indus riil ization

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Meaning / Introduction

Industrialisation(orindustrialization) is the period of social and economic change thattransforms a human group from anagrarian societyinto anindustrialone. It is a part of a

widermodernisationprocess, wheresocial changeandeconomic developmentare closely

related withtechnologicalinnovation, particularly with the development of large-

scaleenergyandmetallurgyproduction. It is the extensive organisation of aneconomyfor the

purpose ofmanufacturing.[2]

Industrialisation also introduces a form ofphilosophicalchange where people obtain a different

attitude towards their perception ofnature, and asociologicalprocess of

ubiquitousrationalisation.

There is considerable literature on the factors facilitating industrial modernisation and

enterprise development.[3]Key positive factors identified by researchers have ranged fromfavourable political-legal environments for industry and commerce, through abundantnatural

resourcesof various kinds, to plentiful supplies of relatively low-cost, skilled and

adaptablelabour.

As industrial workers' incomes rise, markets for consumer goods and services of all kinds tend

to expand and provide a further stimulus to industrialinvestmentandeconomic growth.

The first country to industrialise was the United Kingdom during theIndustrial Revolution,

commencing in the 18th century.[4]

By the end of the 20th century,East Asiahad become one of

the most recently industrialised regions of the world

Histroy of industrialization

Most pre-industrial economies had standards of living not much abovesubsistence, among that

the majority of the population were focused on producing their means of survival. For example,

inmedievalEurope, as much as 80% of the labour force was employed in

subsistenceagriculture.[citation needed]

Some pre-industrial economies, such asclassical Athens, had trade and commerce as significantfactors, so native Greeks could enjoy wealth far beyond a sustenance standard of living through

the use ofslavery[citation needed]

.Famineswere frequent in most pre-industrial societies, although

some, such as the Netherlands and England of the 17th and 18th centuries, theItalian city

statesof the 15th century, the medieval IslamicCaliphate, and the

ancientGreekandRomancivilisationswere able to escape the famine cycle through increasing

trade andcommercialisationof theagricultural sector[citation needed]

. It is estimated that during
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ilisationhttp://en.wikipedia.org/wiki/Commercialisationhttp://en.wikipedia.org/wiki/Commercialisationhttp://en.wikipedia.org/wiki/Commercialisationhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Commercialisationhttp://en.wikipedia.org/wiki/Civilisationhttp://en.wikipedia.org/wiki/Ancient_Romehttp://en.wikipedia.org/wiki/Ancient_Greecehttp://en.wikipedia.org/wiki/Caliphatehttp://en.wikipedia.org/wiki/Medieval_communehttp://en.wikipedia.org/wiki/Medieval_communehttp://en.wikipedia.org/wiki/Faminehttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Slaveryhttp://en.wikipedia.org/wiki/Classical_Athenshttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Middle_Ageshttp://en.wikipedia.org/wiki/List_of_subsistence_techniqueshttp://en.wikipedia.org/wiki/East_Asiahttp://en.wikipedia.org/wiki/Industrialisation#cite_note-Industrial_Revolution-4http://en.wikipedia.org/wiki/Industrial_Revolutionhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Wage_labourhttp://en.wikipedia.org/wiki/Natural_resourceshttp://en.wikipedia.org/wiki/Natural_resourceshttp://en.wikipedia.org/wiki/Industrialisation#cite_note-3http://en.wikipedia.org/wiki/Rationalization_(sociology)http://en.wikipedia.org/wiki/Sociologicalhttp://en.wikipedia.org/wiki/Naturehttp://en.wikipedia.org/wiki/Philosophyhttp://en.wikipedia.org/wiki/Industrialisation#cite_note-2http://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Metallurgyhttp://en.wikipedia.org/wiki/Energyhttp://en.wikipedia.org/wiki/Innovationhttp://en.wikipedia.org/wiki/Technologicalhttp://en.wikipedia.org/wiki/Economic_developmenthttp://en.wikipedia.org/wiki/Social_changehttp://en.wikipedia.org/wiki/Modernisationhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Agrarian_societyhttp://en.wikipedia.org/wiki/American_and_British_English_spelling_differences#-ise.2C_-ize_.28-isation.2C_-ization.29


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the seventeenth century Netherlandsimportednearly 70% of its grain supply and in the fifth

century BC Athens imported three-quarters of its total food supply.[citation needed]

Industrialisation throughinnovationin manufacturing processes first started with the Industrial

Revolution in the north-west and Midlands of England in the 18th century.[11]

It spread to

Europe and orth America in the 19th century.

