Industries ( Important for APSC)

As India aspires to achieve its ambitious goal of becoming a USD 5 Trillion Economy, the pivotal role of the industrial sector cannot be overstated. This sector is the linchpin of the nation’s economic growth, and within it, eight specific industrial sectors hold paramount significance.

These core sectors collectively wield substantial influence, constituting a substantial 40% share of the Index of Industrial Production (IIP). Consequently, they serve as a leading barometer, providing vital insights into the overall health and trajectory of industrial activities across the country.

Remarkably, in June 2022, the core sector displayed a noteworthy resurgence, registering an impressive 8% growth compared to the Covid-induced downturn. This resurgence can be attributed to the commendable performance exhibited by most of these core sectors. However, it is worth noting that challenges persist, particularly in segments like steel and crude oil, which faced headwinds during this period.

As India marches towards the advent of Industry 4.0, it becomes increasingly imperative to confront and address the obstacles impeding the growth of the nation’s industrial sector, particularly within the core segments. The demand for industrial products and services is surging, outstripping the current supply capacity, necessitating strategic interventions to bridge this gap and foster sustainable industrial development.

What are industries?

Industries encompass a broad spectrum of economic activities focused on the creation of goods, the extraction of valuable resources, or the delivery of services. For instance, industries include the production of goods such as iron and steel, the extraction of minerals like coal, and the provision of services like tourism.

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Classification of Industries

Industries are categorized based on several criteria, including raw materials, size, and ownership structures:

• Classification by Raw Material:

• Agro-Based Industries: Utilize plant and animal-based products as their primary raw materials. Examples include food processing and textile industries.
•  Marine-Based Industries: Rely on products sourced from seas and oceans as their raw materials. Examples include fisheries and seafood processing industries.

• Classification by Size:

•  Small-Scale Industries: Characterized by lower capital investment, a smaller workforce, and limited production volumes. Cottage and household industries are prime examples.
•  Large-Scale Industries: Involve substantial capital investment, employ a larger workforce, and produce high volumes of goods. Industries such as automobile manufacturing and heavy machinery fall into this category.

• Classification by Ownership:

•  Private Sector: Owned and operated by individuals or groups of individuals, representing a private ownership model.
• Public Sector or State-Owned: Government-owned and managed entities, like Hindustan Aeronautics Limited and Steel Authority of India (SAIL).
• Joint Sector: Jointly owned and operated by both the government and private individuals or groups. Maruti Udyog Limited is an example.
• Cooperative Sector: Owned and operated by producers, raw material suppliers, workers, or a combination of these stakeholders. Notable examples include Amul India and IFFCO (Indian Farmers Fertiliser Cooperatives).

Distribution of Major Industries in India

Three major industries of significance are the Iron and Steel industry, the Textile industry, and the Information and Technology (IT) industry. While Information Technology represents a burgeoning sector, Iron and Steel, as well as Textile industries, stand as stalwarts with a rich historical legacy, pivotal to India’s industrialization journey.

The development and expansion of towns and cities across the nation can be largely attributed to the impetus provided by industrialization, driven by these industries.

Industrial Distribution in India

The Iron and Steel Industry

The Iron and Steel industry serves as a foundational sector, producing materials essential as raw inputs for various other industries. Its output forms the cornerstone of modern industrial processes, with steel being a fundamental material integral to nearly every sector.

This industry relies on a range of inputs, including crucial raw materials such as iron ore, coal, and limestone, as well as factors like labor, capital, suitable sites, and essential infrastructure. The transformation of iron ore into steel involves intricate processes of smelting and refining.

In a nation like India, in the throes of development, the Iron and Steel industry has thrived by capitalizing on advantages such as abundant and affordable labor, access to raw materials, and a readily available market.

Key steel-producing hubs, including Bhilai, Durgapur, Burnpur, Jamshedpur, Rourkela, and Bokaro, are strategically located in a region spanning four states: West Bengal, Jharkhand, Odisha, and Chhattisgarh. Additionally, Bhadravati and Vijay Nagar in Karnataka, along with Visakhapatnam in Andhra Pradesh and Salem in Tamil Nadu, stand as significant steel centers leveraging local resources.

The growth and development of the Iron and Steel industry have not only fortified the industrial landscape but have also acted as a catalyst, propelling India’s rapid industrial progress. This sector’s vital role in providing essential materials has paved the way for a thriving industrial ecosystem within the country.

