Role of Industrial Sector :- Industrialization is important for the overall development of a country.
The following points explain the importance of industries. :-
- In the absence of industries, economic growth is dependent on agricultural development and human beings depend only on commodities like grain and coarse cloth. With the development of industries, the process of development gets diversified and people get many types of things like cars, fridges, TVs etc. which are a source of comfort and luxury in our life.
- Industries help in solving the growing problem like unemployment because it provides new employment opportunities which is more stable than the employment found in agriculture sector.
- In industries, machines and new technologies are used as well as development of the area where they are installed, hence it promotes modernization and regional balance.
- It increases both production and productivity, thereby increasing the level of GDP rapidly, thus helping in increasing the income of the society.
- It helps to modernize agriculture, which increases agricultural productivity, due to the use of tractors, threshers, and harvesters, agricultural productivity has increased.
- When all the goods start being manufactured in the country, then the dependence of the country on foreign countries decreases and leads the country towards self-reliant development.
- By increasing the productivity in the country, the surplus production can be sold to the rest of the world, which encourages exports, which is an essential element for the development of a country, thus industrialization is the basic component of the overall development of an economy.
- Industries have promoted urbanization, which has given birth to a new civilization, which work hard to get a high standard of living, due to this different societies have started coming closer to each other.
- Due to industrialization, there has been a greater need for the country’s infrastructure, so the demand for banking, insurance, traffic, communication roads, health, education has increased, due to this sector has also developed.
INDUSTRIAL POLICY RESOLUTION (IPR) 1956
Industrial Policy of 1956 :-
In the industrial policy of 1956, the following things were given more importance:-
(1) Classification of industries and increasing importance of the public sector: – In this policy, the entire industries of the country were divided into three major parts, whose purpose was to decide the role of private and public sector.
- 17 industries were included in Schedule (A), whose full responsibility for future development was entrusted to the state, in other words it included those industries which would be established by the state. Such as weapons, military materials, nuclear power, iron and steel, coal, minerals, oil, glass, zinc, filled machines etc.
- 12 industries were included in Schedule (B), which will be gradually taken over by the government, the government will be able to establish new industrial units in this area. The State may, if it deems fit, seek cooperation from private entrepreneurs. This includes road transport, maritime transport, chemical industry, machine tool, plastic, rubber industry, coal and iron industry which are not included in the above category.
- All the remaining industries are included in Schedule (C). The establishment of these industries has been left to the efforts of private entrepreneurs. But if the government wants, it can establish any industrial unit in this area also.
(2) Importance of development of cottage and small scale industries: In this policy, great importance has been given to the development of cottage and small scale industries. The following roles were assigned to these industries in the planned economy:
- Large scale employment
- Equal distribution of national income
- Full utilization of unused local resources
Industrial Licensing :-To set up industries in the private sector, it was made necessary to take a license from the government. Its main objective was to check the indiscriminate expansion of private industry.
(3) Industrial Concessions :–
In the process of industrialization, where the role of the government will be prominent, many concessions were provided to the private entrepreneurs for the establishment of industries in the backward areas of the country. These concessions included exemption in taxes for establishment of new industrial units in backward areas and supply of electricity at concessional rates.
Thus we understood that in the industrial policy of 1956, the emphasis was mainly on the expansion of the public sector, along with the development of the private sector was also done such as setting up financial institutions, giving adequate license to industries etc.
Role of Public Sector in India’s Economic Development
Public enterprises are those which are owned and managed by the central government and state government, their purpose is to do public welfare, their forms can be as follows.
1. Departmental Enterprises:- Indian Railways, Postal Telegraph Department, Atomic energy
2. Public Corporation:- Food Corporation of India, Life Insurance Corporation of India
3. Government Company:-Bhartiya Electronic Limited (BEL) Bhartiya Heavy Electronic Limited, Hindustan Machine Tools etc.
4. Holding Company :- Steel Authority of India Limited (SAIL)
Contribution to the economic development of India, the role of the public sector and government :-
Lack of Capital with Private Entrepreneur :- Industrial development in India required huge investment and at the time of independence only Tata and Birla were big entrepreneurs who could not meet the entire capital demand, Therefore, it was imperative for the State Government and the Central Government to take the burden of public sector development on themselves.
Motivation of investment: – Private entrepreneurs are not ready to invest until they are lured with profits and only the State Government and the Central Government can do this work.
