Industrial Sector

1. What is industrialization?

Industrialization means widespread development of manufacturing vast
quantities of goods, employing a large number of people, promoting
international market, characterization of specialized skill, science,
technology, increasing application of electrical, electronic, computer
technologies to enhance productivity.

2. What are the important reasons for industrial development?

Raising National Income:

Vigorous industrialization ensures a solid and sustained base to increase
the national income of an economy. A larger share of national income of
industrially advanced economies comes from industrial sector.

Employment Opportunities:

Availability of surplus labour and unemployment are the major challenges of
development strategy. Industrialization uses the productive resources of
the economy and expands employment opportunities which in turn will improve
the income and wellbeing of the people.

Higher Living Standard:

The increasing national income through industrialization helps to meet the
demands of the people for industrial products. It is also expected to
improve the standard of living of the people by increasing their per capita
income. This is possible only through a well designed growth process.

Promoting Exports:

Industrially advanced countries are able to export more and earn large
foreign exchange. The income elasticity of industrial goods is very high
than that of the primary goods. Hence, exports can be promoted to earn
adequate foreign exchange by introducing advanced industrial goods.

Capital Formation:

Expanding employment opportunities, income generation through rapid
industrialization will also lead to increased saving and capital formation
in the economy. This will help to diversify and expand the industrial base
further through higher investment.

Technological Progress:

Industrial sector will also promote technological progress through its
course of development and expansion. The technological advancements and
their dynamic contents provide the required elements to strengthen the
economy as a whole.

3. How was industrial development during pre-independence?

The pre-independent India, mostly characterized by backwardness, did not
have an organized industrial sector

4. Which was beginning of industrial development?

The Second World War made small beginning in the industrial development.

5. Which made shift in industrial development?

There had been a marked shift in the advancement of the industries after
the implementation of five year Plans in the independent India.

6. Which aimed at self-sufficiency?

The Indian strategy of development planning, inspired by economic
nationalism, aimed at achieving self-sufficiency under the direction of
public sector.

7. What were the long term objective of five year plan?

Maximum production and full employment, and the attainment of economic
equality were the long term objectives declared by the First Five Year

8. What is public economy?

Public sector means the part of the economy that is publicly owned as
distinct from those owned by private individuals or firms.

9. Which places significant role in GDP?

Public sector is playing a significant role in terms of its contribution to
GDP in many developed as well as developing countries.

10. What are the public sector contribution of industrialization?

· It has promoted small scale and ancillary industries as a result of the
backward and forward linkages.

· It has promoted agro-based industries and supported agriculture sector by
providing many inputs like fertilizer, power, etc.

· It has created a sound infrastructural base to help the private sector.

· Public sector has exerted a greater influence on the welfare of the
people through its vast employment opportunities.

11. What are the major components of industries?

1. Basic goods such as cement, chemicals, fertilizers, etc.

2. Capital goods such as machineries, machine tools, and engineering goods.

3. Consumer goods such as cycle, television, refrigerators, bikes, cars,
food articles, soft drinks, etc.

4. Intermediate goods such as paint, plywood, pipe & tube, ancillary
parts, etc.

12. Which is the key industry?

Steel industry, being the key industry, forms the base for almost all other
industries. Manufacturing, mining, construction, power, transport and other
infrastructures and service sectors are all using steel as their inputs.

13. What is SAIL?

The Steel Authority of India (SAIL) was established in mid-seventies to
extend support regarding raw materials and coordinate the development of
many steel industries.

14. Which is the oldest industry?

Textile industry is one of the oldest as well as the largest industries in
India. It has spread to almost all parts of the country. It has been well
organized in terms of the labour employed and turnover of the output.

15. What are the major problems of industry?

The major problems of the industry are non-availability of enough raw
material (cotton), increasing input costs, low profitability of small
mills, and high cost of modernization.

16. Which is the emerging industry?

Cement is one of the emerging major industries with greater development
potential. Cement, being the key raw material of the construction industry,
plays a significant role in the country’s current phase of development. The
industry is almost self-sufficient in terms of raw materials, machinery,
technology and increasing local demand.