Industrialisation in Asia[edit source|editbeta]

Apart from Japan, where industrialisation began in the late 19th century, a different pattern of

industrialisation followed inEast Asia. One of the fastest rates of industrialisation occurred in

the late 20th century across four countries known as theAsian tiger(Hong Kong, Singapore,

South Korea and Taiwan), thanks to the existence of stable governments and well structured

societies, strategic locations, heavy foreigninvestments, a low cost skilled and

motivatedworkforce, a competitiveexchange rate, and low custom duties.

In the case of South Korea, the largest of the four Asian tigers, a very fast paced

industrialisation took place as it quickly moved away from the manufacturing of value-added

goods in the 1950s and 60s into the more advanced steel, shipbuilding and automobile industryin the 1970s and 80s, focusing on the high-tech and service industry in the 1990s and 2000s. As

a result, South Korea became a majoreconomic power

Early industrialisation in other countries[edit source|editbeta]

After theConvention of Kanagawaissued by CommodoreMatthew C. Perryforced Japan to

open the ports of Shimoda and Hakodate to American trade, the Japanese government realised

that drastic reforms were necessary to stave off Western influence. TheTokugawa

shogunateabolished thefeudal system. The government instituted military reforms tomodernise the Japanese army and also constructed the base for industrialisation. In the 1870s,

theMeijigovernment vigorously promoted technological and industrial development that

eventually changed Japan to apowerfulmodern country.

In a similar way, Russia suffered during theAllied intervention in the Russian Civil War.

TheSoviet Union'scentrally controlled economydecided to invest a big part of its resources to

enhance its industrial production andinfrastructuresto assure its survival, thus becoming a

worldsuperpower.[17]

During theCold war, the otherEuropean socialist countries, organised under

theComeconframework, followed the same developing scheme, albeit with a less emphasisonheavy industry.

Southern European countries such asSpainorItalysaw a moderate industrialisation during the

1950s-1970s, caused by a healthy integration of theEuropean economy, though their levels of

development, as well as those of Socialist European Countries, do not match the more

advanced standards of other European countries like Germany.[18][19]
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.

This starting model was afterwards successfully copied in other larger Eastern and Southern

Asian countries, includingcommunistones. The success of this phenomenon led to a huge wave

ofoffshoring

i.e., Western factories orTertiary Sectorcorporations choosing to move theiractivities to countries where the workforce was less expensive and less collectively organised.

China and India, while roughly following this development pattern, made adaptations in line

with their own histories and cultures, their major size and importance in the world, and

thegeo-politicalambitions of their governments (etc.).

Meanwhile, India's government is investing in economic sectors such asbioengineering,nuclear

technology,pharmaceutics,informatics, and technologically-orientedhigher education,

exceeding its needs, with the goal of creating several specialisation poles able to conquer

foreign markets.

Both China and India have also started to make significant investments in other developing

countries, making them significant players in today's world economy.

Current situation[edit source|editbeta]

GDPcomposition of sector and labour force by occupation. The green, red, and blue

components of the colours of the countries represent the percentages for the agriculture,

industry, and services sectors, respectively.

Currently the "international developmentcommunity" (World Bank,Organisation for Economic

Co-Operation and Development (OECD), many United Nations departments, and some other

organizations)[citation needed]

endorses development policies like water purification orprimary

education[citation needed]

andCo-Operation amongst third world communities.[24]

There are

members of the Economic communities who don't believe in recognising that contemporaryl

industrialization policies as being adequate to theglobal south(Third World countries) orbeneficial in the longer term, with the perception that it could only create inefficientlocal

industries unable to compete in thefree-tradedominated political order which it has

created.[citation needed]

The relationship betweeneconomic growth, employment and poverty reductionis complex.

Higher productivity is argued to be leading to lower employment (see jobless

recovery).[25]

There are differences across sectors, whereby manufacturing is less able than
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thetertiary sectorto accommodate both increased productivity and employment opportunities;

over 40% of the world's employees are "working poor" whose incomes fail to keep themselves

and their families above the $2 a daypoverty line.[25]

There is also a phenomenon

ofdeindustrialization, such as in the formerUSSRcountries' transition to market economies,

and theagriculture sectoroften is the key sector in absorbing the resultant unemployment.[25]

IMPACTS OF INDUSTRIALIZATION

TIME-SPACE COMPRESSIONThe term time-space compression is applied to the new relationships among time, space, and

the material world. It derives from geographers earlier observation that, as technology enables

travel times to be speeded up, places appear to get closer together Is this the end or a new

beginning for geography? Now we see that characteristics of place no matter how subtle can

be monitored and exploited. And because the of the time space convergence many more places

with special features are available to us.

Social Stratification

Social impacts of industrialization can be illustrated by how the New International Division of

Labor has tended to create particular clusters of jobs in particular places. For example, in world

cities, a polarized (or dual) labor market structure seems to be emerging. Well-educated

professionals take advantage of lucrative employment positions in FIRE, and have well paying

career posts that include health insurance. Members of the secondary labor market over

represent immigrants, minorities, and women, are employed on a fixed contract, part-time, or

even under-the-table basis, lack representation and benefits, and are minimally remunerated.

