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 Problems Of Industrial Development Of India


Although India has attained a marked sophistication and substantial diversification in her industrial structure, certain deficiencies and distortion have inexorable become part of the industrial scene. The following are important:


Uneven Growth:

The industrial growth rate on India over the years have been uneven and erratic with many ups and downs in industrial development during 1951-2001. While there was a steady growth of about 8 per cent per annum during the first three plans the 15 years period thereafter experienced a slowing done in the rate of industrial growth to 4.1 per cent per annum. ln fact this period (1965-80) is often called the period of declaration and retrogression. This is because this period not only was there a slow down in the industrial growth but tile industrial structure was titled towards the production of eliteoriented goods. Thus, while production of mass consumption goods suffered, the production of goods like beverages, cosmetics, cars, refrigerators, etc., increased substantially.

The situation improved during 1980-91 when the annual rate of industrial growth became 7.8 per cent. However, the period 1992-2001 again witnessed the showdown in the industrial sector with annul growth falling to 6 per cent. Thus, we see that industrial growth has not been smooth and even during the planning period. In 2001-02 , the industrial growth rate was very low at 2.7 % this happened because of lack of domestic demand for intermediate goods and capital goods, high oil prices etc. The Tenth plan aimed at achieving a growth rate of 10% but overall growth at an average of around 8.7 % p.a. has remained at low level. The Eleventh plan aims at 8.5% per annum growth in the GDP.This will require industry to grow at 105 p a.and manufacturing at 12 % during 11tTH plan.


Under-Utilization Of Capacity:

Many industries suffer from substantial underutilization of capacity. In fact, the average level of capacity utilisation is 50-60 per cent. This shown that there is enough scope of, increasing net output of industries. The factors behind this state of affairs are: (i) raw material shortages (ii) outdated and worm out machinery and equipment  (iii) Government policies (iv) demand recession (v) labour problems (vi) discriminate grabbing of industrial licences and creation of capacities by private entrepreneurs.



A large number of industrial units suffer from inefficient and in ept functioning. This is evident from the high cost structure of these units. In many cases, the costs are twice or thrice the international costs.


Increasing Capital-Output Ratio:

Another serious weakness of the industrial profile in India is the ever-increasing average and incremental capital output ratio (ICOR). This will be clear from the fact that ICOR was 2.95 in the first plan.

It increased to 3.9 in the seventh plan and to 4 per cent in the eight plan and ninth plan. Thus more and more capital is being used to produce on unit of output.


Insufficient Production Of Goods Of Mass-Consumption:

As started earlier, the industrial sector has failed to produce wage goods. (i.e. goods for mass consumption) in sufficient volume it has given more attention to non-essential elite-oriented goods and neglected wage goods. As a result, there has been continues increases in the prices of wage goods.


Inadequate Generation Of Employment Opportunities:

Another disturbing feature is that industrial growth has failed to generate employment to any significant extent. As against the 2.5 per cent per annum growth rate of labour force, the industrial growth rate of employment has been less than 2 per cent per annum. In India, while capital is a scarce, labour is available in abundance. Therefore, under such circumstances, it would have been more appropriate to done. In their zeal to speed up industrialization in the economy, indiscriminate mechanization was undertaken which failed to generate adequate employment facilities.


Poor Performance Of Public Sector:

While public sector enterprises have strengthened and diversified national economy, their performance on production and profit front has been generally disappointing. The net loss of the loss making firm(59) stood at more than 15800 cr in 2009-2010 compared with 17600 cr in 2008-2009.


Sectoral Imbalances:

For a well-planned economic and industrial development it is essential that all the sectors should develop in a co-ordinated and synchronized manner. Agriculture and infrastructure have failed to provide the requisite support to the industrial sector. Even within the industrial sector, the input-output relation between various industries require that there should be a fine tuning of all the industries. But such fine turning is more on a paper than in reality in the Indian industrial scene.


Regional Imbalances:

Industrial development in India has remained confined to a few region Gujarat, Maharashtra, Tamil Naidu and West Bangal account for more that 50 per cent of all factories and more that 50 per cent of the productive capital.

Industrial Sickness:

Industrial sickness has been a concomitant factor of industrial development. The sickness is quite natural due to growing competition and changing economic environment. There are around 1.18 lakh sick units in India out of which 96% are small scale units.Even today there are 2 lakh sick unit with an outstanding bank credit of 7000 cr (2010).

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