B.Com Ist Year Industrial Growth In India Question Answer Study Notes Sample papers
Industrial Growth in India
Q.7 Write a detailed essay on changing strtucture of industrial
section of India after independence.(Meerut, 2014)
Or Give an outline of the trends in Industrial develop
ment in India during plans.
Ans. Industrial structure in a country plays a vitalana role in the economic development of an under-developed Nature of industrial structure is not static but is changeab time to time. Present structure of Indian industries is differe earlier. Important changes have occurred in the industrial sto during the period of planning. The main changes are as follows.
(1) Increase in Overall Industrial Production: Indus production in India went up about five times during the period planning. Now the India has become the 10th most industrial nati of the world. There becomes tremendous increase in the consu intermediate and capital goods over the last 60 years. The share of the industrial sector in G.D.P. has slowly but consistently increased from 13-3 percent in 1950-51 to 28 percent now.
(2) Growth of Infrastructural Industries : Substantial expansion of the infrastructure industries is essential for the modern industrial development. Therefore, massive efforts were directed towards the creation of basic industries like electricity, coal, steel, crude petroleum, petroleum refinery,cement etc. Electricity is one of the major source of commercial energy and plays a crucial role in industrial development. On account of this reason, it has been developed on a considerable scale in India during the last six decades. The production of coal, petroleum, cement also shows tremendous increase during planning period.
(3) Building up of Heavy and Capital Goods Industries: With a view to strengthen the industrial base of the economy, preference was given to the development of heavy machine build and capital goods industries during the plans period. Now industrial base of the economy is much stronger than it w 1950-51. A wide range of engineering goods, iron and steel, m etc. are now produced in India itself and dependence on the ou countries has considerably declined.
(4) Rapid Growth of Consumer Durables: Due to the policy of liberalisation, the output of consumer durable goods has expanded at a fast pace. The consumer goods sector has witnessed remarkable changes internally. For instance, the weightage of the consumer durables sub sector has increased by more than 100 percent.
(5) Declining Role of Public Sector : With increasing emphasis on liberalisation and privatisation, the government of India is gradually withdrawing from the industrial sector. The emphasis of the government is now on privatisation of public enterprises. Due to this, the capacity and strength of the private sector has grown considerably.
(6) Emphasis on Chemicals, Petrochemicals and Allied Industries : During eighties emphasis on the establishment of chemicals, petro chemicals and allied industries was given. As a result, metal based products and machinery industries lost their primacy in industrial growth during the eightees.
(7) A Well Diversified industrial Structure : In the early fifties only fourindustries (food products, textile, wood and furniture and basic metal) accounted for two-thirds of production. But now the contribution of different industries has become more even. The share of the machinery sectors, chemicals, transport equipments has risen considerably during planning period.
(8) Research and Development : Remarkable progress has been done in the field of research and development. New advanced technology has introduced into the industrial scctor through foreign collaborations. As a result, sophisticated manufactured products which were previously imported are now being indigenously produced in the country.
Q.8. Discuss the main problems of Industries in India. Also give suggestions to remove these problems.(Meerut, 2013)
Ans. In India, there is wide possibilities of industrial development but due to some problems we are for behind in comparison to the developed nations. The main problems faced by industries can be summarised as follows:
- Under Utilisation of Capacity : It is estimated that, in India 30-40% part of the established production capacity remains unutilised. Main reasons for this are paucity of raw material, energy and demand as well as government policy, labour discontent etc. This cause industrial stagnation.
- (2) Industrial Sickness : Many industrial units, especially small units and traditional industries like Textiles, Jute, Sugar are sick. This is the effect of inefficient management. Neglecting the cost factor due to protective policy, absence of quality improvement and technological renovation also resulted in sickness, The number of sick units is constantly growing in India.
- (3) Foreign Competition : Due to the policy of liberalisation India has withdrawn all quantitative restrictions on imports. This is bound to result in intense competition with imports in coming year forcing a number of industrial units to close down. The small scale
competition from rich and industries cannot withstand technologically advanced multinational companies.
- (4) Higher Cost : Industrial production cost in India is much more in comparison with the international costs. Due to lack of skilled and efficient labour, backward technique, inefficient management, product cost remains high in India.
- (5) Scarcity of Capital : The rate of capital formation is relatively low in India. Due to lack of capital most of the industries are not in the position of using new advanced machines and technology. Thus, production cost remains high and they could not compete in the market.
- (6) Lack of Basic Amenities: Basic amenties such as power, communication, transport, banking, insurance for industrial development are not adequately available in India. Inadequacy of these facilities create mony problems in the development of industries.
- (7) Problem of Centralisation : Industrial development has not been equal in different parts of the country. Some states of India such as Maharashtra, Gujrat, West Bengal and Tamilnadu have become industrially developed while some other states remained backward in industrial growth. This regional imbalance create many problems before industries.
- Growing Dependence on Financial Institutions: Due to capital intensiveness of industries and high rates of corporate taxation, a large part of finance of such industries is provided by financial institutions. Industries squeeze their funds, which were originally established to direct the financial flow on the basis of national priorities
- Labour Problems: The progress of industrialization has been accompanied by increase in industrial disputes in India, Industrial dispute often leads to strikes and lock outs. Both of these activities lead to struggles disturbing the peace of the industrial sector. This affects industrial activity adversely leading to underfulfilment of targets.