Health and Quality of LifeIndustrialization changes human health and thus affects the quality of life, morbidity, mortality,

and broader population dynamics. Many industrial processes have the effect of concentrating

harmful materials near human settlements.

This narrative is based on an essay by Adrian Bailey of the University of Leeds, Leeds England.

The complete article is published in the Journal of Geography Fall 2000

Evaluation of Industrialisation in India

The indicators named above will be used to evaluate the success of Indianindustrialisation policies. A distinction will be made between the period fromIndependence until 1980, characterised by inward-looking policies such as IS, and theperiod from 1980 until today, characterised by reforms and the opening up of theIndian economy. The following analysis with indicators compares the achievementsof these two periods only. Absolute statements of Indian achievements follow later on.
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It must be emphasised that the analysed data conceals sharp disparities within Indiabetween development-oriented states and laggards, between women and men,between adults and children, and between city and countryside. Different states haveprogressed at differing paces and, even within states, different regions have achievedmarkedly varied results. Even more noticeable than geographic differences in poverty

reduction are the inequalities that persist across gender, caste and ethnic groups.Social indicators for women literacy, for example are distinctly lower than formen, and the level of scheduled castes and tribes in both economic and socialachievements is still well below the national average.

Growth of national income

Growth of national income in GNP per capita in India was about 1.4% in the yearsfrom 1960 to 1980. The effects of the reforms of the 1980s are reflected in growthfigures: the average GNP per capita growth increased to 3.25%. And with further

opening up in the 1990s, the GNP per capita reaches new heights with 3.8% averagegrowth in the period from 1987 to 1997.

Alleviation of poverty

In the early 1950s, about half of Indias population was living in poverty. Since then,

poverty has been declining slowly. The poverty reduction was given new impetus bythe reforms: falling from around 55% in 1974 to just under 35% in 1994 by aheadcount index. In the 1980s and 1990s, poverty reached historically low levels.Still, because of Indias rapid population growth rate, the relative reduction of poverty

has not been sufficient to reduce the absolute number of poor which increased fromabout 164 million in 1951 to 312 million in 1993-94.

Reduction of income inequalities

The reduction of income inequalities has only made slight advances. The biggestadvances were made mostly before the reforms. On the other hand, one of the biggestincreases in inequality happened in the late 1970s, and the developments for the late1980s / early 1990s in Figure 1 look promising. Compared to other low-incomeeconomies, the inequality is relatively low.


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Impact of industrialization on economy of Indian Companies

1. Raising Income: The first important role is that industrial development provide a secure basis

for a rapid growth of income. The empirical evidence suggests a close correspondence between

the high level of income and industrial development. In the industrially developed countries, for

example, the GNP per capita income is very high at around $ 28,000. Whereas for the

industrially backward countries it is very low at around $ 400 only.

2.Changing the Structure of the Economy: In order to develop the economy underdeveloped

countries need structural change through industrialization. History shows that in the process of

becoming developed economy the share of the industrial sector should rise and that of the

agricultural sector decline. This is only possible through deliberate industrialization. As a result,

the benefits of industrialization will 'trickle down' to the other sectors of the economy in the

form of the development of agricultural and service sectors leading to the rise in employment,

output and income.

3. Meeting High-Income Demands: Beyond certain limits, the demands of the people are

usually for industrial products alone. After having met the needs of food, income of the people

are spent mostly on manufactured goods. This means the income-elasticity of demand for the

manufactured goods is high and that of agricultural products is low. To meet these demands

and increase the economy's output underdeveloped countries need industrialization.

4. Overcoming Deterioration in the Terms of Trade: Underdeveloped countries like India need

industrialization to free themselves from the adverse effects of fluctuations in the prices of

primary products and deterioration in their terms of trade. Such countries mainly export

primary products and import manufactured goods. The prices of primary products have been

falling or are stable whereas the prices of manufactured products have been rising. This led to


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deterioration in the terms of trade of the LDCs. For economic development such countries must

shake off their dependence on primary products. They should adopt import substituting and

export oriented industrialization.

5. Absorbing Surplus Labour (Employment Generation): Underdeveloped countries like India

are characterized by surplus labour and rapidly growing population. To absorb all the surpluslabour it is essential to industrialise the country rapidly. It is the establishment of industries

alone that can generate employment opportunities on an accelerated rate.

6. Bringing Technological Progress: Research and Development is associated with the process

of industrialization. The development of industries producing capital goods i.e., machines,

equipment etc., enables a country to produce a variety of goods in large quantities and at low

costs, make for technological progress and change in the outlook of the people. This results in

bringing about an industrial civilization or environment for rapid progress which is necessary for

any healthy economy.

