12 important Industrial Problems faced in India

Foregoing analysis shows that India has made sufficient achievement in industrial development during the last five decades and has emerged as the tenth largest industrialized country of the world. But considering the size of the country this development is far from satisfactory.

There are many areas where despite requisite facilities industrial development is either insufficient or completely absent. The pace of industrial progress has been very slow and the growth has always lagged behind the target (except in 7th Five Year Plan). Despite industrial progress self- sufficiency is a distant dream and import substitu­tion a major problem. Under utilization of existing capacity is another major problem which is due to lack of power, raw material and demand.

Industry has developed elite oriented pattern. Concentration of economic power in the hands of few, regional imbalances, sickness of industries, loss in public sector industries, unsatisfactory labour relations, lack of capital and industrial raw materials, chang­ing policy of the government, and defective licens­ing policy are some of the problems which are hindering the overall industrial development in the country. In following paragraphs an attempt has been made to highlight some of these problems.

1. Unbalanced Industrial Structure

Despite all efforts India has not been able to attain self sufficiency in respect of industrial mate­rial. India is still dependent on foreign imports for transport equipments, machineries (electrical and non-electrical), iron and steel, paper, chemicals and fertilisers, plastic material etc. In the total industrial production consumer goods contribute 38 per cent. In newly industrialised countries like Singapore, South Korea and Malaysia this percentage is 52, 29 and 28 respectively. This shows that import substi­tution is still a distant goal for the country.

2. Low Demand

There is low demand for industrial products in the country due to low consumption level, weak purchasing power and poor standard of living. The domestic market is chronically underdeveloped through lack of enthusiasm generated by the middle and upper class segment who do not wish to raise their standard and improve their living conditions.

3. Regional Concentration

In India most of the industries are located in few selected areas leaving out vast expanse of the country devoid of industrial establishments. Most of the industries are located in and around metropolitan cities like Mumbai, Kolkata, Delhi etc. Tables 18.1 and 18.11 present uneven concentration of indus­tries. While the states like Maharashtra, Gujarat, Tamil Nadu etc are well ahead in industrial develop­ment others like Meghalaya, Manipur, Jammu and Kashmir, Himachal Pradesh, Tripura, Orissa, As­sam etc are far behind. This has not only created regional imbalance and regional disparity but has encouraged fissiparous tendency including unrest, violence and terrorism.

4. Loss in Public Sector Industries

Owing to focus on socialistic pattern of de­velopment investment under public sector industries increased phenomenally during early five year plans. But due to defective policy of the government char­acterised by redtops and inefficiency and strained labour-management relations most of these public sector enterprises are running in loss. Every year the government has to incur huge expenditure to cover up this loss and meet obligations of paying wages to the employees.

This hardly leaves surplus money to go for new industrial ventures and launch schemes for social development. To avoid this burden on exchequer the government is promoting privatisa­tion and disinvestment of shares of public sector undertakings. This goes against the Peruvian model of development initiated during the fifties of the last century.

5. Industrial Sickness

In the private industrial sector a growing number of industrial units are becoming sick. Wide­spread sickness has, indeed, become a major prob­lem of this sector. The causal factors for this sickness are: (i) deficient management, (ii) under-utilisation of capacity due to shortage of raw materials, coal and power and transport, (iii) obsolete machinery, equip­ment and production techniques, (iv) uneconomical scale of production, (v) faulty choice of products and processes, (vi) difficulties in selling the products, (vii) diversion of funds to new units under same ownership, and (viii) conflict between different in­terest groups among the owners. As at the end of March 1999 there were 3, 09,013 sick/weak units (3, 06,221 in SSI and 2,792 in non-SSI sectors). A total of Rs. 19,464 crores of bank credit was locked up in these sick units. Sometimes, the government takes over sick units which further worsen the prob­lem.

In order to provide a focal point for the revival of sick units, the Industrial Reconstruction Corpora­tion was reconstituted in 1985 as the Industrial Reconstruction Bank. It is now the principal agency for reconstruction and rehabilitation of sick units.

The Central Government set up in 1986 two Funds, the Textile Modernisation Fund (TMF) and the Jute Modernisation Fund (JMF) to provide assistance on concessional terms to healthy as well as sick units for modernisation. These two Funds are being administered by the IDBI and the IFCI respectively. There is also a need for constant monitoring and deterrent penalties to the parties responsible for sickness.

