Read this essay on the Industries in India: Evolution, Types, Characteristics and Causes of Slow Growth of Industries in India.

Essay Contents:

  1. Essay on the Evolution of Indian Industries
  2. Essay on the Types of Industries
  3. Essay on the Characteristics of Modern Industry
  4. Essay on Industrial Productivity
  5. Essay on the Causes of Slow Growth of Industries

Essay # 1. Evolution of Indian Industries:

In 1919 first world war came to an end and with that economic depression started, which continued all over the world upto 1933. But inspite of this in the country, there was progress on the industrial front. Production of Steel ingot rose from 1.3 lakhs in 1922 to 10.42 lakhs in 1935, which was a rise of about 800%.

Similarly production of Cotton goods increased from 1714 million yards, which was about 250%; output of Match industry went up by 38%, that of Paper by 180% and that of Cane Sugar by about 400%. There was considerable increase in production of engineering goods and those of the electrical goods also started.

Second World War and Indian Industry:

Inspite of economic depression, industries in India made some progress, though as compared with the consumption, population and area, the output on the industrial field was negligible. It was at this difficult time that Second World War broke out; Indian industries now received bulk orders for the supply of the goods to meet day to day demands of the armies, which included not only British soldiers, but soldiers all over the world.

In fact, India became one of the important centres of supplies of war material. Production of goods increased but only in limited sphere. In order to meet needs, particularly war needs, new industrial enterprises were started. Extra plants were set up. In order to increase production, factories were made to work in two shifts.

Similarly organisational and technical improvements were made to get better production. Every machine was made to work to its fullest capacity and where necessary, new plants were added to the existing ones. Industrial production on the whole increased from 104% in 1938 to 100% in 1945; base year 1937 being equal to 100.

Some of new industries which were started during World War II included Ferro Silicon, Ferro manganese, copper, copper sheets, wires, cables, diesel engines, pumps, bicycles, machine tools, cutting tools, textile, tea, caustic soda and chlorine etc. On the whole number of companies in 1945 went upto 14,859 from 11,114 in 1939. Similarly, capital investment in the industries also increased from Rs. 290 crores in 1939 to Rs. 389 crores in 1945.

During this period new industries were also started but if this progress is viewed impartially, it will be observed that it was very slow. Attention was paid and development was made only in respect of industries which were useful for the production of raw material. No attempt was made to produce material, which was of either day to day use or with which common man was concerned.

Thus the needs of common man were completely ignored and Industrial growth had nothing to do with the millions spread all over the country. Moreover there were certain adverse effects on the industrial economy, due to certain forces, which were very active during war period and very adversely influenced industrial growth.

Some of the important factors were:

1. Heavy Strains on the Industry:

During war period industry was put under heavy strains. The machines were put to work from morning till night. Every plant and machinery deteriorated and there was heavy wear and tear of machines.

2. Ignoring of Consumption Goods:

During war days every effort was made to produce only such goods which were useful for meeting war needs. The result was that production of consumption goods was completely ignored. There was inflation in the market and purchasing capacity of the people considerably went down. Thus whatsoever was available, that also could not be purchased by the poor and weaker sections of the society. There were also controls and corruption in the society.

3. Exploitation of Workers:

During this period every labourer and worker was required to produce more and more, because there was heavy demand for the goods. But they were not paid their due share in the profits. Their wages too kept very low. The result was that they were exploited and the owners got profit out of their miserable conditions.

4. Ignoring Long Term Factors:

While setting up new industries during war period no long term factors were taken into consideration. The only factors which were taken into consideration included scarcity of resources and the problems created by raw material. This proved very harmful for the industries in the long run.

5. Large Scale Inter-Locking of Funds:

During the war days many industrial units gained heavy profits. The result of this was that the money got blocked up in the hands of few industrialists. The concentration of wealth in few hands resulted in many social evils and malpractices.

The few powerful people who thus emerged began to control whole industrial system of the country. They formed groups and joint stock companies. Similarly they cared more for their own interests rather than the interests of the shareholders and the workers.

6. No Balanced Growth:

No care was taken about ensuring that the growth was balanced and quite well planned. On the other hand an attempt was made to set up industries as quickly as possible, so that war efforts were not slackened. Though immediate needs were met, yet the society had to pay for this ill planning during the year which followed after war period.

