The following points explain the role of industrial development in economic growth:

1. Modernisation of Industry:

Industrial development is necessary for modernisation of agriculture. In India, agriculture is traditional and backward. The cost of production is high and productivity is low. We need tractors, threshers, pump sets and harvesters to modernise agriculture. To increase productivity, we need chemical fertilizers, pesticides and weedicides etc. These are all industrial products. Without industrial development, these goods cannot be produced. Agricultural products like jute, cotton, sugarcane etc. are raw materials. To prepare finished products like flex, textiles and sugar etc. we need industrialisation. So industrial development is necessary for modernisation of agriculture.

2. Development of Science and Technology:

Industrial development encourages the development of science and technology. The industrial enterprises conduct research and develop new products. Ethanol in the form of biofuel is an example of industrial development. Industry conducts research on its wastes and develops byproducts like biodiesel from Jatropha seeds. Due to industrialisation, we have made progress in atomic science, satellite communication and missiles etc.

3. Capital Formation:

Acute deficiency of capital is the main problem of Indian economy. In agricultural sector, the surplus is small. Its mobilisation is also very difficult. In large scale industries, the surplus is very high. By using external and internal economies, industry can get higher profit. These profits can be reinvested for expansion and development. So industrialisation helps in capital formation.

4. Industrialisation and Urbanisation:


Urbanisation succeeds industrialisation. Industrialisation in a particular region brings growth of transport and communication. Schools, colleges, technical institutions, banking and health facilities are established near industrial base. Rourkela was dense forest but now is ultra modern town in Orissa. Many ancillary units have been established after setting up of big industry.

5. Self-reliance in Defence Production:

To achieve self-reliance in defence production, industrialisation is necessary. During war and emergency dependence on foreign countries for war weapons may prove fatal. Self-reliance in capital goods and industrial infra-structure is also necessary. Atomic explosion at Pokhran (Rajasthan) and Agni Missile are examples of industrial growth.

6. Importance in International Trade:

Industrialisation plays an important role in the promotion of trade. The advanced nations gain in trade than countries who are industrially backward. The underdeveloped countries export primary products and import industrial products. Agricultural products command lower prices and their demand is generally elastic. While industrial products command higher values & their demand is inelastic. This causes trade gap. To meet the deficit in balance of payments we have to produce import substitute products or go for export promotion through industrial development.

7. Use of Natural Resources:

It is a common saying that India is a rich country inhabited by the poor. It implies that India is rich in natural resources but due to lack of capital and technology, these resources have not been tapped. Resources should be properly utilized to transform them into finished industrial products. The British people took India’s cheap raw-materials for producing industrial goods in their country. India was used as a market for their industrial products. So India fought with poverty and England gained during industrial revolution. Hence industrialisation plays important role for proper utilisation of resources.

8. Alleviation of Poverty and Unemployment:


Poverty and unemployment can be eradicated quickly through rapid industrialisation. It has occurred in industrially advanced countries like Japan. The slow growth of industrial sector is responsible for widespread poverty and mass unemployment. So with fast growth of industrial sector, surplus labour from villages can be put into use in industry.

9. Main Sector of Economic Development:

Industry is viewed as leading sector to economic development. We can have economies of scale by applying advanced technology and division of labour and scientific management. So production and employment will increase rapidly. This will bring economic growth and capital formation.

10. Fast Growth of National and Per Capita Income:

Industrial development helps in the rapid growth of national and per capita income. The history of economic development of advanced countries shows that there is a close relation between the level of industrial development and the level of national and per capita income. For instance, the share of industrial sector to national income was 26% and the per capita income in year 2000 was 36,240 dollar in USA.

The share of agriculture in the same year was only 2%. In Japan, the share of industrial sector in her GDP was 36% and her per capita income was 36210 dollar. In India due to industrialisation, the contribution of industrial sector to GDP has gone upto 28.5% in 2000-01 and per capita income has risen to Rs. 16,486 in 2000.

11. Sign of Higher Standard of Living and Social Change:


A country cannot produce goods and services of high quality in order to attain decent living standard without the progress of industrial sector.