Fear of Monopoly: – If the industrial structure had come under the control of a few people, then perhaps some other company like the East India Company would have been established in India. and also provide more employment opportunities.
Contribution to National Income : – The contribution of the public sector to the national income is increasing continuously. From 1960-61 to 2006-07 , the increase in net domestic product was almost double, more than 25% of the country’s net domestic product is received from the public sector.
Equal distribution of income and wealth: – Before independence, industries in India were under the private sector, due to which the inequality of income and wealth was increasing, so to prevent the centralization of economic resources, it is necessary to have a public sector, which would lead to equal distribution of income and wealth. |
Industrial Development: – At the time of independence, the pace of industrial development was very disappointing, so it is necessary to expand the government sector to accelerate the pace of industrial development.
Development of backward areas: – Industrial sector inequality can be reduced by coming to the government sector because the government establishes industries in backward areas, which leads to the development of that area.
Defense: – For the defense of the country and for the production of essential commodities, we cannot rely only on the private sector, so it is necessary to have a public sector.
Other Contribution: – To provide employment, to strengthen the industrial structure, to promote import substitution, it is necessary to have a public sector.
Small scale industries: – Small and cottage industries are called small scale industries, in which capital investment is done from Rs 25 lakh to Rs 5 crore, in addition to this, the industries in which this investment is made up to 25 lakhs are classified as very small industries. Often production in these industries is done through machines and power tools have a special place here, in addition to this, the raw materials for these industries are procured from big markets of the country.
Contribution of small scale industries in the economic development of Indian economy :-
Increase in employment: – Small and cottage industries are often labor intensive and very little capital is required for their operation. Therefore, this industry can be easily operated by ordinary person. Under-employed persons and farmers also get employment easily in free time from these industries. About 2 lakh people get employment in these industries every year.
Capital Output Ratio: – Capital output ratio is higher in these industries than large industries, that is, by making less investment (investment) in small and cottage industries, more output can be obtained than large industries, according to a survey, for a unit of capital. With the use of small scale industries, there is an increase of 1.1% in the volume of production and 0.48% in large industries, so more production can be obtained by investing less in them.
Helpful in equitable distribution of income: – In large industries, high officials are given more salary and smaller employees are given less salary. Due to this inequality of income is encouraged, Whereas in small and cottage industries, ownership is often in the hands of ordinary individuals and families, where there is neither a big position nor a small one, so almost the same income is made in these industries.
Regional Balanced Development:- Good infrastructure is required to establish large scale industries, that is why these industries are established in cities. Due to this regional imbalance is get promoted , while on the other hand small and cottage industries can be easily developed in backward areas also. In this way these industries promote regional balance.
Stability of employment: – Unemployment spreads when the demand for the goods produced in large industries is low. But in cottage industries, items used in daily life are often manufactured and they are spread in every corner of the country, so there is less fear of problems like recession and unemployment in these industries.
Lack of industrial problems: – In large scale industries, there are often debates between the labor organization and the management. Due to this labor strikes, lockouts keep happening in these industries, but these problems remain absent in small scale industries.
Speedy production: – No special technical knowledge and experience is required for the establishment, operation etc. of small scale industries. Therefore, these industries can be established even by an ordinary person and it takes the least time to start production work and starts getting profits soon.
Contribution to exports: – At present, the contribution of small and cottage industries in India’s total exports has been remarkable. The contribution of these industries in the total exports of the country was only 11% in 1970-71 , which has increased to 33% in 1996-97 , so in these 26 years their contribution to export has increased three times, It mainly includes ready-made garments, leather goods, sports goods, engineering goods.
Features of the Industrial Development Strategy for the 1950-1990 Period:-
- In this policy of development, special attention was paid to the centralization of public industries.
- The private sector had to take a special license to set up industries and the production also had to be done only up to a limit, for this a special MRTP Act was made.
- An attempt was made to make those goods which were imported from abroad as far as possible in their own country, this policy is known as “import substitution”, its main objective was to make them self-sufficient in the industrial sector.
- In order to protect domestic industries from foreign competition, heavy duty was imposed on imports and import quota was also fixed.
- Large scale industries were built in the country so that the foundation of the country’s infrastructure should be strengthened.
- To reduce the inequality of income in the country, new employment opportunities were made available.
