Industrial Development in India Since Independence – Geography – UGC NET – Notes

Introduction

• There is broad agreement among development economists that rapid industrialisation is crucial for fast economic growth because productivity in industry is significantly higher than in agriculture.

• Industrialisation is seen as a key instrument for bringing structural economic and social transformation in developing economies, which is necessary to raise long-term growth potential.

• As a result, industrialisation has acquired near-universal appeal as a developmental goal, despite its associated challenges.

• Rapid industrial growth can also generate problems such as pollution, depletion of raw materials, unemployment due to automation and income inequalities.

• India, like other developing nations, has pursued industrialisation as a central strategy for economic development, while grappling with its social and environmental consequences.

Industrialisation and Economic Development

• Industrialisation is widely regarded as synonymous with economic development, as high per capita incomes have rarely been achieved solely through agriculture and primary-sector processing.

• Most developed economies attained high income levels through expansion of manufacturing and industry, with petroleum-exporting nations like Saudi Arabia, Kuwait and the UAE being notable exceptions.

• The distinction between developed and developing economies is commonly based on structural indicators such as the share of workforce employed in industry and the contribution of industry to national output.

• A higher industrial share in employment and GDP is generally associated with greater productivity, higher incomes and sustained economic development.

What is Industrialisation?

Industrialisation is a process by which the center of gravity of the economy shifts from agriculture to industry.

Industrialisation involves two things:

1. Adoption of technologically superior techniques of production that help to transform basic raw materials and intermediate goods into manufactured goods.
2. Application of modern techniques of management and organisation like economic calculations, accountancy and management techniques, etc.

Arguments for Industrialisation

The following factors favour rapid industrialisaiton as means to fast economic development.

Productivity of Labour:

The productivity in the industrial sector is generally higher due to the operation of one or more of the following reasons:

1. The existence of greater capital intensity,
2. Continuity of production, 
3. Greater specialisation and division of labour,
4. Less dependence on natural factors,
5. A greater possibility of internal-external economies in the manufacturing sector.

Moreover, technological relationships change faster in manufacturing activity than in agriculture. Thus, if any serious effort is to be made to pull a Developing Economy out of poverty, it should get translated in a larger diversion of resources, both physical and financial, to investment in the industrial sector.

Employment Generation:

• With increase in productivity in the industrial sector, it will be possible to create more employment opportunities, thus attracting labour from less productive occupations. This process will add to the national output as also to the purchasing power and aggregate consumption expenditure which, in turn, will pull the aggregate demand upwards and would be instrumental in creating more employment opportunities.

Mobilisation of Surplus:

• A major constraint on development in a Developing Economy is the lack of adequate resources to finance the required needs. Inadequacy of resources is the result of two inter-related factors:
  1. The absolute size of resources, national output and saving in a Developing Economy is low, and
  2. It is not possible to mobilise the surpluses. Whereas the problem of inadequacy of resources is common to all the sectors of the economy, the problem of mobilisation of resources is peculiar in the agricultural sector, where the largest share of national income originates. The task of mobilisation of surplus savings in this sector is rendered difficult by the fact that there is no suitable organisational set-up for this purpose. Such a set-up can more easily be provided in the industrial sector of the economy.

Thus, by concentrating resources on industrialisation, the pace of economic development can be quickened.