Chapter - 09

Industrialisation and Economic

Development
 CONCEPT AND MEANING OF
INDUSTRIALISATION
► Industrialisation has a major role to play in the economic development of the
underdeveloped countries.

► The gap in per capita incomes between the developed and underdeveloped
countries is largely reflected in the disparity in the structure of their
economies;

► view of the unfavourable trends in the world trade of primary commodities,

industrialisation is the only effective answer to the problems of
underdeveloped countries.

► The industrial sector, which possesses a relatively high marginal propensity to

save and invest, contributes significantly to the eventual achievement of a
self-sustaining economy, unless agriculture is modernised substantially,
industrial expansion is likely to proceed at a slow speed due to lack of
purchasing power in the hands of the bulk of population.
 THE PATTERN OF INDUSTRIALISATION
► Historically, industrial development has proceeded in three stages.

► In the first stage, the industry is concerned with the processing of primary products: milling grain,
extracting oil, tanning leather, spinning vegetable fibres, preparing timber and smelting ores.

► The second stage comprises the transformation of materials making bread and confectionery,
footwear, metal goods, cloth, furniture, and paper.

► The third stage consists of the manufacture of machines and other capital equipments to be used not
for the direct satisfaction of any immediate want but in order to facilitate the future process of
production.

► To sum up, the industrial development depends upon the rate of capital formation. Supply of capital
goods can be augmented either through imports or through domestic production. An increase in the
imports of capital goods depends upon the rate of growth of exports.

► export-promoting industries, import- substituting industries, and domestic capital goods industries
are not mutually exclusive alternatives. A simultaneous development of all the three classes of
industries will prove to be the most effective strategy of industrialisation.
 RELATIVE ROLES OF PUBLIC AND
PRIVATE SECTORS
► A noteworthy feature of the changing industrial pattern in the planning era in
India is the growth of the public sector in a big way in the heavy and basic
industries, the machine goods sector, engineering industries, and so on.

► if we judge the contribution of different sectors in terms of employment and

value added, then it is evident that nearly 69 per cent of employment and 60
per cent of value added are contributed by the private sector.

► The share of the public sector in employment and value added was only 24
per cent and 28 per cent, respectively.
 INADEQUACIES OF THE PROGRAMME
OF INDUSTRIALISATION
► in the terms of contribution of national product, the share of manufacturing
industry sector continues to be low. In most of the developed nations, this share is between 30 per
cent and 50 per cent.

► Secondly, the process of industrialisation has not been able to make a dent on the problem
of unemployment.

► the process of industrialisation’s rapid expansion of large sector resulted in a comparative

neglect of the small and medium sector.

► Govt. policies have only resulted in the concentration of industrial development in the metropolitan
areas, in the selected states, and among the top capitalists.

► The expansion of large-scale industries has failed to absorb a signifi cant proportion of the increment
to labour force and led in some cases to a loss of income for the rural poor engaged in cottage
industries like textiles, leather, pottery,

► the process of industrialisation has not generated suffi cient growth potential, either in terms of
contribution of output or in terms of employment; and what is really serious is that the rate of
growth of industrialisation has been declining with every decade.
 ROLE OF INDUSTRIES IN THE ECONOMIC
DEVELOPMENT
► Utilisation of Natural Resources
► Balanced Sectoral Development
► Enhanced Capital Formation
► Increase in National Income
► Increase in Job Opportunities
► Lesser Pressure on Land
► Supplementing Export
► Attaining Economic Stability
► Accumulation of Wealth
► Support to Agriculture
► Development of Markets
► Contribution Towards National Defence
► Contribution to Government Exchequer
 INDUSTRIES DURING THE PLAN
PERIOD
► Development of Infrastructure
► Development of Heavy and Capital Goods
Industries
► Enhanced Sectoral Contribution of the Industrial
Sector in GDP
► Rapid Expansions of Consumer Durables Industry
in the 1980s
► Increasing Stress on Chemicals, Petro-chemicals,
and Allied Industries in the 1980s
► Massive Expansion of Public Sector