Jamshedpur Steel Plant: The Birth of Tata Iron and Steel Company Limited (TISCO)

•  Tata Iron and Steel Company Limited (TISCO) was founded in 1907 in Sakchi, later renamed Jamshedpur.
•  Jamshedpur is strategically located and is one of the most conveniently situated iron and steel centers in India.
• The location of Jamshedpur was chosen due to its proximity to vital resources such as iron ore, coal, and manganese deposits.
•  The city’s closeness to Kolkata, a major urban center, provided a substantial market for TISCO’s products.
• TISCO sourced coal from the nearby Jharia coalfields, while iron ore, limestone, dolomite, and manganese came from Odisha and Chhattisgarh.
• The presence of the Kharkai and Subarnarekha rivers ensured a consistent and sufficient water supply for industrial processes.
•  The establishment of the Jamshedpur Steel Plant and TISCO’s strategic location played a pivotal role in shaping the Indian iron and steel industry.

Cotton & Textile Industry

•  Weaving cloth using materials like cotton, wool, silk, jute, and flax is an ancient art.
• The textile industry categorizes based on raw materials: natural fibers (wool, silk, cotton, linen, jute) and man-made fibers (nylon, polyester, acrylic, rayon).
• The cotton textile industry is one of the world’s oldest industries with a rich history.
• Before the Industrial Revolution, cotton cloth was made using hand-spinning techniques and traditional looms.
• Power looms revolutionized cotton textile production in the 18th century, starting in Britain and spreading globally.
• Major cotton textile producers today include India, China, Japan, and the USA.
• Internationally renowned textiles like Muslins of Dhaka, Chintzes of Masulipatnam, Calicos of Calicut, and Gold-wrought cotton from Burhanpur, Surat, and Vadodara are highly esteemed for their quality and designs.
• After the Industrial Revolution, Mumbai established the first successful mechanized textile mill in 1854, benefiting from a favorable climate, access to ports for machinery imports, raw material availability, and skilled labor.
•  In Gujarat, the first cotton textile mill emerged in 1859 along the Sabarmati River, turning Ahmedabad into the ‘Manchester of India’ after Mumbai in textile production.

Ahmedabad Textile Industry

• Close proximity to cotton-growing areas ensures a readily available supply of raw materials for the textile industry in Ahmedabad.
• The local climate is ideal for the spinning and weaving processes, enhancing textile production.
•  The flat terrain and the availability of land make Ahmedabad a suitable location for establishing textile mills.
• The densely populated states of Gujarat and Maharashtra provide access to both skilled and semi-skilled labor, supporting the industry’s workforce requirements.
• Well-developed road and railway networks enable efficient transportation of textiles to various parts of the country, facilitating access to broader markets.
• The proximity to Mumbai Port facilitates the import of machinery and simplifies the export of cotton textiles, enhancing the industry’s global reach and competitiveness.

Information & Technology Industries

• The information technology sector specializes in managing, processing, and disseminating data and information, playing a pivotal role in the modern digital landscape.
• Over a mere decade, the IT industry has rapidly evolved into a global force, driven by a combination of technological advancements, political decisions, and socio-economic shifts.
• Resource availability, cost considerations, and the presence of robust infrastructure stand out as critical factors influencing the choice of locations for IT industries.
• Beyond Bengaluru, India boasts emerging IT hubs in major metropolitan centers, including Mumbai, New Delhi, Hyderabad, and Chennai.
• Several other cities such as Gurgaon, Pune, Thiruvananthapuram, Kochi, and Chandigarh have also emerged as significant players in the IT industry landscape in India.

Hubs of Information & Technology Industries

•  Silicon Valley, California, and Bangalore both contribute significantly to the advancement of information technology.
• They share a pleasant climate that can be conducive to innovation and productivity.
•  Both regions have access to a skilled and educated workforce, essential for the growth of the IT sector.
• The presence of renowned educational institutions, technological hubs, and scientific centers fosters a culture of innovation.
•  Proximity to markets further facilitates the development and expansion of IT industries in these regions.

The Index of Industrial Production (IIP)

The Index of Industrial Production (IIP) is a crucial economic indicator that quantifies changes in the volume of industrial product output over a specified timeframe, with a base year of 2011-2012.

This index is meticulously compiled and released on a monthly basis by the National Statistical Office under the Ministry of Statistics and Programme Implementation in India. It serves as a comprehensive gauge of industrial growth across various sectors.

