Classification of Industries – UPSC

In this article, You will read the Classification of Industries – for UPSC (Industry – Geography of India).

Classification of Industries

Industries are part of the secondary activity. Secondary activities or manufacturing converts raw materials into products of more value to people. The industry refers to economic activities concerned with the production of goods, extraction of services, and provision of services. 

Industry classification or industry taxonomy is a type of economic taxonomy that classifies companies, organizations, and traders into industrial groupings based on similar production processes, similar products, or similar behavior in financial markets.

Industries can be classified into several groups. The following table gives an understanding of them.

classification of industries
On the Basis of Strength of Labour
  • Large Scale: Industries which employ a large number of labourers in each unit are called large-scale industries. Cotton or jute textile industries are large scale industries.
  • Medium Scale: The industries which employ neither very large nor very small number of labourers are put in the category of medium scale industries. Cycle industry, radio and television industries are some examples of medium scale industries.
  • Small Scale: The Industries which are owned and run by individuals and which employ a small number of labourers are called small scale industries.
On the Basis of Source of Raw Material
  • Agro based: Agro based industries are those industries which obtain raw-material from agriculture. Cotton textile, jute textile, sugar and vegetable oil are representative industries of agro-based group of industries
  • Mineral based: The industries that receive raw materials primarily from minerals such as iron and steel, aluminium and cement industries fall in this category.
  • Pastoral based: These industries depend upon animals for their raw material. Hides, skins, bones, horns, shoes, dairy, etc. are some of the pastoral-based industries.
  • Forest based: Paper card-board, lac, rayon, resin, tanning of leather, leave- utensils, basket industries are included in this type of industries.
On the basis of Ownership
  • Private Sector: Industries owned by individuals or firms such as Bajaj Auto or TISCO situated at Jamshedpur are called private sector industries.
  • Public Sector: Industries owned by the state and its agencies like Bharat Heavy Electricals Ltd., or Bhilai Steel Plant, or Durgapur Steel Plant are public sector industries.
  • Joint Sector: Industries owned jointly by the private firms and the state or its agencies such as Gujarat Alkalies Ltd., or Oil India Ltd. fall in the group of joint sector industries.
  • Cooperative Sector: Industries owned and run co-operatively by a group of people who are generally producers of raw materials of the given industry such as a sugar mill owned and run by farmers are called co-operative sector industries.
  • Multi-National: A multinational corporation (MNC) has facilities and other assets in at least one country other than its home country. A multinational company generally has offices and/or factories in different countries and a centralized head office where they coordinate global management. These companies, also known as international, stateless, or transnational corporate organizations tend to have budgets that exceed those of many small countries. E.g. TCS, Infosys, etc.
On the Basis of Raw-Material and Finished Goods
  • Heavy: Industries that use heavy and bulky raw materials and produce products of the same category are called heavy industries. The iron and steel industry presents a good example of heavy industries.
  • Light: The light industries use light raw materials and produce light finished products. Electric fans, sewing machines are light industries.
Miscellaneous Industries
  • Village industries: Village industries are located in villages and primarily cater to the needs of the rural people. They usually employ local machinery such as oil extraction, grain grinding, and agricultural implements.
  • Cottage industries: Industries which artisans set up in their own houses, work with wood, cane, brass, stone, etc. are called cottage industries. Handloom, khadi, and leatherwork at the artisan’s house fall in this category.
  • Consumer-based industries: Consumer industries convert raw materials or primary products into commodities directly used by the people. Textiles, bakeries, sugar, etc. are some of the consumer goods industries.
  • Ancillary Industries: The industries which manufacture parts and components to be used by big industries for manufacturing heavy articles like trucks, buses, railway engines, tractors, etc. are called ancillary industries.
  • Basic Industries: Industries on which depend many other industries for their manufacturing processes are called basic industries. The iron and steel industry and power-generating industries are included in this category.
  • Capital Intensive Industries: Industries requiring huge investments are called capital-intensive industries. Iron and steel, cement, and aluminum are outstanding examples of capital-intensive industries.
  • Labour Intensive: Industries that require a huge labour force for running them are called labor-intensive industries. In these industries, labour is more important than capital. Shoe-making and bidi-manufacturing, etc. are included in these industries.
Categorisation of Industries on the basis of Pollution Index
  • The Ministry of Environment, Forest and Climate Change (MoEFCC) has developed the criteria of categorization of industrial sectors based on the Pollution Index which is a function of the emissions (air pollutants), effluents (water pollutants), hazardous wastes generated, and consumption of resources.
  • For this purpose, the references are taken from the Water (Prevention and Control of Pollution ) Cess (Amendment) Act, 2003, Standards so far prescribed for various pollutants under Environment (Protection) Act, 1986 and Doon Valley Notification, 1989 issued by MoEFCC. The Pollution Index (PI) of any industrial sector is a number from 0 to 100 and the increasing value of PI denotes the increasing degree of pollution load from the industrial sector. The following are the criteria on the ‘Range of Pollution Index for the purpose of categorization of industrial sectors.
    • Industrial Sectors having Pollution Index score of 60 and above – Red category
    • Industrial Sectors having Pollution Index score of 41 to 59 – Orange category
    • Industrial Sectors having Pollution Index score of 21 to 40 – Green category
    • Industrial Sectors having Pollution Index score incl.& upto 20 – White category
  • There shall be no necessity of obtaining the Consent to Operate for White category of industries. An intimation to concerned State Pollution Control Board (SPCB) / Pollution Control Committee (PCC) shall suffice.
  • No Red category of industries shall normally be permitted in the ecologically fragile area /protected area.


Footloose industry
  • Footloose industry is a general term for an industry that can be placed and located at any location without effect from factors of production such as resources, land, labour, and capital.
  • These industries often have spatially fixed costs, which means that the costs of the products do not change despite where the product is assembled. Diamonds, computer chips, and mobile manufacturing are some examples of footloose industries. These are generally non-polluting industries.
  • Non-footloose industries generally require raw material availability within a time limit to make products. The sugar industry, jute industry, and tea industry are examples of non-footloose industries.
  • Footloose industries can also refer to the processing of products that are neither weight-gaining, nor weight-losing, and face significant transportation costs. An example of the footloose processing industry is honey. The weight of the raw honey and wax is the same as the finishing product. So, whether the honey is processed near the source of the raw materials or at the location of the final product demand, the transportation costs are the same.

The key characteristics of a footloose industry are:

  • These industries require small plant size compared to heavy and small industries.
  • These are less dependent on specific raw material, especially weight losing ones. Most of the raw materials are small and light and can be transported easily.
  • It needs skilled workers as the industrial process is advanced and major work needs high-quality precision.
  • Like the inputs, the output is lightweight and can be easily transported to the markets. Most of the footloose industries produce low volume and high-value outputs.
  • These are environment-friendly industries as the process involved in these industries have a negligible carbon footprint.
  • It prefers location which is peaceful and cost friendly as to attract the human capital.
  • Also, location with a good connectivity of roads, railways, telecommunication, airways etc. are preferred to facilitate quick movement of skilled workers and high-value outputs.
footloose industry upsc



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