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the Role of Industrialization in the economic development of India!

Industrialization refers to a process of change in the technology used to produce goods and
According to Wilbert Emoore and G. R. Madan, it is a much broader process of economic
development which has in view the integrated development of all other sectors, i.e.
agriculture, power, transport and other services.
the role of industrializtion in the development of country can be analysed as follows:
i. Increase in per capita income.
ii. Growth in international trade
iii. High level of investment
iv. Generation of employment
v. Meets the requirements of people


Industrialization plays a vital role in the economic development of an underdeveloped
country. The historical facts reveal that all the developed countries of the world broke the
vicious circle of underdevelopment by industrialization. Pakistan being a developing country
also wants to achieve higher standard of living for its masses. It has therefore, embarked upon
various programmers of industrialization. The policies of privatization, deregulation and
liberalization of the economy are being pursued. The role of industrialization in economic
development is summed up as under.
1. Increase in national income.

Industrialization makes possible the optimum utilization of the scarce resources of the
country. It helps in increasing the quantity and quality of various kinds of manufactured
goods and thereby make a larger contribution to gross national product. (GNP).
2. Higher standard of living.
Industrialization helps in increasing the value of output per worker. The income of the labour
due to higher productivity increases. The rise in income raises the living standard of the
3. Economic stability.
Industrialization is the best way of providing economic stability to the country. A nation
which depends upon the production and export of raw material alone cannot achieve a rapid
rate of economic growth. The uncertainties of Nature, the restricted and fluctuating demand
of the agricultural raw material hampers economic progress and leads to an unstable
4. Improvement in balance of payments.
Industrialization brings structural changes in the pattern of foreign trade of the country. It
helps in increasing the export of manufactured goods and thus earn foreign exchange. On the
other hand the processing of raw material at home curtails the import of goods and thereby
helps in conserving foreign exchange. The export orientation and import substitution effects
of industrialization help in the improvement of balance of payments. In Pakistan, the exports
of semi manufactured and manufactured goods showed favorable trend.
5. Stimulates progress in other sectors.
Industrialization stimulates progress in other sectors of the economy. A developments of one
industry leads to the development and expansion of other industries. For instance the
construction of a transistor radio plant, develops the small battery industry (backward
linkage). The construction of milk processing plants adds to its line of production ice cream.
cone cream plants etc.. (forward linkage).
6. Increased employment opportunities.
Industrialization provides increased employment opportunities in small and large scale
industries. In an agrarian economy, industry absorbs underemployed and unemployed
workers of agricultural sector and thereby increases the income of the community.
7. Promotes specialization.
Industrialization promotes specialization of labour. The division of work increases the
marginal value product of labour. The income of worker in the industrial sector is therefore
higher than that of a worker in agricultural sector.
8. Rise in agricultural production.

Industrialization provides machinery like tractors thrashers harvesters, bulldozers, transport,

aerial spray etc, to be used in the farm sector. The increased use of modern inputs has
increased the yield of crops per hectare. The increase in the income of the farmers has given
boost to economic development in the country.
9. Easy to control industrial activity.
The industrial activity compared to agricultural is easy to control. The industrial production
can be expanded or cut down according to the price cost and demand of the product.
10. Large scope for technological progress.
Industrialization provides larger scope for on the job training and technological progress. The
use of advanced technology increases the scale of production, reduces cost of production,
improves quality of the product and helps in widening of the market.
11. Reduction in the rate of population growth.
Industrialization leads to migration of surplus labour from farm sector to the industries
mostly situated in urban centers. In cities improved facilities of sanitation and health care are
available. People through the adoption of family planning measures, reduce the rate of
population growth.
13. Provision for defense.
If a country is industrialized, it can manufacture arms and ammunition necessary for the
defense of the country. A nation which depends on other countries for the supply of
ammunition will eventually suffer and may face defeat. The two wars with India should be an
eye opener for Pakistan.
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. Let us discuss,
in detail, the role of industrialization in the Indian economy.
1. Raising Income: The first important role is that industrial development provide a secure
basis for a rapid growth of income. The empirical evidence suggests a close correspondence
between the high level of income and industrial development. In the industrially developed
countries, for example, the GNP per capita income is very high at around $ 28,000. Whereas
for the industrially backward countries it is very low at around $ 400 only.
2. Changing the Structure of the Economy: In order to develop the economy
underdeveloped countries need structural change through industrialization. History shows
that in the process of becoming developed economy the share of the industrial sector should
rise and that of the agricultural sector decline. This is only possible through deliberate
industrialization. As a result, the benefits of industrialization will trickle down to the other

