Evolution of industries

Introduction

The evolution of industries represents a significant journey in human economic activities. Industries are fundamental to the economic development of any nation as they are involved in producing goods, extracting minerals, and providing services. Their evolution has resulted in a variety of classifications and systems that have adapted to changing technologies, resources, and markets. In this article, we will explore the concept of industries, their classifications, the factors affecting their location, and the way they function as an industrial system.

Industry

Refers to:

Industries refer to economic activities connected to the production of goods, extraction of minerals, and the provision of services. It doesn’t just mean factories but encompasses a broad range of activities.

Examples of Industries

• Production Industry: Involves the production of goods.
  • Example: Cotton and steel industries.
• Service Industry: Provides services to consumers.
  • Example: Tourism and consultancy.
• Mining Industry: Involves extraction of minerals.
  • Example: Coal and Bauxite mining industries.

Classification of Industries

Industry classification, also known as industry taxonomy, is an economic method of organizing companies into different groups based on production processes, products, or behavior in financial markets. Economic activities can be classified into various types based on different criteria.

Types of Industries

1. Based on the Nature of Activities:

• Primary Industries:
  • Involves obtaining raw materials directly from nature.
  • Example: Mining, farming, fishing.
• Secondary Industries:
  • Involves manufacturing or processing raw materials.
  • Example: Automobile and steel industries.
• Tertiary Industries:
  • Provides services rather than goods.
  • Example: Teaching and nursing.
• Quaternary Industries:
  • Involves research and development activities.
  • Example: Information Technology (IT).

2. Based on the Source of Raw Materials:

• Agro-based Industries:
  • Use plant and animal products as raw materials.
  • Examples: Food processing, cotton textiles, vegetable oil, dairy products, sugar, tea, coffee, leather.
• Mineral-based Industries:
  • Primary industries using mineral ores as raw materials.
  • Examples: Iron and steel, cement, petrochemical industries.
• Marine-based Industries:
  • Use sea and ocean products as raw materials.
  • Examples: Seafood processing, fish-oil manufacturing.
• Forest-based Industries:
  • Utilize forest produce as raw materials.
  • Examples: Pulp and paper, pharmaceuticals, furniture, and building materials.

3. Based on Size:

• Large-scale Industries:
  • Capital investment of more than one crore rupees in India.
  • Examples: Iron and steel, automobile industries.
• Small-scale Industries:
  • Capital investment of less than one crore rupees in India.
  • Examples: Silk weaving, food processing industries.

4. Based on Ownership:

• Public Sector Industries:
  • Owned and operated by government agencies.
  • Examples: BHEL (Bharat Heavy Electricals Ltd), SAIL (Steel Authority of India Limited).
• Private Sector Industries:
  • Owned and operated by individuals or groups.
  • Examples: Reliance Textiles, Tata Motors, Dabur Industries.
• Joint Sector Industries:
  • Run jointly by the government and private individuals or groups.
  • Example: Oil India Ltd (jointly owned by private and public sectors).
• Co-operative Sector Industries:
  • Owned and operated by producers or suppliers of raw materials and workers.
  • Example: AMUL (Anand Milk Union Ltd).

Industrial Systems

An industrial system refers to how industries operate as a system with three main elements: inputs, processes, and outputs.

• Inputs:
  • Include raw materials, labor, buildings, capital, and machinery.
• Processes:
  • Involve activities occurring within the manufacturing site, like the actual production of goods, designing, and research.
• Outputs:
  • The finished products, profits, and even waste.

Factors Affecting the Location of Industries

Industries are not uniformly distributed across regions; instead, they are attracted to specific locations due to various factors. These factors help reduce production costs and maximize profits.

Geographical Factors

• Access to Raw Materials:
  • Raw materials should be cheap, easily accessible, and available. For example, industries dealing with bulk materials, such as sugar, steel, and cement, are often located close to raw material sources.
• Suitable Land and Soil Availability:
  • The availability of land suitable for industrial purposes is crucial.
• Access to Water:
  • Water is vital for many industries, such as cotton textiles (for bleaching) and iron and steel (for cooling).
• Access to Labour:
  • The availability of skilled and unskilled labor influences industrial location.
• Access to Transport and Communication Facilities:
  • Efficient transportation is crucial for moving raw materials and finished goods. Transportation also plays a role in regional economic development and manufacturing specialization.
  • Example: The concentration of industries around the Great Lakes region in North America due to water transportation.
• Access to Market:
  • Industries prefer to be near markets where products can be sold. Developed regions like Europe, North America, and Japan have larger markets due to higher purchasing power.
• Storage and Warehousing:
  • Ensures the storage of raw materials and finished products.
• Climate:
  • Favorable climate conditions are essential for some industries.
• Access to Sources of Energy:
  • Energy-intensive industries, like aluminum production, are located near energy sources.

Non-Geographical Factors

• Access to Capital:
  • The availability of capital or investment funds is essential for establishing industries.
• Government Policies and Incentives:
  • Policies like tax benefits, subsidies, and regional development strategies influence industrial location.
• Agglomeration of Economies:
  • Industries benefit from being located near each other, allowing for shared services and infrastructure.
• Institutional Factors:
  • Historical, social, and political factors also influence industrial location.

