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Industrialization

According to Oxford English, Industrialization is the process of social and
economic change whereby a human group is transformed from a pre-industrial
society into an industrial one. It is also a means of modernization.
Industrialization can solve the problems of economic development as its main
objectives are reduction of income inequalities, growth of national income and
alleviation of poverty. Development and expansion are closely associated as
revealed by the experience of certain industrial nations.

Industrialization since Independence

India followed a non-industrial model under the British rule. However, many
Indians believed that the true progress lies in Industrialization. Indias first Prime Minister, Jawaharlal Nehru, also regarded industrialization as an
answer to alleviating poverty. Industrialization not only offered self
sufficiency to the nation but alsopromised external economies accruing from its industrial growth. This period
gave priority to heavy industry and viewing the potential of agriculture and
exports to be limited. In 1951, Industrial Development and Regulation Act
(IDRA) was formulated for the administrative control on industrial competence.
The Import Trade Control Order of 1955, in order to practice Import
Substitution, restricted almost all imports in the form of import licenses.
Involvement of Indian state in industrial development was extensive as the key
industries were under the states control.

Two major shifts took place under Prime Minister, Indira Gandhi, first the
agriculture was revived leading to green revolution and secondly, further
tightening of state control over every aspect of the state economy. Banks were
nationalized, trades were restricted, price controls were forced on variety of
products and foreign investment was reduced.

Foreign Exchange and Regulation Act of 1973 literally shut out the inflow of
new technology from abroad into India during the 70s and 80s. After World War II most of the developing countries followed the policies of
inward looking industrialization and India was one of them.

Mild trends towards deregulation started in early 1980s. Various economic reforms were initiated liberating trade, financial and
industrial policies and at the same time subsidies, tax concessions and the
depreciation of the currency enhanced export incentives. During the 80s, GDP grew over 5% as compared to 3.5 % during 1970s. However, the quantitative restrictions and the tariffs continued to be among
the highest in the world.

Indias foreign trade reserves were exhausted by mid 1991 due to the restrictive
policies and continuous discouragement of foreign investment. A major social
reform was launched in July 1991 in which the government committed itself to
encouraging a competitive economy that would be open to trade and foreign
investment. Governments influence on corporate investment decisions was reduced, industrial licensing
system was dismantled, the areas closed to public sector such as areas of the
oil industry, electricity generation, heavy industry, roads, air transport and
some telecommunications were opened up. The economy opened for foreign
investment.

Noteworthy reduction in the import licenses and tariffs, removal of subsidies
for export and beginning of foreign exchange market opened gates for global
integration. Ever since 1993 trade is completely free except a small list of
exports and imports that are restricted and after the monetary reforms in 1995,
rupee can be considered fully convertible currency at market rates.

After the over protected Indian market opened in the late 90s, the Indian industry has recorded a remarkable growth in the past decade and
a half. The number of industries has doubled in the last fifteen years. Various
programs were devised and started to build up adequate infrastructure for rapid
industrialization. The industrial policy revolving around the core factors like
industrial Entrepreneurs memorandum, industrial licensing, environmental
issues, locational policy and policy regulating to small scale undertaking have
helped the Indian industries to grow rapidly. Massive growth has taken place in
Information Technology, Telecommunication and Pharmaceuticals sectors.

Investment in human capital is another essential ingredient for promoting
industrialization. Uplifting the educational sector by making primary education
compulsory and encouraging women to study will aid in developing the economy.

The development of India into a modern industrialized nation is slow but
continuous process. India should aim to develop suitable environment for
industries to flourish, it should to improve the quality of education, should
provide appropriate compensation to farmers whose lands are acquired for
setting up industries, avoid political dogma and improve the labor market to
help industrialization flourish.

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