Evolution of Industries & Phases of Industrialization – UPSC

In this article, You will read the Evolution of Industries and Phases of Industrialization in India – for UPSC IAS.

Industry

  • The industry is a category of active enterprises and organizations which produce or sell products, services, or sources of revenue.
  • Industry means not a factory, it refers to economic activities that are connected to the production of goods, extraction of minerals, and providing services.
  • Industries are commonly categorized in economics as the primary industry, secondary industry, and tertiary industry.

Manufacturing

  • Manufacturing means the transformation of natural material endowments into commodities of utility by processing, assembling, and repairing.
  • Manufacturing acts as the engine of economic growth.

Evolution of Industries

  • Industrial development is important for socio­economic and human development of a country. From the times before independence India has been traditionally renowned for cottage and household industries like muslin of Dhaka, Chintez of Masulipatnam, Calicos of Kochin, Silk goods, artistic pottery and ruminants of ancient architectural work for e.g. Mahrauli Iron Pillar.
  • The cotton textile, silk textile, pottery, bronze, brass, silver, copper works, dyeing and calico printing of India was famous throughout the world.
  • Before the beginning of modern industrial development, Indian pottery, muslin and silk goods were much in demand.
  • Traditional handicrafts industry, however, suffered after the advent of the British in India. Arrival of English as tradesmen and subsequent industrial revolution resulted in the adoption of policy of raw material export from colonies and finished material import, which led to the downfall of Indian cottage industries. This critical scenario improved somewhat after the mid-nineteenth century but the growth of industries was a slow process.
  • In India, the modern industrial sector on an organized pattern started with the establishment of the cotton textile industry in Bombay in 1854 with predominantly Indian capital and enterprise. In 1855, the jute industry was started in the Hooghly valley at Rishra near Kolkata, largely with foreign capital and enterprise.
  • Rail transport made a beginning between Bombay and Thane in 1854. The country’s first paper mill was started at Ballygunj near Kolkata in 1870 and steel was first manufactured by modern methods at Kulti in 1874. The Tata Iron and Steel Company started at Jamshedpur in 1907.
  • This means that the modern industrial sector had its beginning only after the middle of the nineteenth century. The two World Wars gave an impetus to the development of a number of industries, such as chemical, iron and steel, sugar, cement, glass, and other consumer goods industries.
  • The post-independence industrial policy emphasized the attainment of the socio-economic objectives such as employment generation, higher productivity, removal of regional imbalances in development, providing strength to agricultural base, promotion of export-oriented industries, and consumer protection. A deliberate policy of locating the industries in economically backward regions has been pursued to reduce regional imbalances in development.
  • The industrial policies of 1948 and 1956 indicate the direction of industrial development in India. The process of industrialization started with the launching of the First Five Year Plan and continued through successive plan periods.

Phases of Industrialization (Evolution of Industries) in India

Indian industrialization i.e. Evolution of Industries can be classified into five following phases.

