Strategy of Industrial Growth | IPR- 1956 | Features | Impacts | Chapter 4 |
Industry refers to the group of enterprise that produce and supply goods and services in the economy which are classified into three category namely; Primary, Secondary and Tertiary.
Significance of Industry
Industrial sector plays a vital role in for the growth and development of the country.
Some points which highlights the significance of industry are as follow:
- Centre of Country’s Growth: Industrial sector helps in the incrementation of Gross Domestic Product (GDP) through the structural transformation in a country. It works as a secondary sector of economy which uses the output from agriculture sector or primary sector and converts it into finished goods which can be consumed by consumers. For example, use of sugarcane for making sugar by sugar mills.
- Growth of Economy: With the rise in the level of production, the growth in a county also rises as GDP rises which directly or indirectly helps in the growth of economy.
- Promotes Modernisation: The setting up of industry helps in the development of that area as investments in that place are taken at a very high rate. Government of India also promotes this by setting up Special Economic Zone (SEZ), in these zones the rate of taxes charged by the government is less whereas subsidies are also provided for inducing the investment by the private sector.
- Source of Employment and Farming Tools: Industrial sector provides employment opportunity. When agriculture is over-burdened, the labour from that sector shifts to industrial sector which shows that the industrial sector has soaked a large number of labour force.
Industrial sector also provide machineries to the agriculture sector such as harvester, tractor etc. whereby the growth and development of agriculture sector increases.
- Growth of Infrastructure: With spread of industries in every corner of countries helps in the expansion of infrastructural facilities like banking, insurance, communication, power etc.
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Participation of State in Industrial/ Industry Development
Although industrial sector provides growth to the economy but after the independence of the country the industrial sector was very poor and there was lack of investment in the sector. Therefore, Government of India has taken direct participation for the development of industries in the country.
Essentials related to the involvement of public sector are as follow:
- Low Induced Investment: After independence the level of income was very low due to which the level of demand got low. Therefore, owing to low level of demand the size of the market squeezed due to which the private investor did not want to invest much which resulted in the fall of economy in a vicious circle and was broken by the investment by the public sector by which the industrial process observed a rise.
- Growth with Social Justice: Public sector had invested money not for the maximization of profit but for the growth in the economy. At that time, the employment opportunities were very fewer which was increased by the investment made by the public sector.
- Development of Infrastructure and GDP: At the time of independence, the industrial sector was not in a good condition and majority of GDP was dependent on agriculture sector of the economy. Therefore, to increase more GDP and to lessen the burden of the agriculture sector, public sector had come up with a big push of investment in industrial sector.
- Lack of Investment: The investment in the industrial sector was very less as there was lack of private investment in the country due to which industrial sector in India needed a big push of investment as at the time of independence. There were only two big industrial houses established in India but India required more. Therefore, Government sector intervened by directly participating in the industrial activities of the country.
Industrial Policy Resolution – 1956 (IPR-1956)
According to the Industrial Policy Resolution – 1956, it allowed the government sector to play a leading role in the industrial process with the social injustice.
Features of IPR-1956
The principal/Features of IPR-1956 are as follow:
- Three-fold Classification of Industries: Under this, the industries are classified into three categories, firstly which is exclusively established as public sector enterprise. Secondly, those industries which are established as private and public sector. The third category includes all of the industries which are not covered in the first and second category.
- Industrial Licensing: License policy was established by the government to promote the regional equality. Under this, private sectors were asked to establish only through the licensing process. This was promoted to establish the private entrepreneurs in the backward regions of the country and to promote the social welfare rather than private profit. Both type of industries require license; for the establishment of new firm and to increase the production in existing one.
- Industrial Concession: Private entrepreneurs were provided with reduction in taxes and subsidies on power supply to establish themselves in the backward regions of the country.
Development of Small Scale Industry (SSI)
Small Scale Industries (SSI) is the type of industries whose capital does not exceeds .over Rs. 5 crore. But at the beginning, SSIs were those industries whose capital did not exceed Rs. 5 lakh. These Industries were established to generate the employment opportunities in the country.
Features of Small Scale Industry (SSI)
Three main characteristics of SSIs are as follow:
- Labour Intensive: These industries are generally labour intensive whereas large industries are capital intensive. Therefore, SSIs are employment-friendly for they include direct participation of labour in the production activities. SSIs were promoted to achieve full employment level.
- Needs Small Investment: SSIs need small investment to establish themselves whereas large scale require more capital than small scale. Equity is also promoted by employing greater per unit of investment in SSIs as compare to large scale industries.
- Flexible in Location: The large scale industries are not location-friendly and incur a high cost of transportation for the transportation of raw material whereas SSIs are flexible in location. Therefore, they contribute balanced regional growth.
Features of Industrial Growth from 1950 to 1990
Some of the silent features of industrial growth strategies are as follow:
- Public sector played central role in the industrial process.
- Private enterprises were asked to play secondary role in the industrial process through licensing process.
- Industrial process focused on import substitution. Under this more emphasis is given on those goods which are imported from rest of the world.
- Domestic industries were protected from foreign trade by imposing heavy duty on import and fixing import quotas so that growth of domestic industries can be fastened.
- Large industries were developed with the aim of building up infrastructure of the country whereas small industries were developed with the aim of building up employment opportunity in the country.
Good Effects of Industrialisation
- Growth of economy got a big push and a rise in the output level in the economy.
- SSIs made a substantial contribution for the growth process.
- Large-scale industries showed a greater growth in the country.
- Diversification in the domestic industries marked.
Bad Effects of Industrialisation
- There was monopoly of the public sector in the country.
- Domestic industries failed to achieve international standards in the quality of the product.
- Foreign reserves started shrinking due to the adaptation of technique like import substitution.
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