6. Lack of Infrastructure

An inadequate infrastructural facility is another major problem faced by the Indian industries. En­ergy crisis has a great bearing on the industrial development and production. Although the installed capacity of electricity increased from 66.08 million km in 1990-91 to 85.79 million km in 1996-97 but it is much short of the actual demand.

It leads to power cut and rostering which hampers the industrial pro­duction. Most of the State Electricity Boards are running in loss and are in deplorable condition. Rail transport is overburdened while road transport is plagued with many problems. Even national highways in many places are in bad shape. Telecom­munication facilities are mainly confined to big cities.

7. Improper Location Base

Industrial locations, in several instances, were established without reference to cost-effective points. Each state clamors for the establishment of major industries in the public sector within its boundaries, and the location decisions are often politically motivated.

8. Lack of Capital

Indian industrial development is facing acute shortage of capital. The short-term and long-term loans from international agencies like World Bank and Asian Development Bank etc have done more harm to the economy than taking it out from the crisis. A lot of foreign exchange is being utilised in the payment of these loans.

The situation becomes acute when fresh loans are taken to pay the installments of the old loans. Due to liberalisation, the foreign exchange reserve position has improved in recent years and flow of foreign capital has started in industrial sector. These foreign investors also do not like to invest in such industries which require large capital, need long gestation period and where recovery is slow or more risk is involved. Instead of depending on foreign capital we have to place more reliance on indigenous capital with greater emphasis on the development of priority industries.

9. Shortage of Industrial Raw Material

Indian Agricore, the major source of indus­trial raw material, is still dependent on the monsoon. Natural calamities like drought, famine, flood etc badly affect agricultural production as well the sup­ply of industrial raw material. Failure of monsoon even affects the purchasing power of the people and also the demand for industrial products. It some­times creates glut in the market and industrial plumpness. Cement industry is recently facing such crisis.

Drought like situation even affects hydel generation, leading to energy crisis, more pressure on railways to transport coal and on thermal power sector for higher output. This leads to a chain of crises which have interlinking effect.

10. Higher Cost of Production and Low Quality of Goods

Indian industries mostly survive on home demands. These have been given a number of con­cessions and even protection from foreign indus­tries. Here most of the work is done by hand on old and obsolete machines.

This increases the cost of production and brings down the quality of products produced. Since these industries have virtual mo­nopoly they hardly bother to improve their quality. Public sector units, under direct control of the gov­ernment, frequently increase the prices which provide golden opportunity to private industrialists also to increase the prices. Our industrial products are not able to make wide market abroad.

The low purchasing power of the people even reduces home demand. The situtation is likely to change during globalisation when there is apprehension of wide spread closure of these industries due to stiff compe­tition offered by multinational companies. This is also not good for the country and the Indian indus­tries.

11. License Policy

The license policy approving the site, capac­ity, type and expansion of industries is a typical example of excessive state interference and red tapes which hinder the industrial development. Recently some examples of political vendetta have come to surface whereby central government over delayed the approval of industries from such states where hostile political party is in power. Ministers and influential political leaders are pres­surising industrialists to install industries in their electoral area so as to approve their licenses. With the introduction of liberalisation policy many of the shortcomings of the license policy have been re­moved.

12. Lack of Institutional Organization

A major development thrust during the Five Year Plans was toward the establishment of a vigor­ous public sector developed hastily without the crea­tion of a base of administrative machinery capable of undertaking this enormous task. Preparatory work for such tremendous institutional regorganization was poor. High performance was rarely insisted on even after the construction of an administrative base. The result was non-achievement of targets. During the Fourth, Fifth and Sixth Plans, achievement lev­els fell short of targets by 15-18 per cent. This malady is still persisting even after liberalisa­tion. There is no clear-cut planning at state level to attract foreign capital and promote industrialisation.

Industrialization started in India roughly a century later than in the developed countries. That is why, when it was in mature stage in the Western countries it was in infantile stage in India. Hence, India had to perform dual task of promoting indus­trialisation as well as to equip herself with latest technology in the field of electronics, nuclear sci­ence, space research etc.

This slowed down the pace of industrial progress. Frequent change in the ap­proach-sometimes emphasis on rural industrialisa­tion, sometimes on urban-nucleated industrialisa­tion or rural led employment-oriented strategy or creation of employment-oriented agro-based indus­tries-confuse the situation. Indian industrialisation has passed through great odds. Besides being victim of 'economics of scarcity' it has been mauled by political indecision, prejudices and confusion.