Introduction to Economic Development In India

This article is all about the concept of economic development in India up until now. You will be benefited from the article so we will be discussing the salient features of industrial planning and development, the role of public and private sector organizations and the status related to export and imports of India.

Because the economic development of India is up to Industrial development, if the industrial developments go well then the economy of India will rise up as well.


Industrial Development in India

Since its independence, India is trying to build up a sound industrial base. But, in spite of all its efforts, India is still not an industrially developed country. India possesses a huge reserve of natural resources but in spite of that, the country could not develop a sound industrial sector which could contribute a good portion to its national product.

During the 200 years of British rule, no serious efforts were made by the Britishers to develop industries, especially basic and heavy industries. During the mid-19th century, tea, jute, textile and coal industries were mostly developed in India by the British rulers with the help of British industrialists.

In the post-independence era, i.e. on 6th April 1948, the Government of India adopted the Industrial Policy Resolutions for accelerating the industrial development of the country.

Industrial policy measures various issues connected with different industrial enterprises of the country. This policy is essential for devising various procedures, principles, rules and regulations for controlling such industrial enterprises in the country.


Features of Industrial Planning and Development in India

The major features of industrial planning and development in India are as follows:

  1. Development of Infrastructure
  2. Development of Heavy and Capital Industries
  3. Rapid Expansion of FMCG, Consumer Durables and Service Sector

Development of Infrastructure

Infrastructural development is extremely essential for attaining sound industrial development. Thus, in the initial part of planning in the country, serious efforts were made for building basic infrastructural facilities like power, transport and communications along with the development of heavy engineering industries.

Development of Heavy and Capital Industries

From the Second Plan onwards, the government put much emphasis on the development of heavy machine-building industries and capital goods industries in order to strengthen the industrial base of the country.

Rapid Expansion of FMCG, Consumer Durables and Service Sector

Due to the initiation of the policy of liberalization by the Government during the 1990s, the consumer durables industries and service sector enterprises in telecom, banking, insurance etc. expanded at a faster rate. The rise in per capita income and purchasing power of citizens helped in the growth of sales of FMCGs (Fast-moving consumer goods).


Problems of Industrial Development In India

The major problems of industrial development in India are as follows:

  1. Unbalanced Industrial Structure
  2. Regional Concentration
  3. Loss in Public Sector Industries
  4. Industrial Sickness
  5. Lack of Infrastructure
  6. Lack of Capital
  7. Shortage of Industrial Raw Material
  8. Higher Cost of Production and Low Quality of Goods

Unbalanced Industrial Structure

Despite all efforts, India has not been able to attain self-sufficiency in respect of industrial materials. India is still dependent on foreign imports for transport equipment, machinery (electrical and non-electrical), iron and steel, paper, chemicals and fertilisers, plastic material etc.

Regional Concentration

In India, most of the industries are located in a few selected areas leaving out the vast expanse of the country devoid of industrial establishments. While the states like Maharashtra, Gujarat, Tamil Nadu etc are well ahead in industrial development others like Meghalaya, Manipur, Jammu and Kashmir, Tripura, Orissa, Assam etc are far behind.

This has not only created regional imbalance and regional disparity but has encouraged fissiparous tendencies including unrest, violence and terrorism.

Loss in Public Sector Industries

Most of these public sector enterprises are running in loss. To avoid this burden on exchequer the government is promoting privatisa­tion and disinvestment of shares of public sector undertakings.

Industrial Sickness

Wide­spread sickness has, indeed, become a major prob­lem of industrial development.

Lack of Infrastructure

Energy crisis has a good bearing on the industrial development ot its production. It leads to power cut which hampers the industrial pro­duction. Rail transport is overburdened while road transport is plagued with many problems.

Lack of Capital

The situation becomes critical when fresh loans are taken to pay the installments of the old loans. Due to liberalisation, the foreign exchange reserve position has improved in recent years.Still, access to capital is a problem.

Shortage of Industrial Raw Material

Indian Agriculture, the major source of industrial raw material, is still dependent on the monsoon.

