Industrialization and

Economic Developmemt

Industrialisation is the process of manufacturing consumer goods

and capital goods and of building infrastructure in order to provide
goods and services to both individuals and businesses. As such
Industrialisation plays a major role in the economic development of
underdeveloped countries like India with vast manpower and varied
resources.
 Role o f industry

1. Modernisation of Agriculture and Industry

• Industrial development is necessary for modernisation of agriculture. In India,

agriculture is traditional and backward, therefore, the cost of production is high
and productivity is low. We need tractors, threshers, pump sets and harvesters to
modernise agriculture. To increase productivity, we need chemical fertilizers,
pesticides and weedicides etc. These are all industrial products. Without
industrial development, these goods cannot be produced. Agricultural products
like jute, cotton, sugarcane etc. are raw materials. The industrialisation is cause
and effect in this case therefore to cater the needs of modern agriculture new
industries are needed to be established.
 ROLE OF INDUSTRY

2. Boost to Capital Formation: 

• Acute deficiency of capital is the main problem of LDCs. The

agricultural sector, due to backwardness, suffers from low
productivity ,therefore generates either small or no surplus. In large
scale industries, the surplus is very high. By using external and
internal economies, industry can get higher profit. These profits can
be reinvested for expansion and development. Therefore
industrialisation helps in capital formation
 ROLE OF INDUSRY

3. Development of Science , Technology and boost to R&D

• Industrial development encourages the development of science and technology.

The industrial enterprises conduct research and develop new products. Ethanol in
the form of biofuel is an example of industrial development. Industrialization, has
contributed immensely to the progress of atomic science, satellite communication
and missiles etc.

4. Industrialisation and Urbanisation

• Urbanisation succeeds industrialisation. Industrialisation in a particular region

brings backward and forward effects viz. growth of transport and communication.
Schools, colleges, technical institutions, banking and health facilities are
established near industrial base. For example, Rourkela was once a dense forest
but now it is a modern town in Orissa. Many ancillary units have been established
after setting up of big industry.
 ROLE OF INDUSTRY

5. Importance in International Trade

• Industrialisation plays an important role in the promotion of trade. The advanced
nations gain in trade than countries who are industrially backward. The LDCs export
primary products and import final products. Agricultural products command lower
prices and their demand is generally elastic. While industrial products command
higher values & their demand is inelastic. This causes trade gap. To meet the deficit
in balance of payments we have to produce import substitute products or go for
export promotion through industrial development .

6. Alleviation of Poverty and Unemployment:

• Poverty and unemployment can be eradicated quickly through rapid
industrialisation. It has occurred in industrially advanced countries like Japan. The
slow growth of industrial sector is responsible for widespread poverty and mass
unemployment. So with fast growth of industrial sector, surplus labour from
villages can be shifted to industry . This would deal with all kinds of unemployment
prevalent in villages.
 ROLE OF INDUSTRY

7. Use of Natural Resources

• It is a common saying that India is a rich country inhabited by the poor. It implies
that India is rich in natural resources but due to lack of capital and technology,
these resources have not been exploited. During the British rule India’s cheap raw-
materials were taken to UK for producing industrial goods in their country. India
was used as a market for their industrial products. So, India struggled for freedom
and with poverty simultaneously whereas England gained during industrial
revolution.

8. Self-reliance in Defense Production

• To achieve self-reliance in defense production, industrialisation is necessary. During

war and emergency, the dependence on foreign countries for weapons may prove
fatal and counterproductive. Self-reliance in capital goods and industrial infra-
structure paves a way for self reliance in defence production. Now a days there is a
very good international market for defence products and it could be exploited for
the benefit of the country by planned investment in dedicated industries.
 ROLE OF INDUSTRY

9. Main Sector of Economic Development

• Industry is viewed as leading sector to economic development. We

can have economies of scale by applying advanced technology and
division of labour and scientific management. So production and
employment will increase rapidly. This will bring economic growth
and capital formation.