sectors of the economy in the form of the development of agricultural and service sectors
leading to the rise in employment, output and income.
3. Meeting High-Income Demands: Beyond certain limits, the demands of the people are
usually for industrial products alone. After having met the needs of food, income of the
people are spent mostly on manufactured goods. This means the income-elasticity of demand
for the manufactured goods is high and that of agricultural products is low. To meet these
demands and increase the economys output underdeveloped countries need industrialization.
4. Overcoming Deterioration in the Terms of Trade: Underdeveloped countries
like India need industrialization to free themselves from the adverse effects of fluctuations in
the prices of primary products and deterioration in their terms of trade. Such countries mainly
export primary products and import manufactured goods. The prices of primary products
have been falling or are stable whereas the prices of manufactured products have been rising.
This led to deterioration in the terms of trade of the LDCs. For economic development such
countries must shake off their dependence on primary products. They should adopt import
substituting and export oriented industrialization.
5. Absorbing Surplus Labour (Employment Generation): Underdeveloped countries
like India are characterized by surplus labour and rapidly growing population. To absorb all
the surplus labour it is essential to industrialise the country rapidly. It is the establishment of
industries alone that can generate employment opportunities on an accelerated rate.
6. Bringing Technological Progress: Research and Development is associated with the
process of industrialization. The development of industries producing capital goods i.e.,
machines, equipment etc., enables a country to produce a variety of goods in large quantities
and at low costs, make for technological progress and change in the outlook of the people.
This results in bringing about an industrial civilization or environment for rapid progress
which is necessary for any healthy economy.
7. Strengthening the Economy: Industrialisation of the country can provide the necessary
elements for strengthening the economy. In this regard the following points may be noted.
(a) Industrialisation makes possible the production of goods like railways, dams, etc. which
cannot be imported. These economic infrastructures are essential for the future growth of the
(b) It is through the establishment of industries that one can impart elasticity to the system
and overcome the historically given position of a primary producing country. Thus, with
industrialization we can change the comparative advantage of the country to suit its
resources and potentialities of manpower.
(c) Through industrialization the requirements for the development of agriculture can be met.
For example, improved farm-implements, chemical fertilizers, storage and transport facilities,
etc., appropriate to our own conditions can be adequately provided only by our own

(d) The industrial development imparts to an economy dynamic element in the form of rapid
growth and a diversified economic structure which make it a progressive economy.
(e) Providing for Security: Industrialisation is needed to provide for the countrys security.
This consideration becomes all the more critical when some international crisis develops. In
such situation, dependence of foreign sources for defence materials is a risky affair. It is only
through industrial development in a big way that the national objective of self-reliance in
defence materials can be achieved.
industrial policy refers to those principles and activities being pursued and performed to
industrialize a country. It studies taxation system, protection policy, labour and capital,
cottage and small industries, foreign capital and all other related matters concerned with
industries of a country.
Prior to independence, government was guided has by the principle of laissez-faire and
industrial development was left exclusively to the private control.
It is only after independence that government has taken keen interest to develop industries of
the country. At present, industrial development is fully controlled in and regulated by the
Role of Industrialization
There is no second opinion to say that industrialization is an effort of finding solution to the
problem of poverty, insecurity, over population and ending backwardness. However, its role
is explained as under:
1. Leading Sector to Economic Growth:
industrialization is considered crucial to development strategy as it lifts our stagnation. It
brings forth both backward and forward linkage effort.
The success of western countries followed by Asian countries, Japan is the standing instance
of what industrialization can do to a nation.
2. Gainful Employment Opportunities:
No wonder, industrial development can greatly increase gainful employment opportunities
especially in less developed countries. Generally, these countries are characterized by the
existence of surplus labour. Thus, it opens avenues for employing the surplus labour.
3. Raising Productivity:
The modern industry can directly or indirectly help to raise productivity of the economy. This
is due to better organization and technology. Moreover, it is accompanied by the expansion of
tertiary sector.

4. Development of Agricultural Sector:

In fact, agricultural and industry are the two arms of an economy. Both are interdependent
and the development of one sector promotes the other.
The interdependence relates to (i) supply of raw material and inputs from agriculture to
industry and vice versa (ii) supply of wage goods to industrial sector (Hi) the supply of
materials for building up economic and social overheads in the agricultural sector and (iv) the
supply of basic consumption goods to the agricultural population.
5. Useful for Foreign Trade:
The nature of foreign trade also undergoes a change with industrialization of the country. It
has been noticed that foreign trade of less developed countries is dominated by primary
products but industrial development may lead to a change in the composition and direction of
foreign trade.
This is clear from the fact that India witnessed a spectacular increase in non-traditional items
of export on account of industrial development.
6. Higher National Income and Per Capita Income:
As there is proper utilization of natural resources with the adoption of latest and modern
techniques of production. It leads to higher national income and per capita income, increased
employment and greater production which further leads to national prosperity.
7. Capital Formation:
Industrialization promotes capital formation that is crucial catalyst of economic prosperity.
Truly, industrial development brings in good profit and more income which in turn leads to
greater saving and investment. One of the reasons of Japan's industrialization is that it ranks
first as far as capital formation is concerned.
8. Sign of Higher Standard of Living and Social Change:
A country cannot produce goods and services of high quality in order to attain decent living
standard without the progress of industrial sector. In other words, industrialization has been
regarded as a vital instrument for eradicating poverty and misery of poor lots.
9. Useful for Defense:
Industrial development is also helpful for the defense of a country. The more an industrialized
country, more arms and ammunition it produces and thus, strengthens its defense.
10. Specialization and Division of Labour:

Industrialization involves specialization and division of labour. In fact, specialization is based

on the application of modern technology. Therefore, industrialization results in all round
progress of the country.
After independence, need for a new, well planned and clear industrial policy was felt. To meet
this need, four industrial policies consisting Industrial Policies of 1948, 1956, 1977, 1980 and
1991 have been formulated. But we small discuss only the policies of 1956, 1991.