17. Which is the important agro based industry?

Sugar industry is an important agro-based industry. Its contribution to the
economy is manifold. This industry has been the source of rural development
through employment and income generation, and increased transport and
communication facilities. In addition, sugar industry also provides input
for some other industry. It is also earning from abroad through exports.

18. What was the first five year plan contribution to industrialization?

The First Five Year Plan (FFYP) 1951-1956 has made a major step towards
industrialization has been attributed to Industries (Development and
Regulation) Act 1951.

19. What was the contribution of Second Five Year plan contribution on

The Second Five Year Plan (SFYP) made a marked shift in the industrial
policy and development of the country. The main aim of the second plan was
to accelerate the growth of the economy through rapid industrialization.

20. What is LPG?

Liberalization, Privatization and Globalization

21. What are the specific reforms related to the restructuring of public
sector enterprises?

The specific reforms related to the restructuring of public sector
enterprises are as follows.

(i) To encourage private participation in the economy. The areas of
industry reserved for the public sector has been considerably reduced from
17 to 8. In particular, telecommunication, power, air transport, petroleum,
sectors were opened for private sector.

(ii) The disinvestment of shares of some public sector enterprises in order
to raise the resources and to encourage private participation in the public
sector enterprises.

(iii) Public enterprises which are sick, will be referred to the Board of
Industrial and Financial Reconstruction for rehabilitation or

(iv) An improvement of performance and accountability has to be ensured
through new rules and only potentially viable public sector undertakings
(PSUs) can be revived.

(v) Budgetary support to sick public sector industries will be reduced

(vi) Only potentially viable PSUs can be revived and others will be closed

22. What is the objective of disinvestment?

· The objective of disinvestment is to mobilise enough resources by way of
withdrawing from some sector in order to invest in priority areas like
particularly social sectors.

· The mobilized resources are used to repay the public debt of the
government to pay for various VRS schemes, labour retrenchment and
redeployment schemes under the exit policy.

· The other objectives include the promotion of private sector, enhancement
of efficiency and competition.

23. What is liberalization?

Liberalism means the order of the market or capitalist economy relying
predominantly on competition and private sector. It envisages free trade,
full convertibility and non-discriminatory tariffs.

24. What is privatization?

Privatization policy has been adopted as a part of the liberalization.
Privatization is defined as transfer of ownership from public sector to
private sector. It is the process of reducing the role of State or public
sector in the economic activities of a country.

25. What are the integrated strategies devised by the Eighth Plan for
public sector restructuring?

1. Restructuring involving modernization, rationalization, product-mix
changes, selective exit and privatization.

2. Increase in autonomy and performance accountability through the system
of Memorandum of Understanding (MOU) between the administrative ministries
and central public enterprises launched in the Seventh Plan.

3. Changes in management practices at specific enterprises level to promote
efficiency, dynamic leadership, resourcefulness and innovation.

4. A major effort by state governments to promote reforms in public sector.

5. Technology upgradation through an integrated R & D effort and import
of technology.

6. Re-orientation of approach in ministries and other government agencies
regarding liberalization and dismantling of regulations.

25. What are the of the recent public policy initiatives in India to
control environmental pollution?

1. Formulation of National Environmental Policy

2. Setting up of National Clean Development Mechanism (CDM) Authority as
per Kyoto Protocol.

3. Reengineering environmental clearance process

4. Revising the Coastal Regulation Zones (CRZ)

5. Developing a National Chemical Management Profile for the country.

26. What is the need for financial requirement?

The financial requirement of industries may be for the short term to meet
‘working capital’ requirements

27. What are the sources of industrial finance?

In India, as in many other countries, industrial finance is available under
two broad sources viz. external and internal sources.

28. What is internal source?

Internal sources of industrial finance consist of funds mobilized from own
sources as in the case of small scale units, paid-up capital in the form of
equity shares subscription as in the case of large units, own surpluses and
reserve funds of industries.

