Growth & Structure of Industries

UNIT-1 BBA-2

Unit-1

• Meaning of industry and industrialization, Significance of industrialization in India

• Factors hampering industrial development of India/ Problems of industrialization

• Meaning and importance of location, • Factors affecting industrial location • Classification of industries

What is Industry?

• Industry is characterized by the conversion of raw materials into final product with the help of human efforts working with machines.

• Raw material human labor + machines (process) final product

• Ex. Cotton weaving, bleaching, dying with help of labor cloth = cotton textile industry

• Ex. Cement industry, Jute industry, oil industry, ship building industry, sugar industry,

Cotton to textile process

Cotton Gin

Spinning /Weaving of cotton

Bleaching of cotton

Dying

• Cotton is spun in small villages with very simple tools such as Charkha or handloom, all managed manually , it is called ‘Cottage industry’

• Human efforts play an important role

Industrialization

• It refers to large scale modern industries which are characterized by the use of-

- complex modern machinery- A large number of people handling machines- Factory system of production- Mass production of goods and services at rapid speed- Use of electricity or such power- Wide domestic and often foreign markets for goods

produced in such factories or plants

Why industrialization in India?1. Substitute for agricultural product:- ex. Man-made fibers for cotton yarn, synthetic

rubber, plastic wrappings and materials2. To reduce unemployment and poverty3. Value addition process in India- Using raw material in India only to prepare final

product, which increase income of people4. To raise income of people engaged in agriculture

5. Modernization of India's agricultural sector:- By increase in the supply of industrial goods i.e.,

tractors, electrical engines, pump, hybrid seeds etc.6. More self reliance- Reduction in imports, less dependence in foreign

countries7. To develop defense system- Vast network of modern industries are required to

produce bombs, warships, missiles, rifles and guns etc.8. Decreasing importance of agriculture

Factors hampering rapid industrial development of India

1. Economic factor: - Lack of infrastructure facilities (transport,

communication, training insti., fin. Insti.)- Lack of power2. Socio-demographic environment:- Rapid growth of population -> low per capita income

-> low rate of saving -> Low rate of investment, poverty

- Variety of cast, religion, culture in India, only certain castes and community will associate with industry and commerce. Hindrance to entrepreneurs

- Mentality on life is influenced by fatalism, theory of Karma (deeds of past life)

3. Public administrative machinery:- Lack of decision making ability, bureaucratic delays,

corruption, waste of various types of resources and inefficient implementation of developmental schemes.

4. International environment:- Developed countries may put restrictions on exports of

capital goods and equipment for countries like India

Industrial Location

Definition:• Facility or Plant location is a place where a

factory, warehouse, office or any business enterprise is built

• Selection of a location depends on the type of business.• The objective of selection of a location is to

obtain the maximum efficiency and effectiveness by minimizing operating cost and achieve maximum revenues.

Reasons for Plant/Facility Location

1. Starting new business2. Introduction of new product or service3. Insufficient capacity4. Changes in technology5. Mergers6. Changes in input resources7. Shifts in geographical demand may occur8. govt.

Importance of Location Decision

1. Efficiency and effectiveness• Efficiency and effectiveness are dependent upon location.• Location affect the operating cost such as production and distribution costs.• In service, it affects the demand and effectiveness of the entire operation.

2. Long term commitment• Involve huge amount of capital.3. Fixed Cost• Involve the cost of constructing or purchasing new plant, renovating (if renting).4. Revenues• Revenue may depend on having the facility near the potential customer.5. Variable Costs• Cost of labor, and material also depend on location.

Factors influencing industrial location1. Land and raw material:- Land includes water, forest wealth, rivers, coastline, wind etc.- Rent of land- Climate and transportation- Ex. Moist climate suites textile industry of Mumbai- Ex. Fishing industry- coastline area, paper industry- bamboo tree area

2. Labour:- Skilled, semiskilled, unskilled- Labor union- Rate of wages3. Capital and finance:- Nearness of bank- Rate of interest- Relation with bank personnel

4. Proximity of markets:- Perishable and heavy products units should be

near to market5. Availability of transport:- water, road, rail- Ex. Steel plant at Vishakhapattanam6. Power:- Coal for iron and steel- Electricity at reasonable rates- Other sources i.e., wind, water, solar etc.

7.Infrastructural facilities8. Historical factors9. Entrepreneurship10. Strategic considerations11. Government policy