10. Fast Growth of National and Per Capita Income

• Industrial development helps in the rapid growth of national and per

capita income. The history of economic development of advanced
countries shows that there is a close relation between the level of
industrial development and the level of national and per capita income.
 INTERRELATION BETWEEN AGRICULTURE AND
INDUSTRIAL DEVELOPMENT
• OVERDRAWN DICHOTOMY
• LIMITATIONS OF OVEREMPHASISING
INDUSTRIALISATION
• AGRICULTURE PROGRESS HAS A VITAL ROLE IN
DEVELOPMENT PROCESS
• EARLIER CONFONTRATION A FALSE ISSUE
• INTERRELATIONSHIP BETWEEN INDUSTRY AND
AGRICULTURE
 INTERRELATION AG AND INDUSTRY

• LDCs MORE PEOPLE ARE ENGAGED IN

AGRICULTURE FOR THEIR LIVLIHOOD THAN
OTHER SECTORS

• AG. GROWTH PROVIDES FOOD FOR NON-AG

LABOUR FORCE

• RAW MATERIAL FOR AGRO BASED INDUSTRY

• STIMULATES DOMESTIC DEMAND FOR

INDUSTRIAL GOODS
 INTERRELATION AG AND INDUSTRY

• INCREASE IN SAVINGS AND TAX REVENUE WHICH

CAN BE USED FOR FURTHER DEVELOPMENT

• EARN MORE FOREIGN EXCHANGE TO FINANCE

IMPORT OF CAPITAL , INTERMIDIATE GOODS AND
RAW MATERIAL FOR INDUSTRIALISATION

• FACILITATES DEVELOPMENT OF LABOUR-

INTENSIVE VILLAGE , SMALL AND MEDIUM
INDUSTRIES IN RURAL AND URBAN AREAS
 INTERRELATION AG AND INDUSTRY

• INITIALLY AG PROVIDE EMPLOYMENT TO 60 T0

70% POPULATION

• INCREASE IN AG PRODUCTION AND PRODUCTIVITY

RAISES RURAL INCOME

• RISING AG INCOME HAS A STRONG MULTIPLIER

EFFECT WHICH RAISES THE DEMAND FOR
DOMESTIC NON-AG GOODS AND SERVICES -
INCREASE IN INCOMES OF THOSE PROVIDING
GOODS AND SERVICES
 INTERRELATION AG AND INDUSTRY

• INDUSTRIALISATION BOON FOR AG

• INCREASE IN DEMAND FOR AG PRODUCTS MILK,
VEGITABLES ,EGGS,POULTRY etc.
• LABOUR INTENSIVE--- MORE WORK TO RURAL
POPULATION
• INCREASES THE AVAILABILITY OF CAPITAL FOR AG
SECTOR ----HELP IN MODERNISING OF AG AND
RAISING OF FARM OUT-PUT

• INDUSRIALISATION FOLLOWED BY URBANISATION---

VAST JOB OPPORTUNITIES TO RURAL POPULATION
 INTERRELATION AG INDUSTRY

• IMPROVED MEANS OF TRANSPORTATION –

EXPANSION OF MARKET-REMUNIRATIVE PRICES
FOR AG PRODUCTS

• URBANISATION FOLLOWS INDUSTRIALISATION—

LARGER FACILITIES FOR EDUCATION , TRAVEL

• AG AND INDUSTRIALISATION ARE INTERRELATED

• GROWTH OF ONE STIMULATES THE GROWTH OF
OTHER
 SERVICE SECTOR
• TRADE, HOTEL , TRANSPORTATION

• FINANCIAL , REAL ESTATE AND

PROFESSIONAL SEVICES

• PUBLIC ADMINISTRATION, DEFENCE AND

OTHER SERVICES
 SERVICE SECTOR

SERVICE SECTOR IN INDIA

IT-BPM FINTECH ISO 9001 14001

HEALTH CARE & TOURISM

SPACE

LOGISTICS AND TRANSPORTATION

OTHER SERVICES--- ANIMATION, GAMING, DUBBING

EDUCATION, SPORTS –IPL, IFL SPORTS MANGEMENT
LEGAL, RISK MANAGEMENT AND ADVISORY FUNCTION