower average cost, or else they cannot improve their competitive strength.
Prospect before the IT industry: In the current scenario, many foreign companies get their business processes done by IT-enabled service companies in India. This is called business process outsourcing. India earned nearly US $3.6 billion from the exports of IT-enabled services during 2003 – 2004.
Scope for the expansion of agro-based industries: According to the provisions of WTO, the developed countries will have to reduce agricultural subsidies. Therefore, some agro-based industries such as food processing and fruit processing will have sufficient scope to expand and venture into the export market.
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