29. What are external sources?

External sources of industrial finance include raising of borrowed finance
from sources such as public deposits, equity capital, debenture issues and
availing loans from commercial banks and other financial institutions

30. What are the financial institutions?

At National Level

1. Industrial Finance Corporation of India (IFCI)

2. Industrial Development Bank of India (IDBI)

3. Industrial Credit and Investment Corporation of India (ICICI)

4. Industrial Investment Bank of India (IIBI)

5. National Small Industries Corporation (NSIC)

At State Level

1. Tamil Nadu Industrial Investment Corporation (TIIC) (First of its nature
to be set up in India in 1949)

2. State Financial Corporations (SFC)

3. State Industrial Development Corporations (SIDC)

At Intermediate Level

1. Unit Trust of India (UTI)

2. Life Insurance Corporation of India (LIC)

3. General Insurance Corporation of India (GIC)

31. What are the roles of small scale industries?

· Small Scale Industries (SSIs) play an important role in the economic
development of a country.

· Their role in terms of production, employment generation, contribution to
exports and facilitating equitable distribution of income is very critical.

· The small scale sector consists broadly of

1) The traditional cottage and household industries viz., khadi &
village industries, handicrafts, handlooms, sericulture and coir
industries; and

2) Modern small scale industries.

32. What is modern small scale industries?

The modern small scale industry is mostly defined in terms of the size of
investment and labour force.

33. What is SSI?

The Industries (Development & Regulation) Act 1951 defines SSI having
less than 50 workers with the aid of power or less than 100 workers working
without the aid of power. The more formal definition is in terms of the
fixed assets less than Rs. 35 lakh (1981). In 1991 the limit was raised to
Rs. 60-75 lakh. The Ninth Plan fixed the ceiling at Rs. 100 lakh and the
Tenth Plan increased to it to 50 corers in the case of hi-tech and export
oriented sectors.

34. What are the contributions of SSI?

1. The contribution of SSIs to the manufacturing sector and GDP as a whole
is significant in terms of its share in total value added.

2. SSI performs a very significant role in generating employment
opportunities in a sustainable manner.

3. SSI can play a role in mitigating the problem of imbalance in the
balance of payment accounts through its export promotion.

4. While the large scale industries are expected to increases the
inequities of income and concentration of wealth, SSI is expected to help
widespread equal distribution of income and wealth.

5. SSI may provide opportunities to a large number of capable and potential
entrepreneurs who are deprived of appropriate opportunities.

6. It can help to release scarce capital towards productive use.

7. SSI can reap the benefits of lean production and can find new
cost-efficient techniques of lean production.

8. As small units can use resources more efficiently to the full capacity
without any wastage, they may have higher allocative efficiency.

9. As the element of risk is minimum in small scale sectors, more resources
will be employed by large number of labour force.

35. What are the problems of SSI?

SSIs are facing many problems. The following are some of their major

a) Scarcity of inputs

b) Inadequate capital

c) Marketing

d) Under-utilization of capacity

e) High cost of production

36. What are the government policies of SSI?

1. Having realized the importance of small scale industries to the Indian
econmy, the government has supported the SSI through various policy
measures since independence.

2. The appointment of Karve Committee by the Planning Commission in 1955
was the first major effort towards the improvement of small scale

3. During the second Five Year, a Japanese team of experts studied the
organisation of SSIs in India and made many recommendations including the
setting up of industrial estates in large numbers to promote small scale

4. The policy of reservation of items for manufacturing in small scale
industries was introduced in 1967. This has received a statutory banking in

5. A policy package for SSI has been announced in 1991 with the primary objectives of imparting more utility and growth impetus to SSIs.

6. The Tenth Plan announced a policy package on the basis of the recommendations made by S. P. Gupta’s Study Group. It includes policies

a) Enhancement of excise duty exemption limit

b) Increase in loan limits

c) Credit facilities

d) Enhancement of investment limit

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