Industrial Pattern on the Eve of Planning

This section emphasises on the industrial pattern on the eve of planning. Prior to the rise of the modem industrial system Indian manufacturers had a global market. Indian muslin and calicoes were in huge demand the world over. Indian industries not only supplied all local wants but also facilitated India to export its finished products. Indian exports comprised chiefly of manufactures such as cotton and silk fabrics, artistic ware, calicoes, silk and woollen cloth. 

The void developed by decay of Indian handicrafts was not filled by the rise of modem industry in India due to the British policy of motivating the import of manufactures and export of raw materials from India.

Caution: The impact of the British connection and industrial revolution led to the decay of Indian handicrafts. Instead, machine-made goods started pouring into India.

The British Government in India offered distinguishing protection to some chosen industries since 1923. This protection was escorted by the most preferred nation clause for British goods. In spite of this factor, some industries like cotton textiles sugar paper, matches and to some degree iron and steel did make advancement. But one thing was quite apparent that during the British period no attempt was made to foster the development of capital goods industries. Instead the British Government put definite obstacles and cold-shouldered their development. The chief features of the industrial pattern in India on the eve of planning (1950) were as below:

1. Lop-sided Pattern of Industry: The Indian industrial structure mirrored a lop-sided size-pattern. The total number of persons hired in manufacturing in mid-I956 was nearly 15 million. Out of this, only 3.9 million were hired in factories (described by the Act as unit of production employing 10 or more persons); 11.1 million were hired in household enterprises and workshops hiring less than 10 persons. Out of total factory employment 00.9 million persons, 1.2 million or 3.1% were in small factories, 1.0 million or 26 were in medium factories and 1.7 million or 43 per cent were focused in large factories. The distinctiveness of the industrial pattern of India was the high concentration of employment either in small factories and household enterprises, that is, the lowest size-group or that there was a high concentration of employment in large factories, that is, the highest size group. The medium size factories did not develop in India. The existence of this lopsided industrial pattern was because of the colonial nature of our economy. The foreign firms and those owned by big business and industrial magnates were of a very huge size arriving at the top of the pyramid, and at the bottom were a very huge number of indigenous small size firms. The lop-sidedness of the industrial pattern was shown in the absence of the middle entrepreneurs operating medium sized firms.

2. Low Capital Intensity: You must understand another characteristic of the Indian industrial pattern was the occurrence of low capital intensity. It was the outcome of two factors-first, the general level of wages in India was low, and, second, the small size of the home market in opinion of the low per capita income and the restricted use of mass production (or high capital intensity) techniques led to low capital per worker hired.

3. Composition of manufacturing output mirrors the preponderance of consumer goods industries vis-a-vis producer goods industries. In 1953, the ratio of consumer goods to producer goods was computed to be 62: 38. As per the criteria advised by Hoffmann, India seems to have entered the second stage of industrial development. However even then, there is no doubt that the capital-goods sector is under-developed and there is a requirement for the expansion of this sector so as to make sure a quick rate of growth to make the economy self-reliant and finally foster the pace of industrialisation in the country. Only then can per capita income be pushed up at a quick rate.

There was a structural imbalance in the industrial pattern. In instance of consumer goods, domestic supply was over the demand. The index of domestic supplies of consumer goods was 112 in comparison to domestic demand equal to 100. But in instance of producer goods, the domestic supplies fell short of domestic demand. The index number of domestic supplies with respect to demand was 80. This enhanced our dependence on other countries in the capital goods sector. The conclusion is evident. There was a huge need for increasing the output of ultimate and intermediate producer goods so as to rectify the imbalance between their demand and supply. Industrial development “is not solely a process of expanding output to meet the rising demand created by growing per capita incomes, it is also a process in which existing demand for manufactures is met increasingly from domestic production instead of from foreign sources.”

In brief, the industrial pattern in India on the eve of planning was indicated by low capital

intensity, restricted development of medium sized factory enterprises as well as imbalance between consumer goods and capital goods industries. It would be of interest to inspect the extent to which the Five-Year Plans have made an effort to improve the industrial pattern, rectify its lop-sidedness and develop the capital goods sector.

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