SUGGESTIONS TO REMOVE THE PROBLEMS OF INDUSTRIES
(1) Development of Infra-Structure : For the rapid development of economy, basic amenities like power, transport, banking, insurance etc. should be developed in the country. In the absence of basic infrastructure, industries have to face many problems and dream of industrial development would not be completed.
(2) Development of Alternative Rssources of Energy : Energy is the basic requirement for increasing productivity. So efforts must be made to develop the alternate resources of energy. The prospects of non-conventional sources such as solar energy, geothermal energy, wind energy and tidal energy are being examined.
(3) Good Relations with Workers : For industrial progress and prosperity, maintenance of peaceful relations between labour and capital is of the first importance. Therefore, every effort must be made to maintain industrial peace. By making workers’ share in equity and debentures and participation in management, industrial peace can be promoted in the country.
(4) Educational and Training Facilities for Workers: By increasing the productivity of labour, per unit cost of output can be reduced. This can be possible only by using trained and skilled labour in the production. Therefore educational and training facilities must be provided to the worker so that they would become trained and skilled.
(5) To Provide Finance Facilities : To solve the problem of inadequate finance, the number of stock exchanges should be increased so that the investing public has facilities of buying and selling stocks of industrial concerns. More vigorous efforts should be made to mobilize the small and scattered savings of the public.
(6) Attention on Quality Control : Due to low quality products, industries in India could not face competition with the multinational companies. Therefore efforts should be made to improve the quality of the products. For this purpose different quality control methods must be adoped.
(7) Rehabilitation of Sick Units : In view of the large scale epidemic of industrial sickness, it would be necessary to organise a task force consisting of competent and experienced executives to go into the case and monitor recovery. Indetification of sick unite reconstitution of managements, modernisation of machinery improving labour relations, performance incentives are some inportant steps, which is necessary to root out the disease.
(8) Encouragement to Foreign Capital : For rapid industrial development, efforts should be made to attract the foreign capital in the country. The foreign capital helps to raise productivity and real income which in turn, leads to increase in marginal savings. The foreign capital, in the form of direct foreign investment, enables the country to achieve the objective of technological upgradation.
Q.9. Describe the main causes of Industrial Slow Down and give remedial measures for their improvement.
Ans. Reduction in the growth rate of industrial production is the main indicator of industrial slow down. The performance of industries was best in 1995-96 when industrial production increased by 12.8% but during 1996-97 industrial growth slowed down considerably to 5.6%. During 1999-2000 industrial growth rate was 6.7% which becomes 2.9% during 2011-12. This is a major hurdle in the industrial development and also affect all the sectors of the economy. Main causes of industrial slow down can be summarised as follows:
(1) Infrastructure Bottlenecks in Power and Transport: Lack of adequate power supply and transportation facilities is the main cause of industrial slow down. It affects the productivity of the industries adversely.
(2) Lack of Technology Upgradation :Inadequate attention was paid to technology upgradation and economizing energy consumption. This raise costs of the production and slows down the rate of industrial production.
(3) Insufficient Demand: Declining trend in the internal and external demand also cause the situation of industrial slow down. Insufficient demand in case of textiles, automobiles etc. contribute in the industrial slow down.
(4) Business Cycles : Demand of some industries such as cement, automobiles and steel industries slows down due to effect of business cycles. Due to this, these industries have to face the problem ofindustrial depression.
(5) Time Lag in Adjustment : Time lags in adjustment resulting from industrial reconstruction through merger and
acquisition and delays in establishing appropriate Institutional and Regulatory framework in some sectors also affects the rate of industrial growth adversely.
(6) Continuing High Level of Interest Rates : Continuing high level of interest rates, increase the cost of production. This situation also contributes in the slow down of industrial growth.
REMEDIAL MEASURES TO REMOVE THE
INDUSTRIAL SLOW DOWN
Government of India have adjusted several remedial measures to remove the Industrial Slowdown as below:
(1) Reduction in Interest Rates : To provide finance at cheaper rates, interest rates have been reduced by the government of India. Interest rates have still presently reduced under Cheap Monetary Policy, to encourage investment.
(2) Motivation to Foreign Investment : To remove the inadequacy of capital, 100% FDI has been permitted in various sectors such as telecom, Airport, drugs, hotel, tourism sector, courier services etc. This will prove helpful in raising the growth rate of industrial production.
(3) Reduction in Custom Duties: Peak duty of customs have reduced from 38.5% to 35% with the abolition of 10% surcharge.
(4) Simplication of Central Excise Tax Rules: To remove the industrial slow down, government simplified the central Excise Net Value Added Tax Rules, 1944. The government has also made drastic reduction in the rules of the Act.
(5) Encouragement to Non-Banking Financial Companies : To promote the Non-Banking Financial companies, foreign equity upto 100% will be permitted in this sector.
(6) Efforts to Remove the Infrastructural Constraints : Greater emphasis is laid by the government on additional availability of power for the rapid removal of infrastructural constraints.