The Evolution of Industries in India

Before 1750 AD (Pre-Industrial Revolution Era)

• Indian silk and cotton goods, known for their superior quality, dominated the international market. India was the only country capable of producing high-quality silk and cotton.
• Armenian and Persian merchants transported goods from Punjab through mountain passes and deserts.
• Major ports like Surat on the Gujarat Coast, Masulipatnam on the Coromandel Coast, and Hooghly in Bengal facilitated India’s robust export trade.
• There was a well-developed trade network within India, connecting weaving villages to export cities.
• Indian merchants and financiers were actively involved in export trade, financing production, transportation, and supply of goods.

Between 1750 AD to 1854 (Colonial Era and Decline of Traditional Industries)

• With the establishment of British political power, the trade network controlled by Indian merchants began to break down.
• European companies gained monopoly rights over trade through connections with local courts and gradually took control of the Indian market.
• The Industrial Revolution in Britain led to the establishment of cotton factories, which pressured the British government to impose import duties on Indian goods.
• The East India Company began exploring the Indian market for British manufactured goods.
• The textile export sector declined drastically:
  • In 1811-12, textiles accounted for 33% of India’s exports.
  • By 1850-51, this share had shrunk to just 3%.
• The import of machine-made cotton goods increased:
  • In 1800 AD, India imported almost no cotton products.
  • By 1850 AD, cotton products accounted for 31% of all imports, rising to 50% by 1870 AD.
• Indian weavers faced significant challenges:
  • Export markets collapsed, and they couldn’t compete with machine-made goods.
  • The American Civil War (1861-1865) caused a shortage of cotton, leading to increased demand for Indian raw cotton, which further raised raw material prices.

Between 1854 to 1947 (Growth of Early Industries and Indian Entrepreneurs)

• Early Indian entrepreneurs who traded with China and Southeast Asian countries gained profits and invested in establishing factories in India.
• Prominent entrepreneurs of this era included:
  • Dwarkanath Tagore in Calcutta.
  • Jamshedji Tata in Bombay.
  • Marwari businessman G.D. Birla.
• Establishment of key industries:
  • 1854: The first cotton mill was set up in Bombay.
  • 1855: The first jute mill in Bengal.
  • 1860: Elgin Mill in Kanpur.
  • 1861: Cotton mill in Ahmedabad.
  • 1874: The first spinning and weaving mill in Madras.
  • 1874: The steel industry at Kulti in Bengal.
  • 1907: Tata Iron and Steel Company (TISCO) at Jamshedpur.

Between 1947 to 1991 (Post-Independence Industrialization)

• The post-independence period focused on building a self-reliant economy through public sector-led industrial development.
• Heavy industries, infrastructure, and basic industries were established to strengthen the foundation of industrialization.

From 1991 to Present (Economic Liberalization and Modern Industrial Growth)

New Industrial Policy of 1991

• The Government of India announced a liberalized industrial policy in 1991 amidst severe economic instability. The main objectives were to raise efficiency and accelerate economic growth.

Features of the New Industrial Policy

• De-reservation of Public Sector: Reduced the role of the public sector in several industries.
• De-licensing: Removed the need for licensing for many industries.
• Disinvestment of Public Sector: Allowed privatization of some public sector enterprises.
• Liberalization of Foreign Investment: Encouraged foreign investment in various sectors.
• Foreign Technology Agreement: Opened up avenues for foreign technology collaboration.
• Amendment of the MRTP Act: The Monopolies and Restrictive Trade Practices (MRTP) Act was replaced by the Competition Act, 2002.

Outcomes of the New Industrial Policy

• Abolished the ‘License, Permit, and Quota Raj,’ leading to reduced bureaucratic hurdles.
• Encouraged privatization, with the easier entry of multinational companies.
• Promoted export-oriented units, export processing zones, special economic zones, and national investment and manufacturing zones.

Limitations of Industrial Policies in India

• Stagnation of the Manufacturing Sector: Despite policies, manufacturing growth has been slow.
• Displacement of Labour: Increased mechanization and automation have led to job losses.
• Absence of Incentives for Efficiency: Focus has been more on consumption-led growth rather than investment or export-led growth.
• Vaguely Defined Industrial Location Policy: Lack of clarity on where industries should be established.
• Distortions in Industrial Pattern: Selective inflow of investments has led to imbalanced industrial growth.

Way Forward

• Liberalized Industrial Policy Regime: Focus on increased foreign investment and reducing regulations.
• Efforts Toward Ease of Doing Business: Simplify business regulations to attract investments.
• Promote ‘Make in India’ and ‘Start-Up India’: Encourage domestic manufacturing and innovation.
• New Industrial Policy: Develop a policy to boost the manufacturing sector, which is essential for economic growth.

Conclusion

The evolution of industries in India reflects a journey from dominance in handmade goods to modern industrialization, shaped by colonial impact, early entrepreneurship, and liberalization policies. Despite challenges like stagnation, labor displacement, and imbalanced growth, India’s industrial sector has significantly progressed. The New Industrial Policy of 1991 played a pivotal role in opening up the economy, fostering growth, and attracting foreign investment. However, for sustained development, it is crucial to focus on liberalization, ease of doing business, and initiatives like ‘Make in India’ to boost manufacturing, innovation, and overall industrial efficiency, ensuring balanced and inclusive growth in the future.

1. Discuss how government policies and incentives play a crucial role in shaping the distribution and development of industries in different regions. (250 words)
2. Discuss the significance of the New Industrial Policy of 1991 in shaping modern industrial growth and its effects on the Indian economy. (250 words)
3. What are the major limitations of industrial policies in India, and how can they be addressed to ensure balanced and sustainable industrial growth? (250 words)