Industrial Development of India: 12 Major Obstacles

The following points highlight the twelve major obstacles in industrial development of India. The obstacles are: 1. Poor Capital Formation 2. Political Factors 3. Lack of Infrastructural Facilities 4. Poor Performance of the Agricultural Sector 5. Gaps between Targets and Achievements 6. Dearth of Skilled and Efficient Personnel and  Others.

Obstacle # 1. Poor Capital Formation:

Poor rate of capital formation is considered as one of the major constraint which has been responsible for slow rate of industrial growth in India.

Obstacle # 2. Political Factors:

During the pre-independence period, industrial policy followed by the British rulers were not at all favourable for the interest of the country/Thus, India remained a primary producing country during 200 years of British rule which ultimately retarded the industrial development of the country in its early period.

Obstacle # 3. Lack of Infrastructural Facilities:

India is still backward in respect of its infrastructural facilities and it is an important impediment towards the industrialisation of the country. Thus in the absence of proper transportation (rail and road) and communication facilities in many parts of the country, industrial development could not be attained in those regions in-spite of having huge development potentialities in those areas.

Obstacle # 4. Poor Performance of the Agricultural Sector:

Industrial development in India is very dependent on the performance of the agricultural sector. Thus, the poor performance of the agricultural sector resulting from natural factors is also another important factor responsible for industrial stagnation in the country.

Agriculture provides not only raw materials and foodstuffs but also generates demand for the goods produced by the industrial sector. Thus, this poor performance of the agriculture retards the development of industries in India.

Obstacle # 5. Gaps between Targets and Achievements:

In the entire period of planning excepting 1980s, industrial sector could not achieve its overall targets. During the first three plans, against the target of 7, 10.5 and 10.7 per cent industrial growth rate, the actual achievements were 6, 7.2, 9 per cent respectively.

Since the Third Plan onwards, the gap between the targets and achievements widened. It is only during the Sixth and Seventh Plan the industrial sector could achieve its targets. Again in first part of 1990s the industrial sector again failed miserably to achieve its target. This trend is all along against the smooth industrial development of the country.

Obstacle # 6. Dearth of Skilled and Efficient Personnel:

The country has been facing the problem of dearth of technical and efficient personnel required for the industrial development of the country. In the absence of properly trained and skilled personnel, it has become very difficult to handle such highly sophisticated computerised machineries necessary for industrial development of the country.

Moreover, inefficiency and insincerity of those personnel engaged in industrial sector has been resulting in huge wastage of resources of the industrial sector. Moreover, social factors like immobility of labour and capital and lack of proper initiative and enterprises on the part of people of India are also highly responsible for this slow pace of industrialisation in the country.

Obstacle # 7. Elite Oriented Consumption:

In recent years, a strong tendency to produce rich men’s goods has been established among the large industrial houses. Accordingly, the production of “white goods” like refrigerators, washing machines, air conditioners etc. expanded substantially along with the other luxury products. But the production of commodities for mass consumption has recorded a slow growth rate.

This clearly reveals a ‘distortion of output structure’ of Indian industries, resulting in a recessionary tendency in the market of these luxury products in recent years.

Obstacle # 8. Concentration of Wealth:

The pattern of industrialisation in the country has been resulting in concentration of economic power in the hands of few large industrial houses and thus failed to achieve the objective of planning in reducing concentration of wealth and economic power.

As for example, Tata’s with 38 companies at present substantially increased their assets from Rs 375 crore in 1963-64 to Rs 14,676 crore in 1991-92. The assets of Birla’s also increased from Rs 283 crore in 1963-64 to Rs 6,775 crore in 1990-91. Similarly other large business houses are also multiplying their assets at a very faster rate and are tightening their stronghold on the economy.

Obstacle # 9. Poor Performance of the Public Sector:

In-spite of attaining a substantial expansion during the planning period, the performance of public sector enterprises remained all along very poor. A good number of such enterprises are incurring huge losses regularly due to its faulty pricing policy and lack of proper management necessitating huge budgetary provision every year.

Thus, the public sector investment failed to generate required surpluses necessary for further investment in industrial sector of the country.

Obstacle # 10. Regional Imbalances:

Concentration of industrial development into some few states has raised another problem of imbalances in industrial development of the country.

Western region comprising Maharashtra and Gujarat attained maximum industrial -development whereas the plight of the poor states are continuously being neglected in the process of industrialisation of the country in-spite of having a huge development potential of their own.

Although a huge investment in the public sector has been made in the backward states like Bihar, Orissa and Madhya Pradesh, but the ‘trickling down effects’ of such investment were not also visible.

Various fiscal incentives, capital subsidies and other facilities introduced for industrial development of backward area were mostly channelized to develop industries in backward areas of developed states leading to a gross neglect of the demand of backward states.

Obstacle # 11. Industrial Sickness:

Another peculiar problem faced by the industrial sector of the country is its growing sickness due to bad and inefficient management.

While showing the reason of such sickness, the Sixth Plan observed, “The pattern of industrial development has not been sufficiently guided by cost considerations. In a regime of protection from international competition, industries have tended to get established at sub-optimal capacities, leading to a high cost industrial structure. Adequate attention has also not been given to improvements in technology and quality of products. Some of these factors have led to the emergence of sickness in certain industries particularly when market conditions tend to generate a measure of competition with the economy.”

As per the RBI estimate, a total number of sick industrial units in India were 1, 71,316 as on 31st March 2003 and these sick industrial units had involved an outstanding bank credit to the extent of Rs 34,815 crore. The RBI estimate further disclosed that every seventh small scale unit in India was sick at the end of December 1983.

Thus, growing sickness of industrial units has resulted in a huge problem in the path of industrial development of the country.

Obstacle # 12. Regime of State Controls:

Lastly, industrial inefficiencies resulting in perpetuation of regional state controls and regulatory mechanism are standing in the path of industrialisation of the country. In recent years, the Government has undertaken some serious measures to make necessary economic reforms in the industrial structure of both the public as well as private sectors of the country.

Although these measures are quite challenging in nature but these are expected to do much headway in removing various obstacles mentioned above and also in attaining industrial development of the country further in the years to come.