Industrialization plays a significant role in the process of economic development. The examples of developed countries indicate that there is a direct relationship between high level of income and industrial development.

Industries account for 37% of the gross domestic product in Japan, 32% in UK and 22% in the U.S. whereas it stands at 27% for India. Further a strong industrial base is required for generating gainful employment opportunities for the unemployed and under-employed labourers in the agricultural sectors. Industrialization also helps in overcoming trade gap.

The less developed countries are generally primary producers and import industrial output. With industrialization of their own economy they need not import industrial product from outside and this helps in reducing the trade gap.

Industrialization also helps in satisfying a variety of demands of the consumer’s. With modernization of the economy the demand for industrial product has increased considerably. Industrialization brings a change in the socio-cultural environment of the economy. It makes people dynamic, hard-working, mobile, skillful, efficient, and punctual. It brings a change in the way-of life of the people and makes people more commercial. It also provides security to the economy by making it self-dependent.


Thus industrialization in a nutshell acts as a catalyst in the smooth process of economic development.

Industrial Development during the Plan Periods

Prior to British rule, India was industrially an advanced country and was exporting its industrial products in the European world. Each village of economy was an industrial unit producing output based on availability of raw materials and use of local expertise to produce it.

Unfortunately Britishers for their selfish interests systematically destroyed the industrial base in India. As a consequence, India inherited a weak industrial base, undeveloped industrial infrastructure and a stagnant economy at the time of her independence.


The industrial structure in 1947 was restricted to few textiles, sugar-cane, cement and jute industries localized in few regions of the country. Just after independence, the Government of India called an industries conference in December 1947 to consider ways and means to utilize the existing capacity of the existing farms and to promote industry so as to boost up industrialization and revive the economy of the country.

The first plan was basically an agricultural plan and only three steel plants had been set up and limited development in Railway workshop took place during the First Plan. The transformation of a traditional economy to an industrial economy was attempted during the second plan period on the basis of the Industrial Policy Resolution in 1956. The stimulus for the adoption of such a policy was provided by the success achieved in the agricultural sector during the first plan period.

The following Table shows the investment in organised industries and mines and the industrial growth rate during different plan periods:

Plan Periods Ind. Sector

Investment in Percent (Rs. In Crore)

Growth Rage

1st Plan



2nd Plan



3rd Plan

1, 726


Annual Plan

1, 510


4th Plan

2, 864


5th Plan

8, 989


6th Plan

27, 667


The above table shows a rapid and fairly continuous growth in industrial production during the first 15 years of plan development whereas subsequently, the rate of growth has become slower. On the other hand, the planned investment for industrial sector has increased significantly during the plan periods.