Essay # 2. Types of Industries:

In every country, industries are given encouragement so that these flourish and national needs and necessities are met from within the country.

But industries are of different types and kinds which may briefly be discussed as under:

(1) Cottage Industries:

These are the industries in which not much capital or space is required. Usually a craftsman or few of them combine together work at their residence or with small accommodation which they manage to get on rent or have their own. The members of the family assist the craftsman in his work. Once the goods have been produced, the craftsman himself manages to sell them to his self- created customers.

In some advanced countries of the world, like Japan and Switzerland, cottage industries play a very important role in national economy. The greatest advantage of cottage industries is that manpower is not wasted and the people engage themselves in these industries usually in their spare time.

(2) Small Scale Industries:

‘Small’ scale industry is a comparative and relative term. But usually such an industry is an individual’s adventure. A person with some capital starts the industry and employs people to work under him. In small scale industries it is not the craftsmanship or the manual power which counts, but it is machine and technical knowhow which gets preference.

(3) Private Sector Industries:

Then comes private sector industry. It is a kind of industry which is set up by few individuals with their own capital. They manufacture such commodities, which according to them, will be readily accepted by the society and through which they will get maximum profit. In such an industry profit or loss is that of the individual or individuals who have set up the industry. Such an industry has considerable freedom in the personnel policy.

(4) Large Scale Industries:

Large scale industries are the nerve centre of a nation. These industries need large capital, machine and space. In it there is great respect for technical experts. There is clear division of labour and each one is required to confine oneself to a particular job allotted to him. Similarly whole industry works under a well organised system. The contacts between the management and the employees are impersonal rather than personal. Large scale industries are usually faced with problems of employer-employee relations.

(5) Public Sector Industry:

But today many states feel that private sector industries do not take social needs into consideration. It is also felt that these industries exploit their employees to the maximum. Accordingly in very many states of the world the states themselves have set up important industries. The money needed in setting up such industries is spent by the state. The profit or loss in running such industries is borne by the society as a whole.

(6) Joint Sector Industry:

It is a type of industry in which capital and control is neither exclusively in the hands of the state nor that of the private individuals, but in it, both the state and the private individuals combine together. In such an industry usually the share capital and investment of state is more than that of the private individuals thereby giving the former a weightage or an upper hand over the later.

These are some of the important types of industries in every society. But the greatest need for every new industry is that it should be given sufficient protection so that it is in a position to face competition from the outside world. In case no protection is given, the result will be that it will not survive competition from more developed countries and be killed in its infancy.

Essay # 3. Characteristics of Modern Industry:

Modern industrial organisation is quite different from the past. In the past, there was direct, close and personal relationship between the employers and the employees. In many cases crafts men used to work at their residences engaging all the members in the work, in one way or the other. They also used to take pride in the nature of their work. There was no division of labour and also no problem of distribution or consumption.

The producer himself was the distributor. Where an employer engaged others to do work for him, iron law of wages was applied. The employee was paid so little that it was not only difficult but rather impossible for him to make his both ends meet. He was not allowed to raise his voice and there was no job security and his job was always threatened and ever in risk.

But in so far as modern industry is concerned conditions are quite different.

Modern industry has its own characteristics which may briefly be discussed as under:

1. Big Industries:

Our modern industries are usually quite big in which a large number of people are employed all belonging to different cadres holding high and low positions, skilled, semi-skilled and un-skilled.

2. Trade Unionism:

Those who work in an industry usually organise themselves into trade union. These organised people then try to bargain with the management for better working conditions, better emoluments and for getting other facilities.

3. Impersonal Character:

In modern industry worker has no close affiliation or association with the goods which he is producing. It is primarily because one who starts the work does not finish it. It is to pass through various stages before it completely becomes a finished product. The top bosses meet together and have personal contacts only and do not know much about workers.

4. Amenities:

In every industry employer is supposed to provide amenities to the employees. He is to see that the employees have all such amenities which are conducive for efficient working. Similarly he is also to see that safety has been provided to them, if they are working on dangerous machines.

