The following are the main causes responsible for the decentralization of industries:

1. Advent of Electricity:

With the coming of electricity, it is no longer necessary to locate the factories near coal-mines or on the banks of rivers or streams.

Electricity can be supplied at a distance of hundreds of miles from the generating station.

If, therefore, localisation was due to the nearness to the source of power, this factor has now ceased to operate.

2. Development of Means of Transport:


On account of improved transport, distant markets can be approached and distant sources of raw materials tapped. The industry need not be located near the market or near the raw materials, if there are other more important advantages elsewhere. Thus industry gets decentralised.

It is worth noting that development of the means of transport works both ways. It helps concentration and also assists decentralisation. It helps concen­tration in this way that if the local supply of raw materials has become insufficient, they can be imported from outside.

The industry will develop further in the locality to reap benefits of localisation. But it also assists in decentralisation. For example, if the market is more important than the materials, then the factories can move out, and get established in or near the market. Raw materials can be transported to that place.

3. Higher Costs in Old Centres:

A rise in costs in old industrial centres and concessions available elsewhere help decentralisation. It is found that as industries grow up, rents rise and so do the municipal taxes. The cost of living also goes up which necessitates the payments of higher wages. Factory sites also become very costly.


All these factors render it uneconomical to start factories there. On the other hand, cheap sites for factories may be available elsewhere. Our cotton mill industry is becoming decentralized. Improved organisation for collection and distribution of goods has made it unnecessary for industries to remain wedded to the local markets. They can thus move out with advantage. This leads to decentralisation.

4. Risk of Bombing:

The last war has shown that centralisation is dangerous, as a crowded area is more vulnerable to bombing from the air. Wise governments, therefore, encourage the spreading out of industry. The industry gets decentralised.

Most of the Indian industries suffer from over-centralisation. A degree of decentralisation is essential. Decentralisation, however, does not necessarily mean decentralisation of control. A mill started in undeveloped areas may still belong to the people who are in the main industrial centre.

A Swedish combine established a network of match factories in a number of States retaining ownership and control but with decentralised production. Decentralised econ­omy is the goal of our economic development, as visualised in our Five-Year Plans.