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Industrialization refers to a process of change in the technology used to produce goods and
service.
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 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
people.
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
economy.
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.
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
economy.
(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
industries.
(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
government.
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.