Higher Cost of Production and Low Quality of Goods

Indian industries mostly survive on home demands. Most of the work is done by hand on old and obsolete machines. This increases the cost of production and brings down the quality of products produced. Our industrial products aren’t able to make large market abroad.


Disinvestment and Privatization in India

Disinvestment is the process which reduces government ownership of the various industries and privatization is the result of this process. Indian government’s huge investment in the public sector resulted in inefficiency, lack of vision for future technologies, stagnation, Reluctance to adopt new ways of production, no real competitors in the market, reservation of the selected industries only for government PSUs.

This resulted in a huge burden and large deficits in many countries and also in India. This led to the Indian govern- ment to do public sector reforms and shift ownerships of many government industries partially or fully to the private sector step by step.

Methods of Privatization

  • Through the sale of equity of PSUs to the private sector or the em- ployees of the same company.

  • Denationalization of the earlier nationalized entities.

  • Government can outsource the goods and services required by con- tracting the private companies and give off government companies.

  • Allowing private sector in some fields where government thinks it should keep out of the market.

  • Privatization can also be done by privatization of management.

  • Government can also do privatization by liquidize the government assets and closer of the entity.

Role of Public Sector in Indian Economy

We have listed here the importance role of public sector in Indian economy:

  1. Maximizing the Rate of Economic Growth
  2. Development of Capital-intensive Sector
  3. Development of Agriculture
  4. Balanced Regional Development
  5. Development of Ancillary Industries
  6. Increasing employment opportunities
  7. Import Substitution

Maximizing the Rate of Economic Growth

It was the public sector alone which could build the economic overheads such as transport, power etc. Since then the ideological objective of capturing the “commanding heights” by the public sector has been duly fulfilled. It succeeded in creating the infrastructural base for sustained industrial growth. It has tremendously boosted technological capabilities.

Development of Capital-intensive Sector

India suc­cessfully implemented various schemes of multi-purpose river projects,, hydroelectric projects, transport and communication, atomic power, steel, etc. The public sector has played a strong role in this regard.

Development of Agriculture

The public sector plays an important role in the field of agriculture as well. The public sector assists in the manufacture of fertilizers, pesticides, insecticides and mechanical implements used in agriculture.

Balanced Regional Development

Through the extension of public sector enterprises, the Government desired to remove regional imbalances. Generally, the private sector cannot be induced to start industries in the backward areas. The policy of dispersal of Industries focuses on removing regional disparities.

Development of Ancillary Industries

States like Punjab have made vast progress because of the development of small and ancillary units. This realization made the public sector take a close interest in the development of small and also ancillary units.

Increasing employment opportunities

The growth of the public sector has led to the increasing employment opportunities.

Import Substitution

Today many commodities starting from basic drugs to highly advanced equipment are manufactured in the public sector, which previously used to be imported from abroad.


FAQ

What are features of industrial planning and development in India

The major features of Industrial planning and development are as follows:
1. Development of Infrastructure
2. Development of Heavy and Capital Industries
3. Rapid Expansion of FMCG, Consumer Durables and Service Sector

What is Disinvestment?

Disinvestment is the process which reduces government ownership of the various industries.

What are the problems of industrial development in India

The major problems of industrial development in India are as follows:
1. Unbalanced Industrial Structure
2. Regional Concentration
3. Loss in Public Sector Industries
4. Industrial Sickness
5. Lack of Infrastructure
6. Shortage of Industrial Raw Material
7. Higher Cost of Production and Low Quality of Goods

What are the methods of privatization?

Followings are the methods of privatization
1. Denationalization of the earlier nationalized entities.
2. Government can outsource the goods and services required by con- tracting the private companies and give off government companies.
3. Denationalization of the earlier nationalized entities.
4. Allowing private sector in some fields where government thinks it should keep out of the market.
5. Privatization can also be done by privatization of management.
6. Government can also do privatization by liquidize the government assets and closer of the entity.

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