Phase I (Abortive Phase)- 1818 to 1854
  • In this phase many attempts were made to initiate industrialization but were failed
  • Some of the industrial set up during this period was:
YearIndustry established
1818Textile Mill at Fort Gloster, Kolkata
1827Iron steel smelting at Chennai
1829Textile Mill at Ahmadabad
1832Paper and Pulp Industry in Chennai and Ballyganj
  • All of the industries were failed and were shut down due to suppressive British industrial policies.
  • The private industries were not encouraged as a result of suppressive British industrial policies.
Phase II (Incipient Phase)- 1854 to 1907
  • This was the phase of early expansion. The modern industry marked its presence by the establishment of the following industries at:
YearIndustry
1854Cotton Textile Mill at Mumbai by Karsonji Devarji, who was the first private entrepreneur of India.
1855Jute textile mill at Rishra. Export of jute to Australia started.
1863Ahmadabad cotton mills were established, it expanded due to the American civil war.
1870Woolen textile mills at Banglore, Dharival, and Kanpur
1875More than 50 textile mills were set up.
1907Close to 120 mills were established of which 46 were in Bombay alone. Thus Bombay became ‘Cotton polis of India’
  • Other industrial developments which were witnessed in this phase were:
    • The first paper mill at Kolkata in 1870
    • Beginning of first railway services from Thane to Mumbai in 1853.
    • Bengal ironworks started at Kulti in 1874.
  • Major emphasis was given to the paper and pulp industry and Jute textile industry in Hoogly and Bihar region.
  • The cotton textile industries were emphasized in Western regions of India.
  • Thus, this phase was successful in setting up then robust Agro based industrial set up in India but basic and heavy industries were still lagging.
Phase III (Premature Phase)- 1907 to 1955
  • This was the premature phase where industrialization based on the iron steel industry started. Some of the industries were:
YearIndustry
1907The First Iron and Steel industry was started by Jamshedji Tata in 1912 at Jamshedpur
1919TISCO at Kulti and Hirapur
1923Vishweswarya Steel Plant at Bhadrawati, Karnataka
  • Inter war period:
    • During the First World War there was rise in demand of industrial goods from Armed Forces.
    • Indian Fiscal Commission set up in 1921-22 gave protection to industries like Iron and steel, textile, cement, sugar, paper and metals.
    • Transportation cost of raw materials made products in Europe were costly due to hindrances in goods via sea, which led to the following of liberal policy by British towards Indian made products during the war.
  • This period also saw the dispersion of cotton textile industries away from Mumbai. India emerged as the 4th largest cotton manufacturing country in the world. India became the main supplier of liquor and textile during this period.
  • Post World War II:
    • While Indian industry prospered between First World War and Second World War, the participation of India in Second World War and entry of Japan in the war created problems for Indian industries.
    • However, above problems were short lived and industries recovered. The manufacturing of arms and ammunition to meet the war time requirements led to the flourishing of Indian ordinance industries.
    • Heavy chemical industry started in 1941 and production of H2SO4, synthetic ammonia, caustic soda, chorine and bleaching powder commenced.
    • In 1942 Bangalore Aircraft industry started. Metal fabricating industry like copper was initiated.
    • Engineering industries like electric equipments and plastic industry flourished during this period.
  • Post World War II and Partition:
    • After Second World War there was fall in demand followed by labour shortages, overworked machinery, transport bottlenecks, which adversely affected the industrial growth in India.
    • Partition adversely affected cotton textile and jute industry. 40% of cotton and 80% of Jute producing tracts went to Pakistan.
  • At the eve of independence Indian industry was largely dominated by consumer goods e.g. cotton, sugar, leather etc. while the growth of intermediary nod capital goods was slow.
  • Industrial Policy Resolution of 1948 changed the situation. The objectives of Industrial Policy Resolution of 1948 was:
    • Employment generation
    • High productivity
    • Removal of regional imbalances.
    • Promotion of public sector.
    • Self sufficiency
  • Apart from above Industrial Policy Resolution of 1948 had following features:
    • It declared the Indian economy as Mixed Economy
    • Small scale and cottage industries were given the importance
    • The government imposed restriction on foreign investments
    • It classified industries into four broad areas:
      1. Strategic Industries (Public Sector): It included three industries in which Central Government had monopoly. These included Arms and ammunition, Atomic energy and Rail transport.
      2. Basic/Key Industries (Public-cum-Private Sector): 6 industries viz. coal, iron & steel, aircraft manufacturing, ship-building, manufacture of telephone, telegraph & wireless apparatus, and mineral oil were designated as “Key Industries” or “Basic Industries”.