5. Headache of Management:

When interests of the workers themselves clash it becomes the headache of management to settle them. Not only this, but the management is required to create capital, to make arrangements for the continued supply of raw material and sale of the finished products.

6. Need for Money:

A good modern industry cannot run without finances. In the past a craftsman could manage with little money, but today heavy finances and amounts are needed to keep the industry running.

7. Stress on Organisation:

In industry today, the employer lays more stress on organisation rather than the employee. He will try to popular his brand rather than the craftsman. What he believes is that once his organisation is sound and his brand has become popular, the things will go smooth, whether there is one craftsman or the other working on that.

8. Division of Labour:

In the past there used to be no division of labour in the industry. But today there is clear division of labour. Each person is required to do only a particular type of job, leaving the rest to the care of the others. One does not know through how many stages raw material will pass before taking the shape of finished product.

9. Problem of Sale:

In the past craftsmen used to produce very limited number of goods, which he could very easily sell in the market. But today articles are purchased in bulk. Bulk production has created problem of sale in the market. Little slowness in sale will mean hoarding of stocks, which will in turn create problem of raising additional capitals, for keeping the factory moving.

10. Need for Specialisation:

Each industry tries to have specialisation in one field or the other. It is with this end in view that need and necessity of specialists in each industry is increasing and they are commanding more and more respect.

11. Desire for Monopoly:

Still another feature is that every industry wants to have less competition and more monopoly conditions. It wants to avoid wastage of money and human resources in competition. But inspite of this desire, almost every industry is faced with competitions from other industries.

12. Adequate Wages:

In our industry of today iron law of wages cannot apply. Today it is believed that an employee must get adequate wages, so that he can pull on reasonably well, along with his family. The industry should pay him enough so that he can maintain his social status.

13. Stress on Profit:

An industrialist of today cares more for his product than for anything else. He wants to be sure that minimum is spent and maximum is saved so that his margin of profit increases. More an industrialist saves, happier he feels.

14. Less Manual Labour:

In an advanced and developed industry there will be less manual labour. It is because today it is believed that machine can work with more accuracy, uniformally and quickly as compared with the manual labour.

15. Stress on Human Relations:

Then in our industry of today much stress is laid on establishing and having happy and healthy human relations. The employer will try to approach every problem on human grounds, if really today he wants to progress and prosper.

16. Rise of Industrialists:

Today, needs and necessities of the society have become very complex and complicated. In order to meet these needs, a class of industrialists, who have sufficient wealth, has come into existence. These people invest and try to add to their wealth by earning. These people are socially respected and enjoy great social status.

Essay # 4. Industrial Productivity:

i. Factors Causing Low Productivity:

One of the factors making for low productivity is constraints on production. It is useful here to note the trends in capacity utilisation in the industrial sector. Surprisingly, in spite of the importance of the subject, very few systematic studies exist, especially at the aggregate level. Given this position, the results put out by the Centre for monitoring the Indian economy on capacity utilisation in manufacturing industries come too handy.

According to these results, in 1980 capacity utilisation in manufacturing industries was 74.4 per cent, suggesting that capacity is under-utilised to the extent of a maximum of 25 per cent.

ii. Falling Capital Utilisation:

Another disturbing Act is that capacity utilisation is exhibiting a falling trend. During the decade of the seventies capacity utilisation has fallen from 85.2 percent in 1970 to 74.4 per cent in 1980. But the data also threw up some beautiful signs since the trend can be broken up into two distinct phases, the first one from 1970 to 1974 exhibiting a market fall in capacity utilisation.

At this stage, it would be instructive to note the rationale for fall in capacity utilisation. The overall growth in capacity during the period has been around 88 per cent as compared to a growth of 64 per cent in production. Capacity growth of the order of 6.5 per cent per annum could not by any reasonable criteria be considered excessive.

iii. Capacity Utilisation:

Information of capacity utilisation presented in ICICI’s financial performance of companies for 1979- 80, is also interesting. According to data presented in the study, the median value of capacity utilisation for sample of238 public limited companies was 67 per cent in 1979-80, showing a marginal decline from the previous year. The utilisation was especially low in companies in the machinery manufacture industries.

