Meaning of Localisation of Industry:

Localisation of industries is also called the geographical or territorial division of labour.

This means that certain areas or towns come to specialise in the production of certain commodities.

Some of them acquire a State-wide reputation, while others come to be known throughout the country and even in other parts of the world. Some Kashmir products have an international reputation. Mysore silk is known all over India and Sheffield cutlery has a world-wide market.


Among Indian industries which have become localised may be mentioned the cotton textile industry in Bombay and Ahmedabad, the sugar industry in U.P. and Bihar, jute mill industry in Calcutta and the iron and steel industry in Bihar, West Bengal and Orissa. These places or areas have become famous for their products. This form of specialisation is called localisation or centralisation of industries.

Causes of Localisation of Industry:

There are several factors which are responsible for certain centres specialis­ing in certain products. It is partly due to natural causes like climate, nature of the soil, presence of minerals and power resources. Then, there are economic factors like the availability of labour and capital and proximity to markers. Sometimes political factors also assist localisation by extending patronage and restricting outside competition.

Let us discuss these causes in detail:


Favourable Climate:

There are certain industries which require special type of climate, e.g., damp climate for spinning and weaving. The growth of certain herbs and the preparation of medicines and drugs from them need a temperate climate. The climatic factor is a very important one for determining the localisation of an industry. The damp climate of Bombay specially suits the cotton textile industry localised there.

Nearness to Raw Materials:

Proximity to raw materials is an essential condition of localisation, if the raw material is bulky. A cement factory must be near the limestone rock; the iron and steel industry must be located where iron-ore fields, coal-mines and abundant water are to be found in close proximity. These conditions are ideally fulfilled in Bihar and West Bengal.


Nearness to Sources of Power:

For running a mill, power is necessary. The fall of a canal or a stream from a higher to a lower level may be used to generate electricity, or coal should be available nearby. Our industrial areas are centred in West Bengal and Bihar, for coal is available there. Tamil Nadu, Maharashtra, Gujarat, U.P. and the Punjab are poor in coal but rich in the source of hydro-electricity.

Fertility of the Soil:

Industries which are based on agriculture, like the sugar industry, the dairy industry, fruit and vegetable canning, etc., must have vast areas of fertile land all around. It will be impossible to establish such industries in areas which are arid wastes.

Nearness to Markets:

If the market is near, the cost of transportation will be low. Many foreign concerns were established in India so as to come close to their consumers and save transport costs. This is the case of Indian match industry.

Availability of Trained Labour:

Some areas have traditions of inherited skill. Adequate supplies of trained labour are available there. The employers will experience no difficulty in securing an adequate supply of efficient labour here. This is a great inducement to the capitalists to establish their factories there.

Availability of Capital:


No business can be run and expanded successfully without adequate credit facilities at reasonable rates. The presence of banks and financial houses in a locality encourages the establishment of trading and industrial concerns there.

Political Patronage:

Sometimes States give certain concessions like grants of free land, advances of cheap money, subsidies, bounties, protective duties and guarantees of purchases. This attracts industries to certain areas. Many Indian industries have grown behind the shelter of the tariff walls.

Many mills were started in the former Indian States attracted by the concessions granted by their rulers. Even now some industrially backward States offer concessions to prospective industrialists in order to accelerate industrial development in their regions.


Momentum of an Early Start:

Sometimes no particular cause is at the root of the location of an industry in an area. The industry just happened to be started there by some enterprising businessman sometime back. It grew in strength from the momentum gained from that early start. The Ludhiana hosiery industry owes its present position to this cause.

Causes of Persistence of Localised Industries:

We notice that some industries having been localised in certain areas tend to persist there even though the original causes leading to localisation may have ceased to operate. Every new venture in the field tends to gravitate to that particular place. Anybody who wants to start a hosiery factory will find it to his advantage to start it at Ludhiana. Why is it so?


The following reasons may be given for this tendency:

Trained Labour:

In no other city will a man find such an abundant supply of hosiery workers as in Ludhiana. The factories working there serve as training grounds, and a large supply of skilled labour is built up on which the new entrants in the industry can easily draw. This is no small attraction.

Credit Facilities:

In an industrial centre, several banks are started. Ample backing facilities thus become available. This is a great facility. In order to enjoy this facility, more industrialists are drawn to that place.

Specialised Transport:


Means of transportation may have become specia­lised and adapted to the needs of that particular industry. For example, railway sidings may be made available by the railway authorities. This facility attracts further concentration of the industry in such areas.

Subsidiary Industries:

Many subsidiary industries grow up in this place. The main industry draws valuable support from these. For example, in Ludhiana, bleaching, washing and dyeing industries have been developed. They assist the main hosiery industry.

Industrial inertia:

An industry tends to remain where it is localised, unless positive drawbacks appear in that locality. It will even put up with small hardships and inconveniences. Man does not like to move out, if he can help it.

Other Causes:


The reputation of the place helping in publicity, publication of technical journals, presence of training and research institutions and the existence of associations to safeguard the interests of the local industry, etc., are the other causes on account of which the industry clings to that place.


To overcome these drawbacks of localisation, two remedies may be suggested:

(i) Supplementary Industries:

Several small industries which may assist the main industry may be established. This will remove the risk of unemployment and lessen the severity of the depression when it conies. It will remove the – exclusive dependence of the locality on one industry, and provide other strings to its bow. This will also remove dependence on foreign markets or materials. The workers will have a wider scope of employment.

(ii) Decentralisation:


By decentralisation is meant spreading out of indus­tries in various regions of a country. It will be found more economical to move an industry to other less congested centres. It will remove some of the drawbacks’ of centralisation. Such decentralisation has been taking place in recent times. For example, cotton textile mills have been established away from Bombay and at other centres.