      3. Important Industries (Controlled Private Sector): It included 18 industries including heavy chemicals, sugar, cotton textile & woollen industry, cement, paper, salt, machine tools, fertiliser, rubber, air and sea transport, motor, tractor, electricity etc.
      4. Other Industries (Private and Cooperative Sector): All other industries which were not included in the above mentioned three categories were left open for the private sector.
  • 1st five year plan 1951-56 rolled out during this phase. The key features of the plan were:
    • This plan promoted the idea of self reliant closed economy and was developed by Prof. P. C. Mahalanobis.
    • In this plan, highest priority was given to the Agriculture to achieve food selfsufficiency in the shortest possible time and control of inflation.
    • Emphasis was given on increasing the capacity of existing industry than setting up the new ones.
    • Some new industries emerged during this period such as newsprint, power loom, medicine, paint, transport and equipments.
    • Some of the industries set up were Sindri Fertilizer factory, Chittaranjan locomotives, Integral Coach Factory.
  • Thus during 1907 to 1955, some of the modern and basic industry took root in India but looking at enormous population it was miserably insufficient.
Phase IV (1955-1985)- Early Mature Phase and 2nd FYP
  • 2nd plan is known as the economic constitution of India. It was inspired by the socialist pattern of USSR. The 2nd five year plan functioned on the basis of Mahalanobis model. The Mahalanobis model was propounded by the famous Prasanta Chandra Mahalanobis in the year 1953.
  • The salient features of 2nd year five year plan was:
    • Rapid industrialisation with particular emphasis on the development of basic and heavy industries.
    • Industrial Policy of 1956 accepted the establishment of a socialistic pattern of society as the goal of economic policy.
    • Backward area development and the trickledown theory of Growth Pole Centre were adopted.
    • Steel mills at Bhilai (USSR) in 1954, Durgapur (UK) in 1959, and Rourkela (Germany) 1959 were established in second five year plan.
    • Many pre-existing steel plants such as Jamshedpur, Burnpur, Kulti, Burnpur and Bhadravati were expanded.
    • HMT Bangalore, Sindri fertilizer and Chittaranjan locomotive workshop were also expanded.
    • Two more fertilizer plants at Raurkela and Nangal were set up.
  • Third Five Year Plan (1961-66): The salient features of this plan were:
    • This plan emphasized on industrial diversification and expansion of existing industries like steel, machine, building, fuel, chemicals etc.
    • HMT plants at Bangalore, Haryana, Ajmer and Ranchi were started.
    • Heavy electrical at Bhopal, Drugs and pharmacy at Haridwar became new pillars of modern industry.
    • Some of the problems during Third Five Year Plan were
      • The Indo-China war 1962 and Indo-Pak War 1965
      • Drought of 1965
      • Non availability of foreign credit
      • Inability of rigid administrative rules to cope with abnormal situations.
  • Three Annual Plans (1966- 69): Plan Holiday
    • Failure of Third Plan that of the devaluation of rupee (to boost exports) along with inflationary recession led to postponement of Fourth FYP. Three Annual Plans were introduced instead.
    • Prevailing crisis in agriculture and serious food shortage necessitated the emphasis on agriculture during the Annual Plans. During these plans a whole new agricultural strategy was implemented.
    • It involving wide-spread distribution of high-yielding varieties of seeds, extensive use of fertilizers, exploitation of irrigation potential and soil conservation. During the Annual Plans, the economy absorbed the shocks generated during the Third Plan It paved the path for the planned growth ahead.
  • Fourth Five Year Plan (1969-1974):
    • Indian economy started recovering from recession at the beginning of Fourth Five Year Plan.
    • Bokaro Steel Plant became operational.
    • Ago based industry, small scale industry and household industry were greatly emphasized.
    • Efforts were made to accentuate the process of Industrial dispersal through regional and local planning process.
    • Significant progress by industries like alloys and special steels, aluminum, automobile tyre, petroleum refinery, electronic goods, machine tools, tractors and heavy electrical equipments were made.
    • PSUs also showed the good progress.
  • Fifth Five Year Plan (1974-79):
    • During Fifth Five Year Plan there was emphasis on rapid growth of core sector industries and increase the production of export oriented articles and articles of mass production.
    • There was rapid growth of steel plants. Steel plants at Salem, Vijayanagar and Vishakhapatnam were proposed to create the additional capacity.
    • SAIL was constituted in 1973. Drug manufacturing, oil refining, chemical fertilizer and heavy engineering industry made good progress.
    • World energy crisis during this period adversely affect the industries in India.
  • Sixth Five Year Plan (1980-85):