Factors Causing Low Utilisation of Capacity:

This lower utilisation of capacity not only in industry but also in agriculture could be traced to many factors. In some sectors, inadequate demand, as currently in textiles, could be the constraint. But it is now widely recognised that quite some part of under-utilisation of capacity could be accounted for by deficiencies in the basic infrastructure of power, coal and transport. Many of these are being attended to and many of the lagging sectors have shown improved performance lately.

iv. Stagnation in Productivity:

Stagnation in productivity can also be overcome by improving the incentives to work and lessening industrial disputes. However, one of the unfortunate elements in a situation where productivity is to be stepped up is the loss in mandays due to unhealthy industrial relations. Since 1951 there have been an increasing number of losses of mandays.

This is an area where action could bring quick results by way of increased-production to boost productivity. Recent measures to limit strikes should be considered as only the first step to provide the breathing time necessary to create an atmosphere where the basic causes leading to the need for strikes are less end as it is difficult to completely eliminate them.

Essay # 5. Causes of Slow Growth of Industries:

The data pertaining to the rate of industrial growth indicates that industrial growth was rapid during the first two decades, especially during the Second and Third Plans. Industrial growth, however, slowed down after the Third Plan. The scenario of consistent structural deterioration since the mid-sixties was primarily the result of policy actions and inactions including the downgrading of production process.

The following factors account for the slow- growth of industries since mid-sixties:

(i) Fall in Savings and Capital Formation:

Both net domestic saving and net domestic capital formation steadily rose over the first three Plans period. Thereafter, the absolute level of net investment in real terms fell even below the First Plan level. For the ten years period from i.e. 1966- 67 to 1976-77, the average growth rate in real investment worked out to 3.1 per cent per annum as against 12.6 per cent per annum during the preceding decade.

In 1985-86, the growth rate of gross domestic capital formation rose to 24.6 per cent but it came down to 23.4 per cent in 1986- 87, and further to 22.1 in 1987-88. In 1989-90, 1990-91, 1991-92, 1992-93, 1993-94 and 1994-95 the growth rate of-gross domestic capital formation rose but due to the stringent monetary and fiscal policies of the government the industrial growth rate decelerated.

(ii) Slowing Down of Public Sector Investment:

The public sector is a major source of resource mobilisation in India. Investment in the public sector had slowed down after the Third Plan. Whereas the share of public sector in net domestic product steadily increased, the percentage of public sector saving to the sector’s share in net domestic product declined considerably.

The savings of the public sector have declined continuously from 3.2 per cent of gross domestic product in 1985-86 to 1.7 per cent in 1994-95. The declining trend of saving and capital formation in the public sector adversely affected the industrial growth.

(iii) Relaxation of Industrial Controls:

It was a common feeling that the public sector is encroaching too much in the spare of industrial activities and the private sector is subjected to some unnecessary controls abolition of industrial licensing (except in case of 6 industries), automatic expansion of plant capacities, import relaxation, abolition of asset limit on MRTP companies etc., led to many distortions, and economic difficulties.

(iv) Fall in Development Expenditure:

Development expenditure of the Central Government had formed about 60 per cent of the total expenditure in 1964-65; thereafter, it declined to such a low proportion as 45.2 per cent in 1973-74, but rose to 45.6 per cent in the Budget 1996-97. The disproportionate growth of non-development expenditure has been responsible for erosion in the development effort.

(v) Shift in Terms of Trade:

Since mid-sixties a shift in terms of trade in favour of the agricultural sector has taken place. Industrial stagnation has followed from the relatively more successful assertion of the bargaining strength of industrialist class by landlords and the rural rich in recent years.

(vi) Centralisation of Capital:

Centralisation of capital takes place when large business houses take control of smaller companies by devices like intercorporate investment.

(vii) Speculative Dealings:

Economic surplus concentrated in the hands of rich farmers and large industries has been used to a greater extent for speculative purposes. This has led to fall in resources for development.

(ix) Political Instability:

After 1989 there has been a climate of political instability which has adversely affected both the domestic conditions following the unfortunate Ayodhya incidents have also affected industrial activities.

In brief, the Indian economy is suffering from the problem of structural retrogression which has slowed the pace of industrialisation. If the trend is to be reversed, what is imperative is that the rate of investment in the economy should be stepped up considerably.