Read this article to learn about the most frequently asked questions on the Indian Industries.

Q. 1. How does agriculture promote industrial development?

Ans. Agriculture and industry are interrelated sectors. Agriculture helps industry in the following way.

In the first place, agricultural development means rising incomes of farmers. Increased income creates demand for industrial goods.


Secondly, agriculture provides raw materials and intermediate goods to various industries.

Thirdly, by exporting agricultural commodities, capital goods for industries can be imported.

Q.2. What does the term ‘industrialisation’ mean?

Ans. The term ‘industrialisation’ refers to the setting up of capital goods industries and basic industries capable of ensuring a high rate of growth of the economy as a whole.


Q.3. What do you mean by industrial structure?

Ans. By industrial structure we mean inter­relationship among various branches of industries—the relationship between small scale and large scale industries, the relationship between consumer goods industries and capital goods industries. In the process of industrial development, industrial structure undergoes a change.

Q.4. Which is the oldest industry in India?

Ans. The cotton textile industry is the oldest industry in India.


Q.5. What is meant by ‘public sector’?

Ans. A public sector may be defined as that sector in which government owns and manages it fully on its own initiative.

Q.6. Point out the reasons for expansion of the public sector industries in India.

Ans. In India, a great deal of importance is attached to the public sector to:

(a) Prevent the growth of monopolies and concentration of economic power in the hands of a few small businessmen, and

(b) To establish a socialistic pattern of society.

Q.7. Menuon the major drawbacks of public sector industries in India.

Ans. The major drawbacks of public sector enterprises in India are:

(i) Unnecessary delay in the execution of a project and escalation of the cost of construction,


(ii) Problem of over capitalisation,

(iii) Use of manpower resources in excess of actual requirements,

(iv) Underutilization of capacity,

(v) Excessive stock in inventories,


(vi) Bureaucratic, corrupt and inefficient management, and

(vii) Faulty price policy, etc.

Q.8. What do you mean by ‘infrastructure’?

Ans. Capital invested for the improvement of transport, communication, generation of power, and creation of public services like education, health, etc. are known as ‘social capital’. By infrastructure we mean ‘physical capital’ and social capital’. To accelerate the process of economic development in a country, development of economic infrastructure is a pre-condition.


Q.9. Point out the causes of the problem of sickness in Indian industries.


Mention two causes of industrial sickness in India.

Ans. Both exogenous and endogenous factors are responsible for industrial sickness. They are government policies pertaining to production, distribution and prices; change in the investment pattern due to the change in plan priorities, power shortage, scarcity of raw materials, unfavorable industrial relations, etc.

Endogenous factors are the following: managerial inefficiency, diversion of funds, lack of provision for depreciation of machinery, excessive inventories, etc.

Q.10. Point out the symptoms of industrial sickness.



Mention two causes of industrial sickness in India.

Ans. One of the important symptoms of industrial sickness is the liquidity crisis which develops if the industry fails to manage required amount of resources and money. Irrational capital structure is considered to be another symptom of industrial sickness.

Q. 11. What is meant by privatisation?

Ans. In India, privatisation refers to the selling of shares or equity to mutual funds, financial institutions and the private sector. So, it means disinvestment of the public sector industries.

Q. 12. Mention two objectives of New Economic Policy.


Ans. New Economic Policy has the two important objectives:

(i) Macroeconomic adjustment and balance that aims at reduction in fiscal deficit, establishing balance in foreign trade and stabilisation in prices;

(ii) Reorganization of the Indian economy.

Q.13. In what forms private foreign capital comes to India?

Ans. Firstly, foreign capital enters India in the form of equity capital. Secondly, it takes the form of equity participation by foreigner’s and creditor’s capital. That is to say, it can take the form of foreign collaboration. Thirdly, foreign capital may take the form of direct inter- government loans. Fourthly, loan from international financial institutions at concessional rate is another source of foreign capital.

Q. 14. At present, which country dominates in the supply of foreign capital in India.


Ans. The bulk of foreign private investment comes from Mauritius where tax laws are very lenient. However, the US FDI comes to India via Mauritius.

Q.15. What is ‘industrial sickness’?

Ans. An industry which has at the end of the financial year accumulated losses equal to or exceeding its entire net worth and has also suffered cash losses in such year and the financial year immediately preceding such financial year.

Q. 16. Mention two elements of ‘exit policy’.

Ans. Exit policy refers to the:

(i) Shedding of the load of excess workers in the public sector or popularly called the ‘voluntary retirement scheme’ (VRS), and


(ii) Disinvestment of public sector enterprises or the so-called privatisation.

Q.17. When were the First and the Latest Industrial Policies announced?

Ans. The first Industrial Policy Resolution was adopted in April 1948. The current policy in respect of industries is governed by the Industrial Policy Statement of July 1991.

Q.18. Indicate two main objectives of the Industrial Policy (1991) of the Government of India.

Ans. The 1991 Industrial Policy aims at deregulating the industrial economy so as to make it more competitive both internally and internationally. Another objective is the privatisation of the public sector.