Role and Problems of Industrial Development in India
Introduction
Industries are important for the rapid economic development of India.
Industry: Goods are produced with four factors of production: Land, Labour, Capital, and Organisation.
Industrial development includes:
Increase in the number of industries.
Increase in industrial production.
Improvement in production methods.
Industrialisation allows proper utilization of a country's resources (natural and human).
Industries have higher productivity than agriculture.
Industrial development provides improved means of production for agriculture (machines, tractors, fertilizers, etc.).
Industrialisation is key to economic progress and higher living standards.
Industrial development leads to:
Increased labour productivity.
Higher per capita income.
Increased saving rate and capital formation.
More employment opportunities.
Reduced dependence on agriculture.
Jawaharlal Nehru emphasized the importance of industrialisation.
Role of Industrial Development
Industrial development helps solve problems like poverty, insecurity, unemployment, backwardness, and dependence on agriculture.
It brings about significant structural changes in the national economy.
Balanced Development
The Indian economy is unbalanced, with a large population dependent on agriculture (46.2%).
Developing industries and the service sector will balance the economy.
Increase in Productivity
Industrial development leads to a rapid increase in per capita productivity.
Industries are more controlled by humans, allowing for division of labour, specialization, machinery use, and large-scale production.
Productivity per worker increases with industrial growth.
Industries offer more internal and external economies compared to agriculture.
Large-scale and inter-industrial linkages increase with industrial growth, boosting productivity.
Development of Agriculture
Industrial development is instrumental in agricultural development (Green Revolution).
Availability of agricultural tools, machinery, tractors, pumping sets, and chemical fertilizers is due to industry.
Industrial development increases demand for agricultural products, especially commercial crops.
Increase in National Income
Industrial development enables the productive use of natural resources.
Industries add value to agricultural products (e.g., food processing).
Industries offer opportunities for new inventions, enhancing production and value added.
National income increases as a result.
Industrial countries have higher national incomes than agricultural countries.
India's national income rises with the increasing share of industries and the tertiary sector.
Increase in Employment
Industrial development establishes new industries, increasing labour demand and creating employment opportunities.
Surplus agricultural labour can find employment in industries and related activities (trade, transport).
Development of small-scale, cottage, medium, and large-scale industries increases employment.
Improvement in Standard of Living
Industries raise the standard of living by providing a variety of consumer goods (fine cloth, gadgets, TV sets, cars, etc.).
Increased employment and income provide people with more purchasing power to buy industrial products.
Increase in Capital Formation
Capital formation is key to economic development and depends on saving and investment.
Industrial development increases people's income, leading to a higher marginal propensity to save.
Saving habits improve, and people invest more, promoting capital formation.
Role in National Defence
Industrial development contributes to national defence by producing military hardware (weapons, tanks, aeroplanes, warships, guns, etc.).
Dependence on foreign countries for war materials is detrimental.
India has established industries producing defence equipment.
Export Promotion
Industrial development increases industrial production and promotes exports.
Underdeveloped countries with cheap labour have scope for exporting goods produced by labour-intensive industries.
Import Substitution
Import substitution means producing goods domestically that are similar to or substitutes for imported goods.
Industrial development enables the production of goods within the country, reducing dependence on foreign countries and achieving self-reliance.
Optimum Use of Natural Resources
Industrial development enables optimum use of natural resources like minerals, oil, gas, and water.
Machinery and equipment for extracting and refining oil, generating hydro-electricity, and setting up thermal power plants are made within the country.
Growth with Stability
Industrial development imparts stability to economic development.
Agriculture is dependent on nature, leading to uncertain production.
Industrial production is the outcome of human efforts and government policies, reducing fluctuations and stabilizing economic growth.
Development of Human Capital
Human capital includes education, technical and scientific knowledge, health, and discipline.
Industrial development is essential for multi-dimensional development, bringing out inherent qualities.
People imbibe virtues like discipline, scientific outlook, punctuality, innovative skills, and technical progress.
Industries provide instruments for technical education and health, playing an important role in the formation and progress of human capital.
Development of Infrastructure
Industrial development is essential for developing infrastructure like transport, energy generation, and communication.
Infrastructure development requires industrial products like cement, steel, machines, and equipment.
Meets Increasing Demand
With population increase and rising per capita income, demand for industrial goods has increased.
Industrial development can meet this demand.
Industrial development and economic development are used as synonyms.
Industrial development is essential for the Indian economy, especially with a significant portion of the population living below the poverty line and dependent on agriculture.
Measures/Steps Taken by the Government for Industrial Development
1948: Government announced a progressive industrial policy.
1951: Industries Development and Regulation Act enforced.
Industrial policy amended in 1956, 1977, 1980, and 1991.
1991: Liberalized industrial policy announced.