7. Strengthening the Economy: Industrialisation of the country can provide the necessaryelements for strengthening the economy. In this regard the following points may be noted.

(a) Industrialisation makes possible the production of goods like railways, dams, etc. which

cannot be imported. These economic infrastructures are essential for the future growth of the

economy.

(b) It is through the establishment of industries that one can impart elasticity to the system and

overcome the historically given position of a primary producing country. Thus, with

industrialization we can change the comparative advantage" of the country to suit its resources

and potentialities of manpower.

(c) Through industrialization the requirements for the development of agriculture can be met.

For example, improved farm-implements, chemical fertilizers, storage and transport facilities,

etc., appropriate to our own conditions can be adequately provided only by our own industries.

(d) The industrial development imparts to an economy dynamic element in the form of rapid

growth and a diversified economic structure which make it a progressive economy.

(e) Providing for Security: Industrialisation is needed to provide for the country's security. This

consideration becomes all the more critical when some international crisis develops. In such

situation, dependence of foreign sources for defence materials is a risky affair. It is only through

industrial development in a big way that the national objective of self-reliance in defence

materials can be achieved.

Indias current problems regarding industrialisation


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After evaluating important indicators for industrialisation and giving a summary ofindustrialisation since independence, we will now take a more detailed look at somespecific areas for future industrial development in India.

I nfrastructure

Perhaps the biggest problem for doing business in India is the woeful state of itsinfrastructure. Consider this: it takes four days for a truck to travel the 900 miles

between Indias national capital New Delhi and its commercial capital Bombay. It

takes months to get connected to the power supply in any Indian city, and severalyears to get a telephone connection in large cities.

Poor infrastructure is acting as a drag on the Indian economy, and the Indiangovernment is now attracting private domestic and foreign investment to build thebackbone of a modern economy. A recent report estimated that investment in

infrastructure would rise from 5.5% of GDP in 1997, to about 7% in 2000/01. Thisincludes massive improvements in telecommunications, power, energy, and transport.

India has recognised the vital role telecommunications play in the growth of theeconomy. The Indian telecom sector was wholly under government ownership andcontrol until recently and was characterised by under-investment and outdatedequipment. There is vast potential for extending these services in India, which has oneof the worlds smallest telephone densities of 1.3 per 100 people, compared with the

world average of 10 per 100. Advanced communication services such as fax, datatransmission, and leased circuits are becoming increasingly common. Foreign

collaboration is also being encouraged in cellular phones and paging systems. In thetelecommunications sector, estimates for regional investment needs range from $40billion a year, to as high as $70 billion a year by the end of the century.

As part of Indias liberalisation efforts, the transportation sector has been opened toprivate investment. The government is offering incentives to invest $4.7 billion toconstruct and operate bypass roads, highways, bridges, railways, and ports.

Health and Education

To support Indias goal of achieving universal primary education, the World Bank issupplementing increased state government expenditure. This has boosted schoolenrolment, particularly among girls and disadvantaged children, and is improving thequality of instruction and learning achievement.

Amartya Sen reckons that India could enrol all its children in primary school byspending an additional 0.5-1% of GDP. Providing basic health and education is not


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Tax reforms have been seeking to transform Indias tax system from one with highdifferential tax rates falling on a narrow base, into one with tax rates at moderatelevels falling on a broad base. The 1995 fiscal budget reduced taxes on corporateincome, and a major reform of excise taxes has been implemented to make it resemblea value-added tax more closely.

But the governments income is also constricted by an inefficient taxation system.

Rural areas are not taxed because they contain such a large pool of voters and nogovernment has had the political will to change this. Income tax is skilfully dodged.This leaves the government with excise and customs duties, which represent twothirds of all taxes.

Labour market

India needs greater labour market flexibility to make its companies more competitive

and its economy more productive. Politically powerful labour unions have stifled mostefforts at serious reform or privatisation of Indias largest public sector enterprises,

including most banks, all insurance companies, and many major industries, eventhough privatisation would probably cost the jobs of no more than 1.1% of the urbanlabour market. Indias labour laws hinder efficiency and growth.

Financial sector

Indias financial sector still cannot effectively mobilise and mediate capital to respond

to economic changes. The resulting high cost of capital makes Indian industry and

exports less competitive. In spite of recent improvements, Indias equity markets arestill too thin and volatile to inspire great confidence on the part of domestic or foreigninvestors. Bond markets are practically non-existent. Liberalisation of the insuranceindustry, which would greatly improve the investing of Indias substantial savings,

now 26% of GDP, has been stymied. Indias banking system remains flawed, with the

dominant state-owned banks still carrying bad loans amounting to 15 to 25% of theirtotal.

indus riil ization

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