Pattern and Structure of Growth: Industry: Industrialization During British Era

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Pattern of Growth

4 Phases + 1 (British era) :

  • Industrialization during British era
  • Industrial development during 1950 - 1965
  • Industrial development during 1965 - 1980
  • Industrial development during 1980 - 1991
  • Post Reform Period.

Industrialization During British Era

  • A period of Financial Capital & Colonial Exploitation.
  • Expenditures which were not related to Indian economy were Billed to Indian Exchequer, which led to rise in deficit. Expenditures in India were considered as loans by the British Government.
  • All the goods (from raw material to finish goods) were imported from Britain which led to higher costs and no industrialization in India. Indian Artisians suffered.
  • Indian Handicraft Industry was destroyed, and machine made good flooded the market.
  • The overall impact was the decline of India՚s share in world output.

Industrial Development During 1950 - 1965

  • The Industrial sector was extremely underdeveloped with very weak infrastructure.
  • The structure and concentration of ownership of the industries were in few hands.
  • Technical and Managerial skills were in short supply which led to slow growth.

In the 1st Plan the growth was confined to consumer goods industry. Leather, Paper, cotton textile was key industry.

  • In 2nd plan, Mahala Nobis model of growth was adopted. Heavy reliance was given for growth of capital goods industries. Metal-based and transport equipment industries grew rapidly and there was a sharp decline in relative importance of consumer goods sector. Its share in industrial value added came down from 48.4 % in 1956 to 37.2 % in 1960.
  • The 2nd and the 3rd plan placed great emphasis on building up the capital goods industries. Most of the capital good industries were built under the Public Sector.

Industrial Development During 1965 - 1980: The Period of Industrial Deceleration

The period between 1965 to 1975 was marked by a sharp fall in the industrial growth rate. The rate of growth fell from 9.0 % during the 3rd plan to a mere 4.1 % during the period of 1965 - 75.

C N Vakil and P R Brahmadanda advocated: Wage Good model says that, “worker ′ s productivity depends on not on whether they use machines to produce goods but also on the consumption of wage goods like, food, cloth and other basics. So, the first step towards development is to mechanize agriculture and raise food production; once this objective is reached, one should go for Mahala Nobis strategy of Heavy Industrialization. This will ensure workers ′ efficiency at work.”

Industrial Development During 1965 - 1980

Industrial Development During 1980 - 1991 Industrial Recovery

  • The period saw a revival in the industrial growth rates. The period witnessed an industrial growth rate of more than 6 % during the sixth plan and 8.5 % during the seventh plan. Significant recovery was recorded in the manufacturing and capital good sector.
  • Causes: Liberalization of Industrial policy, reduction in barriers & expansion of competition, massive borrowing by government for expenditure, Higher budget deficit for growth, green revolution, growth of service sector, Investment in Infrastructure.

Phase Four (Post Reform Period)

  • India ushered a new era of economic liberalization in 1991 with the implementation of LPG policies. (Liberalization, Privatization, Globalization)
  • Abolishment of the Industrial Licensing.
  • Simplification of the procedures and regulatory requirement to start a business.
  • Reduction in the sector exclusively reserved for the Public sector.
  • Disinvestment of the selected Public-sector undertakings.
  • Allowing Foreign Direct Investment and FII.
  • Liberalization of the trade and exchange rate policies.
  • Rationalization and massive reduction in the structure of Customs Duties.
  • Reduction in the Income and Corporate taxes to promote Business.
  • The immediate impact was the slow growth in the industrial sector due to external competition.
  • Reduction in Public expenditure under IMF Programme.
  • Underdeveloped capital markets affected domestic firms՚ capacity to raise debt.
  • Low agricultural growth coupled with weak rural demand affected the demand in other sectors.

Practice MCQ

Q. 1. which of the following statement is correct?

1) During colonial rule greater thrust was given for India՚s Industrialization.

2) Cabinet mission plan was sent for India՚s Industrialization.

3) Aim of the British was Industrialization of Britain at cost of India.

Ans: 3)

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