National Manufacturing Policy, 2011, and Make in India Programme, 2014, further boosted industrial development.
Establishment of Basic and Heavy Industry
Prior to independence, basic and heavy industries were almost non-existent.
Government established these industries in the public sector due to the need for huge capital investment and long gestation periods.
Large-scale Iron and Steel plants were set up with foreign collaboration at Bhilai, Durgapur, Rourkela, and Bokaro.
Heavy machine tools, heavy electrical, heavy chemicals, fertilizers, petrol, and petroleum products industries were also set up in the public sector.
Establishment of New Industries
Several new industries were established by the government in public and joint sectors (pharmaceuticals, telephone, railway engines, cars, TVs, etc.).
Establishment of new industries in the private sector was encouraged (engineering goods, computers, electronics).
These industries facilitated balanced industrial growth.
Establishment of Financial Institutions
Government established financial institutions to provide financial facilities to industries:
Industrial Finance Corporation of India
Export-Import Bank of India
Public Sector Banks
State Finance Corporations
State Industrial Development Corporations
Small Industries Development Bank of India
These institutions provide short-term, medium-term, and long-term loans at low interest rates.
In 2023-24, all India financial institutions provided financial facilities amounting to crore to the industries.
Amount of outstanding credit by banks to various industrial units as on 18th October, 2024 was crore.
Facilities of Foreign Capital
Government adopted liberal economic policy to facilitate foreign capital investment.
Iron and Steel factories at Bhilai, Durgapur, Rourkela, and Bokaro were established in collaboration with foreign capital.
Investment of foreign capital was encouraged in the Industrial Policy of 1991.
Foreign Investment Facilitation Portal was appointed to promote foreign investment.
From April 2000 to March 2024, the total amount of foreign direct investment inflow in India amounted to crore.
Facilities of Foreign Technological Agreements
Government sanctioned many foreign Technology Agreements for the import of modern technology.
Indian industrialists may make payments to foreign companies in foreign currency for the import of sophisticated technology (royalty or one-time payment).
Indian industries can get modern production technology at relatively less cost.
Facility of Electricity
Multi-purpose river-valley projects like Bhakra Nangal, Damodar Valley, Mahanadi Valley, Pong Dam, Tehri Dam, etc., were launched.
Many thermal and atomic power stations were set up.
In 1951, power generation was billion kilowatt.
In 2022-23, it increased to billion kilowatt.
Power generation capacity has increased by times.
Facilities of Transport and Communication
Development of transport means (roads, railways, waterways, airways) facilitated movement of raw materials and finished products.
Expansion of communication facilities (telephone, post, telegraph, fax, mobile phones, e-mail) improved industry efficiency.
In 1951, roads measured lakh kilometre.
In 2019-20, India had one of the largest road networks in the world with about lakh kilometres.
Facilities of Inventions and Technical Development
Government took steps to expand invention and technical development facilities.
In 1983, Technology Policy Statement was issued to develop Indigenous Technology and optimize the use of imported technology.
Department of Scientific and Industrial Research provides facilities for invention and technical development, establishing national laboratories and research and development centres.
In 1996, the government set up the Technology Development Board, providing subsidies to industrial units for developing indigenous technology.
Facilities to Rehabilitate Sick Industrial Units
Government made efforts to rehabilitate sick industrial units.
Industrial Reconstruction Bank of India was set up.
National Textile Corporation was established to rehabilitate sick textile units.
In 1987, the Board for Industrial and Financial Reconstruction (BIFR) was set up.
Facilities for Industrialisation of Backward Areas
Special facilities offered for industrialisation of industrially backward regions:
Public sector enterprises set up in backward states.
Industrial Estates and Focal Points established, providing land, sheds, power, and transport.
Subsidies granted to industries set up in backward areas.
Exemption from goods and services tax (GST), income tax, and custom duty for some years.
Import licences issued for raw materials and machines on a priority basis.
Capital Investment subsidy and concessions on power tariff.
Counselling on technical, managerial, and sales matters.
Loans granted at concessional interest rates.
Special Facilities to Export-Oriented Industries
Special facilities offered to export-oriented units (EOU) to promote exports.
Export Processing Zones created in different parts of the country.
Special Economic Zones (SEZs) promoted under Foreign Trade Policy to provide a competitive international environment.
Facility for Standardization of Industrial Goods
In 1974, the Bureau of Indian Standards was set up to improve quality and standardize industrial products.
Industries conforming to the Bureau's standards are allowed to use the "ISI" mark.
The Bureau promotes quality control, standardization, and simplification.
Developing Delhi Mumbai Industrial Corridor (DMIC)
Government is developing DMIC along the western dedicated freight corridor from Dadri (Haryana) to Jawahar Lal Nehru Port (Maharashtra).