Good Effects:
- Due to this a huge investment was made in the country which saw a 6 percent increase in industrial production.
- The maximum development in the industrial sector has happened in the electronics industry, it is called sunrise industry.
- Talking about large scale industries, the steel factories of Rourkela and Bhilai strengthened the infrastructure.
- The process of balanced development has started by promoting small and cottage industries.
Bad Effects :-
- The monopoly of the public sector promoted inefficiency, corruption and theft etc., that’s why the scarce resources of the country were not used efficiently.
- The process of balanced development has started with the promotion of small and cottage industries, but the quality of industries has decreased at the international level.
- If there was no competition in the industries, they were not motivated to produce more and neither did modern technology get a boost.
- The promotion of “import substitution” reduced foreign exchange so much that we had to mortgage our gold reserves with the World Bank to take loans from abroad.
Foreign Trade:–
At the time of independence, raw materials were exported in abundance from India to Britain, on the other hand, finished goods from Britain were imported into India.
In particular our trade balance was favorable (Export > Import) but later our foreign trade started coming from UAE, China, Switzerland, Singapore, Australia, Iran, Hong Kong, Korea, Indonesia, UK, Japan and Belgium The main among them are UAE and China.
After independence, India’s foreign trade recorded a remarkable change due to five year plans viz.
(i) Decline in the percentage share of agricultural exports: – The reason for this was that due to the promotion of small industries in India, the use of agricultural products in the form of raw material increased in the country and Rapid increase was also seen in the population, that’s why their demand for domestic use also increased, thus reducing the contribution of agricultural commodities in exports.
(ii) Increase in the percentage share of manufactured goods in total exports:- Due to industrial development, there was a considerable increase in the production of manufactured goods and surplus was sold to foreign countries as exports.
(iii) Change in the direction of export trade and import trade:- India used to export jute, tea, food grains and minerals earlier, but due to the planned development, the demand for these goods increased in the country, which reduced their exports.
Due to the five year plans, there was a big boom in foreign trade, in the first plan, foreign trade was 6760 crores, which increased to 46,10,335 crores in the tenth plan, which shows an increase of 682 times, but this contribution to world trade was very less. Our contribution in 1950-51 It was 1.8%, which was reduced to only 0.5% in 1991, so by the end of the Seventh Plan this change was nominal.
Note :- Due to the new policy of 1991, it has also increased.
Foreign Trade Policy :-
In India’s first seven five-year plans, trading was commonly referred to as ‘Inward looking Trade Strategy’. This strategy is technically known as ‘import substitution’.
Import substitution refers to the promotion of the production of those goods within the country, the goods which are imported from abroad. In order to protect these industries, heavy import duties were imposed and their quota was fixed, the main objective of doing this was to save foreign exchange and at the same time the policy of promoting exports was also adopted so that our participation in international markets would increase. and earn more and more foreign exchange.
Impact of Inward looking Trade Strategy on domestic industry.
1. It helped in saving foreign exchange by reducing the import of foreign goods.
2. This policy created a protected market for India, which has increased the demand for goods produced from domestic industries globally. Now our industries are no longer limited to the textile and jute industry, it includes a large range of engineering goods and consumer goods.
3. It helped in creating a strong industrial base in our country, due to which economic development started rapidly and new employment opportunities started coming in SSI.
4. This led to the development of sunrise industries i.e. electronic industry because the government imposed heavy duty on the import of these items, which was about 400 percent in the beginning. These industries would have been ruined if they did not provide protection.
Criticism of Inward looking Trade Strategy
1. Lack of Competition:- Modernization is encouraged only when there is competition among industries that is why only FIAT and Ambassador cars took advantage of monopoly due to patronage in automobile industries of India.
2. Expansion of public industries: – In any country, goods for public welfare should be manufactured only by public industries, but when bread and shoes were also manufactured from these industries, it was an unwise decision because it allowed private enterprises to invest. Opportunities were being squandered due to which they were being forced to do business outside the country.
3. Inefficient development of public monopoly: – The biggest example of this is telecommunications, till 1990, it was under the control of the government and had to wait for years to get the connection and today we are easily taking advantage of the facility by taking its connection.
4. Running sick enterprises :- Public enterprises were running in losses, the government was not able to stop them even if they wanted to because both labor unions and opposition started accusing them of snatching jobs and social injustice, so the government should run these industries even in losses. it was a their compulsion.