CAPF-AC (Assistant Commandant) Exam Study Material : Indian Economy - INDUSTRY
CAPF-AC (Assistant Commandant) Exam Study Material : Indian Economy - INDUSTRY
Indian Economy
INDUSTRY:
Post-liberalisation, the Indian private sector, which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labour costs and technology.
Role of the State in Industrial Development
In the Indian economy (after independence), process of industrialisation was spearheaded by the state. Planners and politicians of the country left that the growth and development of industry could not be left to the market forces of supply and demand. Also, it could not be left to the prudence of private entrepreneurs. Direct intervention of the state was considered essential in view of the following factors:
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Lack of Capital with the Private Entrepreneurs: Industrial development in India needed a big push. Implying a large amount of capital. At the time of independence, the well known private entrepreneurs in India were mainly Tatas and Birlas. The requirement of capital for diversified industrial growth far exceeded its availability in the private sector. Accordingly, the sate (or the government) was to undertake industrial investment through public sector undertakings.
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Lack of Incentive among the Private Entrepreneurs: The private investors lacked incentive as well. Owing to limited size of the market, there was no inducement to invest. Limited size of the market refers to low level of demand for the industrial goods in the market. Low level of demand was because of low level of income.
Thus, there was sort of vicious circle operating like this: low inducement to invest because of low level of demand, low level of demand because of low level of income, low level of income because of low level of investment, and low level of investment because of low inducement to invest.