It will cover km and aims to develop manufacturing cities.
The project aims to triple industrial output in years and double industrial employment potential in years.
Problems of Industrial Development in India
Rate of industrial development in India has been low compared to other countries.
Industrial growth has been about per cent per annum in the last seven decades.
Shortage of Power Resources
Availability of power is essential for industrial development.
Supply of electricity, coal, and oil is less than demand.
Agriculture gets higher priority for electricity, leaving industries with less.
Industries have to stop production or use diesel engines, increasing production costs.
Insufficient Capital
Large and medium-sized industries need huge capital investment.
They meet their capital needs from the stock market, financial institutions, and banks.
Scams and volatility in the stock market discourage investment.
Financial institutions fail to provide adequate finance at low interest rates.
Insufficient Economic Infrastructure
Developed economic infrastructure is key to industrial development.
Means of transport and communication have not fully developed.
Quality of roads is unsatisfactory, and railways suffer from a shortage of wagons.
Problem of Old Plant and Machinery
Industrial development requires modern machinery.
Machine tool industry is incapable of meeting the requirements of all kinds of industries.
Consumer goods industries lack modern machinery.
Problem of Research and Innovation
There is a serious lack of research and innovation in industries.
The cost of production does not come down, and there is little improvement in the quality of products.
India spends barely per cent of her GNP on Research and Development (R&D).
Problem of Raw Material
Good quality raw material at a fair price is not available to several industries.
Many industries import their raw material, requiring foreign exchange.
Shortage of foreign exchange limits the import of adequate raw material.
Industrial Sickness
Industrial sickness or the problem of sick units has been on the rise.
Units that fail to repay loans and interest are called sick units.
Regional Inequality
Industrial development is unbalanced in different parts of the country.
Maharashtra, Gujarat, Tamil Nadu, Andhra Pradesh, and Telangana are industrially developed, but Bihar, Odisha, and Madhya Pradesh are backward.
Defective Industrial Production Structure
Production of luxuries and comforts for the rich is large-scale.
Little investment has been made in industries producing mass consumption goods.
Under-utilisation of Production Capacity
Industries are utilizing about to per cent of production capacity.
Reasons include industrial disputes, shortage of power, lack of demand, and shortage of raw material.
Industrial Disputes
Strikes and lockouts are regular features, resulting in a fall in production and profits.
Inefficiency of Public Sector Industries
Many public sector enterprises are inefficient and run at a loss.
Reasons include political interference, inefficient management, an inefficient staff, and an uneconomic price policy.
Problem of Human Capital
Most labourers are illiterate, unhealthy, and lack technical skill.
Low wages mean low income and low efficiency of the labourers.
Less Development of Small Industries
Large industries have developed more rapidly than small-scale industries.
Loss to Domestic Units from Foreign Competition
Entry of foreign enterprises has been liberalized, and Indian industries find it difficult to compete.
Poor Quality Production
Backward technology results in poor quality products with higher per-unit costs.
Industrial Pollution
Setting up more industrial units has polluted the environment.
Industries are causing air and water pollution.
Suggestions to Solve the Problems of Industrial Development/Suggestions to Remove Industrial Backwardness in India
Increase in Efficiency of Public Sector
Basic capital goods industries should be developed more efficiently.
Development of Private Sector
Government should provide more facilities to the private sector.
Encouragement to Foreign Capital and Foreign Technology
Shortage of capital and modern technology should be made up by encouraging foreign capital.
Encouragement to Capital Formation
Facilities must be extended to encourage capital formation.
Development of Infrastructure
Economic infrastructure needs to be developed.
Import of Modern Machines
Import of modern machines and necessary raw materials should be liberalized.
Proper Development of Natural Resources
Proper harnessing of natural resources will benefit industrialization.
Development of Agro-Industries
Agriculture should be developed.
Development of Export Industries
Efforts should be made to develop industries with great export potential.
Industrial Peace
Employers and workers must have cordial relations.
Expansion of Managerial and Technical Education
Managerial and technical education should be imparted on a large scale.
Globalisation and Small/Large Scale Industries
Globalisation has provided opportunities to small and large-scale industries.
Positive Impact of Globalisation on Indian Industrial Units
Expansion of market size
Availability of modern foreign technology
Availability of high quality inputs of other nations
Easy access to foreign capital and external commercial borrowings
Increase in exports
Problems of Small/Large Scale Industries in the Era of Globalisation
Increased competition from MNCs
Difficult to adopt fast-changing technology
Difficulty in selling the product in the global market due to low global image and high production cost
Lack of global vision in small-scale entrepreneurs
Limited demand for artistic goods in the global market
Shortage of finance to compete in the global market and difficulty in accessing the global financial market