The IIP encompasses two main categorizations:

• Broad Sectors:These include Mining, Manufacturing, and Electricity, capturing the overarching segments of industrial production.
• Use-Based Sectors: These consist of Basic Goods, Capital Goods, and Intermediate Goods, offering insights into the utilization and demand for industrial products.

In addition to the IIP, there exists the Index of Eight Core Industries (ICI), which holds significant weight, accounting for 40.27% of the IIP. This specialized index focuses on eight paramount industrial sectors within the Indian economy. These core industries, ranked by their weightage, are as follows:

1. Refinery Products

2. Electricity

3. Steel

4. Coal

5. Crude Oil

6. Natural Gas

7. Cement

8. Fertilizers

The monthly ICI enables an in-depth assessment of both collective and individual performance within these core industries, contributing to a comprehensive understanding of India’s industrial landscape.

Challenges in India’s Industrial Sector:

• Inadequate Infrastructure and Skilled Workforce:The industrial sector faces a significant challenge in terms of insufficient high-tech infrastructure, particularly in transportation, and a shortage of skilled manpower. This hampers manufacturing competitiveness on a global scale. Telecom and electricity infrastructure, in particular, are often underdeveloped and inefficient, mainly outside major urban centers.
• Transportation Woes: Rail transport is burdened with excessive demand, while road transport encounters various problems, leading to inefficiencies in the logistics and supply chain.
• Uneven Playing Field for MSMEs:The Micro, Small, and Medium Enterprises (MSME) sector often faces disadvantages in terms of credit availability and working capital costs compared to larger industrial and service sectors. Addressing this bias is crucial for equitable growth.
• Reliance on Imports: India’s continued dependence on foreign imports for various critical sectors, including transport equipment, machinery, iron and steel, paper, chemicals, fertilizers, and plastics, poses economic vulnerability and hinders self-reliance.
• Low Domestic Production of Consumer Goods: The domestic production of consumer goods in India accounts for only 38% of the total industrial output, contrasting significantly with newly industrialized countries like Singapore (52%), South Korea (29%), and Malaysia (28%). This highlights the challenge of achieving import substitution and strengthening domestic manufacturing.
• Inefficient Industrial Locations: Industrial locations have often been established without careful consideration of cost-effective factors. Political motivations frequently influence these decisions, leading to suboptimal industrial placement.
• Losses in Public Sector Industries: Historically, public sector industrial investment grew substantially under the socialist development pattern. However, ineffective policy implementation, bureaucratic red tape, and strained labor-management relations have led many public sector enterprises to operate at a loss. This results in substantial government expenditure to cover losses and meet employee wage obligations.

Path Forward for India’s Industrial Sector:

• Promoting Public-Private Partnerships (PPP): There is a compelling argument for increasing public investment and fostering PPP initiatives to enhance efficiency and transparency in industrial projects. For example, the successful Mumbai Metro line between Ghatkopar and Versova was developed under the PPP model, showcasing its potential.

• Addressing Infrastructure Constraints: The sluggish pace of capacity expansion in critical infrastructure sectors poses a bottleneck to industrial growth. Addressing this by increasing capacity and removing infrastructure constraints will stimulate industrial output in the medium to long term.

• Leveraging India’s Demographic Dividend: India possesses a significant advantage with a growing young working population. Harnessing this demographic dividend and the large workforce over the next few decades can unlock India’s full manufacturing potential.

• Boosting Research and Development (R&D): Strengthening industrial research and development efforts, both in a general sense and tailored to specific industrial sectors, is crucial to making the industry more demand-driven and innovative.

• Becoming a Global Hub: India’s manufacturing sector is progressively adopting Industry 4.0, characterized by data-driven processes and connectivity. With a substantial pool of engineers, a youthful workforce, and competitive wages compared to China, India is poised to become a global manufacturing powerhouse.

• Reforming Industrial Policies: To sustain double-digit output growth and reduce vulnerabilities in core sectors, the medium to long-term strategy should include a robust industrial policy framework. This framework should support multifaceted reforms, ensuring the sector’s resilience and continued growth.

The way forward involves a multi-pronged approach that encompasses public-private collaboration, infrastructure development, leveraging demographic advantages, fostering innovation, and implementing effective industrial policy reforms. These actions collectively position India’s industrial sector for sustained growth and global prominence.