    • This plan marked a watershed in industrial development process. Liberalization was initiated by Rajiv Gandhi.
    • Optimum utilization of capacities was focused during this plan. The industrial productivity improved during this period.
    • There was increase in output of consumer and capital goods. Electronics industry grew rapidly.
    • Targets of capacity creation achieved for industries like Aluminum, Zink, Lead, Petrochemicals, Automobiles and Consumer durables.
    • Production targets achieved in industries like petroleum, machine tools, Automobiles etc.
Phase V (1985 to present): Mature Phase
  • Seventh Five Year Plan (1985- 1990):
    • Seventh Five Year Plan focused on high tech and electronics industrial service base.
    • There was a general dispersion of industrial bases across all the regions. The local resources were exploited and there was a focus on the proper training for skilling the available human resources.
    • With the Seventh Five Year Plan integrated policy was framed to concentrate on industries with large domestic market and export potential.
    • Macro changes in industrial policies started and some of the stringent and restrictive laws were modified allowing large private sector partnerships and FDIs.
  • Annual Plans (1990-91 and 1991-92)
    • Eight Five Year Plan could not take off due to the fast-changing political situation in the country, which led to the rolling out of Annual Plans of 1990-91 and 1991-92.
    • The impact of liberalization was felt on industries along with other sectors of the economy.
  • Eight Five Year Plan ( 1992-1997)
    • 1991 was the watershed in the history of industrial development in India. New Industrial policy under Rao-Manmohan Model was adopted.
    • Some of the major features of the New Industrial Policy was:
      • Removal of entry barriers of trade.
      • Reduction of areas reserved exclusively for the public sector.
      • Rationalization of approach towards Monopolistic and Restrictive practices.
      • Liberalization of foreign and import policies.
      • Removing regional imbalances and encouraging the growth of the employment-intensive small and tiny sectors.
      • FERA was replaced by FEMA.
      • New Industrial Policy led to the huge influx of foreign multinationals.
      • New Industrial Policy accelerated the process of making the Indian Industry internationally competitive. It was based on the process of Deregulation, Disinvestment, Decentralization, De-licensing, and devolution (debureaucratization)
    • Eight Five Year Plan witnessed the growth in Multinational Nation Companies, Automobiles and Telecom industries.
    • The industrial growth slowed in 2000-01 due to the following factors:
      • Decrease in domestic demands
      • Higher oil prices
      • Gujarat Earthquake
      • High-interest rate with adverse impact on private investment and slowdown in the whole country.
  • Ninth Five Year Plan (1997-2002)
    • During Ninth Five Year Plan there was full Current Account Convertibility of Indian Rupee.
    • Capital Account Convertibility became partial and there was the complete transfer of FERA to the FEMA regime.
    • All economic sectors except three viz. Railway, Space, and Nuclear Science were opened for private investments.
    • Ninth Five Year Plan was successful in addressing the regional imbalance issues.
    • Existing industries like Cement, coal, steel, consumer goods, etc. were optimized.
  • Tenth Five Year Plan (2002-2007)
    • Tenth Five Year Plan emphasized on modernization and technology up-gradation.
    • Tenth Five Year Plan led to the enhancement of export and an increase in the global competitiveness of Indian industries.
    • There was a balance of regional development with the rollout of the Tenth Five Year Plan.
    • The tenth Five Year Plan saw the highest growth rate since independence.
    • India emerged as a leader in IT and service sector.
    • There was growth in the Automobile and Pharmacy sectors.
    • To give major thrust in exports Department of Commerce launched major initiatives like ASIDF, Market Access Initiative (MAI), SEZ, and Modernization of DFFT.
    • For balanced industrial development, industrial policy packages were announced for special category states of Uttarakhand, Himachal Pradesh, Jammu, and Kashmir, North East
    • For the Textile industry, TUFS (Textile Up-gradation for Textile) scheme was launched.
    • Textile center Infrastructure development Scheme was announced to take care of infrastructure development of textile industry in India.
    • There was an increase in the suffusion of IT and the knowledge industry. The tourism industry also got a major boost.
  • Eleventh Five Year Plan (2007-2012)
    • Eleventh Five Year Plan was based in the concept of financial inclusion growth model which envisaged growth of industry and agriculture simultaneously with a futuristic vision.
    • There was a focus on industrial growth with Environmental Impact Assessment.
    • The exploitation of resources was further rationalized.
    • The global crisis of 2008-09 adversely affected the growth trajectory of India during this plan.
Evolution of Industries UPSC

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